Nevertheles, Islamic finance has also much to learn from the west

Islamic banks should step towards the venture capital approach that is also based on profit and loss sharing rather than interest – just like islamic finance. Private equity groups are the real Islamic finance, the genuine article. By providing funds to entrepreneurs with bright ideas, the banks can assist in promoting innovation, invention and creation of new jobs and industries.

« The ironic thing is that although the US is not an “Islamic country “, more authentic and genuine sharia compliant financing is done in the US than in all the Islamic countries combined. That is because American venture capital groups annually provide about $25bn in capital financing to entrepreneurs, scientists and engineers with new ideas. As a consequence of the availability of this type of financing the venture capital industry in the US has given birth and nurtured scores of Silicon Valley companies, including modern day icons such as HP, Cisco, Intel, Sun Micro Systems, Apple, Netscape, Ebay, and Google. All were created in the past 30 years or so from ideas grounded in science and technology. Scientists and engineers came up with the ideas, innovations and inventions while the venture capital industry provided the capital on a partnership basis. Millions of new jobs have been created as a result.

At one time – from AD750 to about AD1100 – it was the Muslim world that was making advances in science and technology, because of the availability of risk capital (from rich people or sponsorship from the rulers) and respect for education, scholarship, discovery and innovation. But nothing of consequence has been invented in the Islamic world for hundreds of years. By becoming more like venture capital groups, the Islamic banks can practice real Islamic finance while helping the Islamic community to rediscover its tradition of invention and innovation.» *

* Muhammad Saleem author of “Islamic Banking: A $300 billion Deception”

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