Bias, prejudice and ignorance have thus far hindered the growth of Islamic finance in Australia, says the author of a new booklet titled 'Demystifying Islamic Finance: Correcting Misconceptions, Advancing Value Propositions.'
Speaking to Lawyers Weekly, partner at Malaysian firm Zaid Ibrahim & Co, Madzlan Mohamed Hussein, said misconceptions about Islamic finance must be broken down if Australia is to benefit from what Islamic finance has to offer.
"[There are] 15 major misconceptions on Islamic finance that seem to be prevalent throughout the world," said Hussein.
"These misconceptions exist whether among Muslims or non-Muslims, [and are] to a certain extent due to outright bias and prejudices, but mostly due to utter ignorance."
According to Hussein, some of the primary misconceptions amongst non-Muslims are that Islamic finance is a form of "terrorism finance"; it can only be used by Muslims; it is a replica of conventional finance; and is a "primitive" method of conducting financial transactions.
"There is a fear that Islamic finance is an instrument of jihad, to replace the conventional [finance] system and pursue world domination by Islam," said Hussein.
Amongst Muslims, said Hussein, the most common misconceptions are that Islamic finance is "welfare" finance, in that the pursuit of profits must be passed over in favour of charitable community service, and that Islamic finance is governed only by Shariah Law.
"Since the system is based on religious ethics and moral values, many are unaware that Islamic banks are not inherently immune from any unethical practice, nor it is totally immune from the impacts of the GFC," he said.
By publishing the booklet, Madzlan hopes to remove some of the ignorance surrounding Islamic finance so that current tax barriers - which the federal government is addressing - is the only roadblock hindering the growth of what Hussein describes as a "young but fascinating" industry.
"[The booklet] attempts to persuade the public to remove their sentiments and consider the facts and features surrounding Islamic finance in a balanced and objective manner," he said.
"[It] highlights that Islamic finance, just like its conventional counterpart, has its own strengths and shortcomings. The strengths do not mean Islamic finance is automatically superior to conventional finance, and vice versa, its shortcomings do not mean that it is therefore weak and useless.
"We cannot make apple-to-apple comparisons between the two, because they are not alike. This is exactly why Islamic finance is well positioned to complement and add value to the existing financial system. The ideal is for the two to harmoniously co-exist."
Zaid Ibrahim & Co, which now has offices in Melbourne and Sydney, also hopes the booklet will render Islamic finance a topic which everyone can properly understand.
"We hope to [make] Islamic finance more accessible and inclusive to everyone," said Hussein.
"We highlight in the publication ten major value propositions of Islamic finance, including helping promote cross-border trade and investments, expanding the asset class, allowing more diversification of risk, creating new jobs, providing closer support to real economy, [and] contributing to systemic stability."
- Claire Chaffey