Demystifying Islamic Banking in Malawi

In 2011 the Reserve Bank of Malawi, rejected the introduction of Islamic Banking. Soon after the rejection, we looked at the merits and demerits of Islamic Banking in a country like Malawi and we found that the benefits outweigh the costs (if any). We pointed out in the article that such a decision falls short of a need to have a better, organized and prudent system of banking that does not limit consumer or customer choice. Today’s financial market is not only globalised and integrated, but is also replete with numerous products, some of which have proven to be toxic to economies as evidenced in the recent financial crisis. Financial engineering and computational finance has given rise to financial instruments such as futures and options, currency swaps, credit default swaps and collaterised debt obligations (CDOs) just to mention a few. Using mathematical finance, numerical methods and computer modelling, these derivatives are designed and created to facilitate in trading, hedging and investment decisions and risk management. The result of this is that in 2008 most major economies collapsed and the effects are still being felt today. Interestingly, while this has been happening, Islamic Finance and Banking has been moving beyond its boundaries into new territories by providing an alternative to this very frenzied psychosis. The CityUK, a UK financial think tank, estimated t global Islamic financial assets to have reached $1.041 trillion in 2009 up from $947billion in 2008 with a steady growth of 10-15% in 2010. Extrapolating this growth, we would assume that the assets should be approaching the $1.7 trillion mark. The think tank further asserted that in the UK alone, there are over 20 banks that provide Islamic assets worth $19 billion, with HSBC Amanah controlling the bulk of it.

Malawi, like many other countries without the Islamic banking and finance system, naturally feels that having this system alongside the current conventional set up will create more chaos and confusion. In some quarters, its introduction is perceived as giving in to pressure or bowing to the dictates of fundamentalist Islam. Fuelled by lack of understanding and proper knowledge concerning the principles of Islamic finance, many sections of the society have been led to believe that Islamic finance is the whole body of the Islamic law. This there has been a failure to understand that Islamic finance is not the same as Islamic law, and that these two are separate and distinct. There common thread is that the former should be in compliance with the latter. Consequently, this leads to the fact that there is no conflict between Islamic law and the laws of the land. Just as conventional finance is required to comply with the applicable laws of the land, Islamic finance must also adhere to these laws in addition to compliance with the Islamic law. Hence it must be emphasized that the obligation of complying with Islamic sharia law is not the same as having sharia law in the country.

To those people who are afraid that Islamic Finance will bring Islamic law, we would like to assure them that Islamic law of banking operates alongside laws of the land and the two do not overlap. Contracts in Islamic banking are drawn in accordance of the law of the land although compliance to Islamic law is a must. Therefore, any breach arising from these contracts, parties should seek redress from courts of the land as opposed to Islamic courts. Islamic law does not give the Sharia Board (the body that looks after Islamic products, comprising of scholars and experts in Islamic Law) any judicial and arbitrary powers since the ultimate power to do so rests with the courts of the land. Having eliminated this misconception, it is therefore worth noting that the only difference between Islamic banking and conventional banking is the mere charge of interest on a product lent or borrowed. Under Islamic finance, interest, known as Riba in Arabic, is disregarded or forbidden since money has no intrinsic value under Islamic law and should only be used as a measure wealth. This is therefore the only fundamental difference between Islamic finance and conventional finance. With interest forbidden, one cannot earn “money” on money lent to another party nor be required to pay interest on money borrowed. Under Islamic law, money cannot create or produce more money. Rather, services must be provided and effort exerted to generate wealth. It is therefore a fundamental condition for any investment or transaction under Islamic law that money be treated as medium of measuring wealth and exchange and nothing else. Hence interest is considered to be both a social and economic injustice in Islam and by excluding it from the financial system; it is thought that a fair and moral economic behavior will be promoted.

It is true to say that the underlying value in Islamic finance is to avoid exploitation with the objective of sharing reward between the parties involved. The conventional system of banking is exploitative in nature therefore not fit for a country like Malawi where the population is largely poor. Malawi would fare well with a system of banking that is just and balanced. By way of an example, in conventional financing, the financier gives money to his client as an interest bearing loan, after which he has no concern as to how the money is used by the client so long as the client keeps up with his repayment that includes interest to the money borrowed. In the case of Islamic banking on the contrary no money is advanced by the financier unless the client assures the financier that he wishes to purchase a specific commodity or conduct a certain business that will produce a reward or profit. The two parties will enter into a profit and loss sharing agreement and thus the exclusion of interest (riba). Some of the most commonly used products are under Islamic finance are profit sharing (mudarabah), safekeeping (wadiah), joint venture (musharakah), cost plus (murabahah) and leasing (ijarah). It is imperative that Islamic institutions need to have a Sharia advisory committee and consultants in order to implement products according to these principles. Their sole function is to ensure that operations and activities of the bank comply with sharia principles when it comes to Islam finance and banking.

It has been observed that conventional current system of banking causes imbalances in society. Unhealthy human instincts are exploited to make money through immoral and injurious products. The evils emanating from this attitude can never be curbed unless humanity submits to the divine authority and obeys its commands by accepting them as absolute truth and super human injunctions which should be followed in any case and at any price. This observation cuts across all faiths and beliefs. In 2009 the Vatican newspaper L’Osservatore Romano voiced its approval of Islamic finance. The Vatican paper wrote that banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis. “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the paper asserted. It continued to state that Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral and that Sukuk may be used to fund the “‘car industry or the next Olympic Games in London. The Vatican paper believed that Islamic banking could become an alternative and an absolute solution to the mess caused by the conventional banks. Three years on after the Vatican message, the United Kingdom Government recently through its Prime Minister, David Cameron announced the intention of launching the first ever Islamic bond in the UK. Mr. Cameron acknowledged the role played by Islamic finance in the UK and the entire world. He cited examples of such big projects such as The Shard, the Chelsea Barracks, Battersea Power Station and the Olympic village as projects funded by the Islamic finance in whole or in part which has helped to transform the London skyline. This could happen to Malawi and it is imperative that we should seize this opportunity at the moment when no country in the SADC region is seriously thinking of taking this necessary step. 

EEA APPLICATIONS TO THE HOME OFFICE

Its now over that EU nationality would entitle a holder free passes into services provided by the UK Home Office. The Secretary of State has just announced that from July 2013 all EEA applications will incur a charge of up to £55.

I am aware that the previous system appeared to have helped so many Non EEA applicants by virtue of them being a family member of an EEA national. One can therefore argue that the change has come forth to put all the applicants at par, there should be no difference at all whether you are in the UK joining your EEA national or a British citizen.

There are no details though indicating how long the applications will now last with the Home Office as currently an application may take up to six months before it is decided. Presumably, with a fee to it, this period may be reduced to a considerable three months period as the case with the rest of the applications.

Please ensure that a fee is attached to your application otherwise the Home Office may make your application invalid due to unpaid fee if applied after 1 July 2013.

For further information regarding this and how to make an EEA application, please do not hesitate to contact Liberty Immigration Services UK on 07842484370 or send your queries to an email libertyimmservices@gmail.com

Revisiting social and family ties, general visit visa

Many people want to come to the United Kingdom for various reasons. Most of those who want to come to UK have friends and families who are present and settled in the UK. However, having a family in the UK does not make one's life easy when it comes to request a general visit visa to the UK at the British embassy. The United Kingdom visas are regulated and enforced by a set of rules called immigration rules.

A visitor to the UK is therefore required to meet those rules in order to obtain a visa. During my entire immigration career, I have had an opportunity to see decisions from different British embassies in the world but all of them will have a unified format in the way they consider entry clearances.

Entry clearance officers (ECO) sometimes are not clear about how an applicant has failed to satisfy the requirements. You may have enough money in your account but the fact that you  have failed to demonstrate the source of that income, your application may fail. Artificially Inflated accounts days before applying may raise eyebrows.

Most applicants do not understand these rules and how they get enforced unless legal advice prior to the process has been sought. Under the rules, the applicant's intention to return is taken to task and scrutinised before the decision is made. ECO should be satisfied that the applicant's circumstances at home are clear enough to form an absolute intention to return.

Some of the elements taken into consideration are your social and family ties in the country of origin. There is no general interpretation of social and family ties but depending on your circumstances, ECO will form an opinion based on the information provided and use his discretion to grant or refuse the applicant a UK visa.

Having an ailing parent who is in the applicant's care may meet the requirement if the applicant is coming to the UK for a week or two and arrangements have been made for the care of the parent in the applicant's absence. Some people may say that this requirement is discriminatory as it singles and lone applicants. However, as I previously stated, your circumstances will be looked independently based on the information provided.

An ECO may not be satisfied if the applicant does not provide evidence of personal and financial circumstances, or of any assets that ties the applicant to the country of origin. The applicant should always bear in mind that under paragraph 41 he is genuinely seeking entry as a visitor for a limited period not exceeding 6 months therefore an intention to return to his country of origin comes under heavy scrutiny.

Further consideration may be given to politically well being of the applicant's country of origin, for example an applicant who is applying from countries marred by civil unrest and instability may be refused on the basis that they are not genuinely seeking entry clearance as a visitor. It is very difficult in their situation to be regarded as they have an intention to return.