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Mufti Taqi Usmani responds to Criticism of Islamic Finance (part II of the interview)

by Standard & Poor’s Moody’s ok, so
let’s move to food security Do you think that’s the problem of
food security food safety are really important for Muslim world. Of course yes. there are many countries who do not produce food staff, agricultural products. In some countries there are no agricultural products. Obviously, every country needs food, so therefore the security of food is a basic need of all countries, not a particular country. Do you have a
feeling… because of course some Muslim countries are relatively more wealthy,
some Muslim countries are relatively more poor. Do you have a feeling that wealthy Muslim countries really want to help poor Muslim
countries to provide their food security – something like Muslim solidarity or not Yes, of course, this is a basic need This is also a direction of sharia of Islam that wealthy should help the poor. So, Islam as I told earlier that the Holy Quran says that the wealth should not be rotating between rich only Therefore, the countries who have rich people should help the poor countries They should perform their duty in that regard. But unfortunately, you know, the profit motive in the business activities has some kind of greed Unless we remove this greed and understand the needs of the poor then we cannot be fulfilling our duties. the rich countries should be providing food to other countries either as a charity or at reasonable price Justice Usmani, here in Russia or in some
countries where Muslims are in minority They criticize Islamic finance from the point of view but some something like it: “Look, in Islamic countries where almost all are Muslims, like Saudi Arabia or like you in Pakistan (as I visited Pakistan
twice) … the majority of population or of Muslim population use conventional
banking or at least they use conventional banking and Islamic banking at the same
time so I saw a lot of people in Pakistan who have at the same time
accounts in conventional banks or in Islamic bank
why do Muslims do so and because in my opinion it undermines trust to Islamic
finance in non-muslim countries because people in non-muslim countries say that
“look, even Muslims use conventional banking why should we use Islamic bank?” In fact, this trend is gradually, you know the trend of going to Islamic banks, is increasing day by day. And the fact that still there are 15% in Pakistan, for example. The reason is not that Islamic banks are not … bringing profit or not competitive. The real reason is that the Islamic finance… is not… people are not educated about what Islamic finance means. You know that all countries, Muslims or non-Muslims, they have been educated in a system in which where there was no place of Islamic finance at all. So their mentality is to follow what is [dominant] in a society. So, therefore the reason is not that Islamic banks are not competent. They are very competent; And this is reflected by the rate of growth of Islamic banks. Islamic banks are growing more speedily than commercial banks even in non-Muslim countries. But the problem is the mentality of those who are in power. They have been trained in the existing system conventional system. so therefore they are very fearful whether we will succeed or not Therefore, they are not converting the whole system to the Islamic one, but they are gradually proceeding towards that. Some time [back] it was 6%, then 7%, now it is 15%, in Saudi Arabia may be around 80%, in some other countries may be 100%, for example in Sudan and Libya So, once we can explain Islamic finance to the people, I think the rate of growth will increase day by day, inshallah. just one more reason why people reject
Islamic finance in my opinion is that they believe that Islamic finance is a
little bit more expensive compared to conventional banks as a source of
funding because people for our own business try to attract as cheapest funding as possible. How can you respond to this argument? This is not actually correct. In fact. that all Islamic banks or Islamic financial institutions are charging more than conventional banks or that they are more expensive In some cases, there is a difference between conventional and Islamic banking. The basic reason for that is that, if we take, for example, murabaha financing where the rate is not fluctuating, it is fixed. You know? So, and the term of finance is much more. Therefore, instead of charging a lesser price at the outset, they take the whole period in consideration in murabaha. But in ijarah and in other financing modes the situation is not this that they are charging more. The level of, you know that different banks according to their [size], they charge different rates, so one must not compare a bank with a conventional bank that has bigger size or smaller size. Therefore, the comparison would be if both Islamic bank and conventional bank are of the same size. And if they charge more, then this objection is right, but is not the case in many financing activities so far, as I am aware of. Justice Usmani, conventional banks are criticized a lot for they create money from air from nothing, by the system called partial
reservation. Do Islamic banks make the same or not? For the time being, they are doing that, but the basic difference is that Islamic banks are trading their all transactions are based on assets, real assets. Therefore, the fractional reserve system is less operating in Islamic banks because if you trade money versus money, then the fractional reserve system will increase the artificial money, increase the creation of money. But when we transact with goods and services, then the fractional reserve system although operating in that case also, does this to a lesser level. Could you explain a little bit the concept
of risk in Islamic finance and Islamic law because you told us that understanding of reasonable risk is different in Islamic world
compared to the rest of [the] world You told us that it’s not possible to make
business without risk and the reason why you can make a profit from any
business is just that you take some risk Could you tell as a little bit more about the concept of risk in Islamic law and finance. [In fact, in Islamic finance] the profit is always the reward of taking risk. So, some kind of risk must be there without which you cannot earn profit, halal profit, – the permissible profit, reasonable profit, unless you take some risk. Even in the sales, for example. If I open a market, and I am a trader, I am a businessman. When I sell commodities, I take the risk of the commodities and that risk brings to me the profit. So, in Islamic finance there is no concept of trading in money, it is always based on assets not asset-backed, but asset-based economy that Islamic finance leads to it. Therefore, the risk is necessary. However, the risk can be minimized by expertise, by putting some extra precautions, so it can be minimised by diversification of the portfolio. So, if you lose in some cases, you will succeed in others, and it will bring an equilibrium between losses and profits. Justice Usmani, I have one more question
connected to risk because in the Western world the risks are assessed by credit rating agencies and you told us that even great companies great investors in [the] Muslim world trust to Western ratings which are issued by
Standard & Poor’s, Moody’s and yes and Fitch. But at the same time you told us
that probably the concepts in which Western credit ratings are based is not correct Could you explain why this concept is not correct and how can it be moderated In fact, I do not say that it is not correct, I say it does not comply with sharia principles because if rating is based on sharia principles, the risk would be there, but the rating agencies they rate the companies or they rate the financial institutions on the basis of avoiding risk totally So, this is the difference between Islamic finance rating and commercial finance rating If we are proceeding to Islamic finance, we have to develop our own rating agencies which may take into account the compliance with sharia and you must appreciate that the risk of non-compliance with sharia, it is also a risk because if you are not compliant with sharia, you have to withdraw from your profit and bring it to charity. So, this is a sharia non-compliance risk. So, this risk should also be a part of rating of Islamic finance. You know that there is an Institute of IFSB, Islamic Financial Services Board. They are preparing standards for regulating Islamic financial institutions from the central bank, from regulatory authorities. So, in those standards this kind of risk has also been taken as a risk. And to avoid that risk, they have invented certain regulations. Does the financial sector of Islamic
countries try to create alternative system of credit rating agencies and if
yes whether these attempts are successful or not successful In fact they are not creating such rating. One rating agency was established in the past, but it could not have the help or assistance from the financial institutions. Therefore, it was not successful so far. Although it is existing, yet it could not work because of lack of interest by the financial institutions. Justice Usmani, I would like to ask to give you some advice for our future Agrofinmost project because the fact that it can be structured by two alternative ways or by combination of two alternative ways because on the one side [there is an] option is is to create a partnership
with Islamic partners like musharaka for example and alternative is not [to]
create such partnership but just issue bonds like for example sukuk salam for example it is possible to issue bonds on the stock
market of the one of the Gulf countries but which option is better, is more attractive in your opinion or we should combine both with two options? In my opinion, the joint venture is the best option from sharia point of view. in the joint enterpreneurship, the sukuk holders will be benefitting more than in a debt-based sukuk. So my preference is musharaka. But if it is not practicable for some reason, then there may be a combination of the two. Justice Usmani, when investors from
non-Muslim countries try to attract investments from Muslim investors, what are the typical mistakes? why companies cannot attract such investments? What typical mistakes do they do at Islamic markets? Ay Islamic markets? Yeah Attract money? Yes, definitely There are many factors. Political factors, bilateral relations, etc. If the people are confident that the investment will be successful, they will be attracted. Like I said [in the first part of the interview], with regard to Russia, there was a concept that they were reluctant to invest in Russia because they were not confident whether their investment will bring fruit or not. So But your policy, the Russian policy is now opening the window, opening the channels, so I think in sha Allah it will be in future we may hope that the people are interested to invest in Russia in sha Allah. You told us that you are a lot criticized by some American scholars. Why do they criticise you? This question should be asked from them why are they criticizing me. But you know, many of them do not want Islam to be presented in an acceptable form. They are against Islam. They feel that Islam is their enemy. They feel that Islam is the name of terrorism, etc. So this is some kind of propaganda that has been raised. But at the same time, even in the US, there were people who alhamdulillah, wrote in favour of Islamic finance, they are in my favour It was the George Washington University for the first time that named me as among 500.. top 50 top six… top 50 of most influential persons. And there were many articles written by those who had studied Islamic finance, studied my books, there was also a praise from them towards me. Many articles in US papers were published in my favour. Justice Usmani, please tell us… Did you change while your really long life your opinion about any important
aspects of Islamic finance? If yes could you give us an example of some issue you
have a different opinion from opinion you had in the past I am always open to any argument raised before me. So I have retracted from many fatwas that I have issued. I have a series of this kind of fatwas which are issued in my monthly magazine Al Balagh But so far as Islamic finance is concerned, I don’t think that I have reverted back from any decision or any fatwa about Islamic finance. But on other matters, I have retracted from some views. Justice Usmani, I have maybe two last questions. Of course Islamic finance community knows who your son is but please, could you tell us a few words for non-professionals about your son. Alhamdulillah Allah Subhanahu wa Taala has mercy on me that Allah S.T. has given me such a son. Alhamdulillah he was educated in Jamia Darool Ulum first, and then he has Alhamdulillah competence in fiqh and Islamic studies. Then he did his PhD in Islamic finance. Now he is one of the most known figures in the field of Islamic finance in the UK, USA, Australia, Sri Lanka. He sits on the sharia boards of many Islamic financial institutions. And he has the first… according to my assessment, if I am not exaggerating because he is my son, but alhamdulillah I have been working with many banks throughout the world. I have been working with HSBC, Citi Islamic Bank, many other banks. But I did not see such a big department of sharia compliance as he developed in Meezan Bank. About 60 people under his supervision are working for sharia compliance and development of new products for Islamic finance. Alhamdulillah. And his book is more detailed in Islamic finance than my book. Is he more conservative or less
conservative compared to you He is more… He reflects my opinions, in fact. But his book on Islamic finance is more detailed and more touching the practical issues of how to run an Islamic finance institution. Justice Usmani, you spent two days in the Higher School of Economics university You had a speech while the plenary and you have all you had your personal honourable lecture. What was your impression coming from the university? Did you like it or not? And is it similar to your University where you serve as a vice rector? What is your opinion? My impression is very good, praise to God. I found the university very useful for all the humans, including Muslims. I was very happy that it is an open-minded university. It has no bias against anyone. And then, I was given an opportunity to present my opinions about Islamic finance and I was so impressed that I am thinking of learning Russian language at this old age. And maybe the last finishing question Justice Usmani, what would you like to wish to Russian Muslim people and maybe to Russian people [in general] I would advise the Muslim people here in Russia that they develop a very understanding atmosphere with their fellow countrymen. And there should be good understanding, a good manner of peaceful coexistence, they should be ready to follow the laws of the country and also I would advise the Russian people to lift these barriers barriers of religion, barriers of races, and have sympathy for each other. Also to be open to the other world with understanding, In sha Allah it will develop more relations between the countries, between the different parts of the country. Justice Usmani, thank you so much for the
interview I know that this is the second time you are in Russia but I believe that you come to us the third time, the forth times, and the fifth time
for both business [pusposes] as a member of our Council and even for non-businesses
issues just as our friend thank you so much in sha Allah! Thank you so much. I would be very grateful for this kind of hospitality and in sha Allah I hope, if I live long, then I have some opportunity to come to Russia again and again.

Jean Kelley



  1. MuslimEco Исламская Экономика Posted on June 24, 2019 at 8:52 am

    Субтитры с переводом на русский язык будут доступны

  2. MuslimEco Исламская Экономика Posted on June 24, 2019 at 9:52 am

    00:25 – food security in the Muslim world
    02:42 – why the majority of Muslims do not use the islamic finance services?
    06:28 – Is Islamic finance more expensive in comparison to conventional finance?
    09:08 – Do Islamic banks use the fractional reserve system?
    10:30 – what is the concept of risk in Islamic finance?
    12:50 – What is the situation with the rating agencies in Islamic finance?
    16:22 – the potential sukuk issuance in Russia
    18:03 – what are the typical mistakes in attracting investments from Islamic markets?
    19:43 – why sheikh Muhammad Taqi Usmani is criticised by American scholars?
    21:40 – Did mufti Taqi Usmani change his opinion on any important aspect of Islamic finance
    23:00 – a few words about Mufti’s son Imran Taqi Usmani
    25:36 – about sheikh’s visit to Moscow 2019 and impression on Higher School of Economics
    26:53 – Mufti Taqi Usmani’s advice to the people of Russia

  3. MuslimEco Исламская Экономика Posted on June 24, 2019 at 11:42 am

    Correct English subtitles are available

  4. Fahim Khan Posted on June 25, 2019 at 10:43 am

    Not as a comment but as a support to Mufti Sahib's interview, I will say the following
    The interviewer raised some important issues of International concern relating to Islamic Economics, such as
    food security
    islamic banking
    Islamic credit rating
    any distinct economic aspect of Islamic finance to attract world
    and several other economic issues
    I think it was not appropriate to put only a Sharia scholar on explaining such economic issues. These were economic issues and Islamic Economists should have been in the interview with Mufti sahib. World is more interested in understanding economic aspects of Islamic finance rather than understanding rational justification of Sharia aspect of Islamic banking.
    In my next comments, I will be giving my brief view in the above mentioned issues in economic perspective.

  5. Fahim Khan Posted on June 25, 2019 at 11:04 am

    Food security issue addressed to Mufti Taqi Usmani sahib
    Following my earlier comment:

    I just draw attention towards the Food security plan that the world known Dr Mahbubul Haq suggested when he was Economic Minister and de facto prime Minister of Pakistan. The plan was to involve Pakistan, Sudan and Egypt to make a food security plan for the whole world. This plan despite being economically feasible, in all aspects, could not go through. I will not explain the reasons for this plan not to go ahead. Those who knew why Muhabubul Haq was thrown out of world bank by writing a book on poverty curtain and also why he was removed from the position of Economic Minister, will understand the reason for failure of Mahbubul Haq food security plan. Those interested to know more details about the plan should contact me individually.

  6. GoLden wOrld Posted on June 28, 2019 at 3:34 pm

    The voice of mufti saheb is low. Cant listening

  7. syed Posted on July 7, 2019 at 8:41 pm

    Most knowledgeable Islamic scholar Mufti Muhammad Taqi Usmani

  8. Ahsan H Posted on July 10, 2019 at 5:21 am

    Thank you for this video. The audio quality could have been better.

  9. sheraz butt Posted on July 11, 2019 at 6:28 am

    Mashallah ❤️ ❤️

  10. Sajidfarooqi Posted on July 27, 2019 at 11:18 am


  11. Ureem Thumeim Posted on November 16, 2019 at 3:31 pm

    Cannot hear a word from.Mufti sb. Very bad very bad. Useless video.

  12. amjad nazir Posted on December 22, 2019 at 1:57 pm

    The voice of mufti sb is barely audible whereas that of the interviewer is loud and clear
    Can anyone explain why is it so ?