The Hindu Business Line : Shariah-compliant products can help unlock trillions of dollars

The funds collected are not for the purpose of accumulating/ paying interest or invested in any negative businesses that harm morality of the society. All transactions are backed by assets with no guaranteed rate of returns.

Chennai March 27 Islamic finance is growing at a rapid pace of 15-20 per cent per annum globally, and is currently estimated to be worth about $300 billion, says Mr Hanuman Tripathi, CEO of InfrasoftTech (www.infrasofttech.com) . The company, which has its software development centres in India and London, offers `OMNIEnterprise Islamic Banking Solution', first adopted by the European Islamic Investment Bank, UK in 2006.

"InfrasoftTech has built a portfolio of 25 financial institutions in the world market that are in the process of finalising or implementing Shariah-compliant Islamic finance technology solution," he says.

Business Line interacts with Mr Tripathi to know more.

What is Islamic finance?

The basic principle of Islamic banking is the prohibition of Riba- (usury - or interest). Islamic banking product offerings are similar to what normal banking products offer, however the main difference is that Islamic banks ensure that each of their product offerings is Shariah-compliant, which means that the funds collected are not for the purpose of accumulating/ paying interest or invested in any negative businesses that harm morality of the society.

Also, all the transactions are backed by assets with no fixed rate of return guaranteed on the investment. Profit and losses are shared as agreed at the time of signing a contract. People often misunderstand Islamic banking as a form of business that is merely devoid of interest.

In reality, Islamic finance has sophistication that requires complex business processes to be incorporated and dual compliance to be managed at the financial institution level.

How widespread is Islamic banking globally?

Islamic banking or Shariah finance is not new, but it caught up in the past 3-4 years, in unexpected financial capitals of the world such as the UK and France, over and above Islamic geographies like Indonesia, Malaysia and Middle East countries.

Retail and investment banking Shariah-compliant products are helping to unlock trillions of dollars of funds lying idle with high-networked individuals and corporate world globally, who follow Shariah principles in their day-to-day business and investment and thus would not participate in usual financial transactions.

On the Indian market for Islamic finance.

Ideally India with a 13 per cent Muslim population, the highest in a non-Islamic country, should have been in the forefront of Islamic banking initiatives. Given the trends and fantastic growth rates in Islamic banking sector, it is only a matter of time before Islamic banking is permitted in India. It will bring in greater competition and enhanced returns to the investors who will have alternative investment opportunities.

It is also expected to hugely benefit the Indian economy by attracting investments from the Middle Eastern economies on the lookout for new investment destinations, nearer home.

What are the unique features of your products?

Growth of any new business model in financial services is heavily dependent on availability of the right technology to meet customer services expectations, operations and compliance. InfrasoftTech has been a pioneer in launching a full service enterprise wide technology solution that provides end-to-end automation of retail, wholesale and investment banking services that are fully Shariah-compliant.

We believe all the sophisticated financial products one sees in the global markets today, would be available in Shariah-compliant business processes, including project financing, bonds trading, exotic derivatives, wealth management, and private equity.