In what could be a major breakthrough for Sharia compliant banking, the industry body has launched a manual discussing how to establish and operate sharia compliant credit unions in developing countries which could help to broaden the Islamic finance industry’s retail customer base. With the exception of Islamic insurance, the co-operative financing model of credit unions is not widely used in Islamic Finance.
The U.S. based trade association which operates internationally, hopes the manual will help to develop Islamic credit unions across a wide range of markets. Brian Branch, the World Council’s President and Chief Executive said “The manual now provides a cornerstone for local credit union development in countries as diverse as Libya and Pakistan to Australia and the United States, we believe the guide is complete, but we also recognize that this is an ongoing project as Islamic finance spreads to other credit union systems”.
The council used its nine year experience establishing co-operatives in Afghanistan to create a manual that follows Islamic principles which bans the payment of interest on monetary speculations. In a media statement, Branch said “The manual is written to be adaptable to contexts outside Afghanistan as well, and we understand there are other credit unions applying the manual to varying degrees for Islamic finance windows”.
According to the council, there are 30 Sharia compliant credit unions in Afghansitan, comprising the world’s youngest credit union movement and the only one to claim full compliance with Islamic laws.
Islamic Credit Union
The Amwal Credit Union was the first Islamic Credit Union in the world established in 2009 by The Arab Chamber of Commerce and Industry with the goal of helping Muslims to adhere to religious restrictions in their finances and a place for non-Muslims to bank in an ethical and equitable manner. The first Sharia Advisory Council was established by the Arab Chamber in Hong Kong consisting of experts in the Islamic code of law.
Based on profound religious belief and humanitarian sentiment, the holy Quran clearly forbids the receiving or payment of interest, or Riba. According to Quran, money is only a medium of exchange; it should not be used to produce more money. Human effort, sacrifice and risk taking is important than the payment of interest. In the 1950’s Muslims began experimenting with banks and organized community financial institutions.
Muslim societies are almost entirely lacking in information about what credit unions are and how to organize and run credit unions as per Islamic law. Documentary materials, training in Islamic credit union operation and technical assistance were unavailable, but now with the successful launch of the manual it will help the Islamic credit unions to adhere to a code of conduct and comply with the principles of Islamic law.
World Council of Credit Unions Launches Manual for Islamic C