Review of Islamic Economics, Vol. 8, No. 2, 2004
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for their being in business. For Islamic banks too profit adequacy is a
survival requirement/4 But if we look at the bigger picture a more
basic question that stares us in the face is: can a business performance
appraisal be independent of the broader priorities of a social
organism? Past history and current practice both answer in the
negative.
Mainstream economics primarily does not look beyond the cost
profit criteria in evaluating the efficiency of a productive unit, simply
because private enterprise operating through the market is the raison
d’être of a capitalist society. While Islam does accommodate many
features of capitalism, it aims at establishing a quite distinct social
order.
All societal institutions including banks must help in the building
of that order and must respond to its demands. The requirement is not
only the formal abolition of interest but, more importantly, the
eradication of the ulterior motives that prompt the seeking of an
Islamic cover for interest.25 Social organization in Islam is inspired by
the central notion of amanah, the focus on fulfilling the basic needs of
human beings, promoting mutual help and cooperation. It makes the
seeking of professional skills and enterprise a fard kifâyah, and
commands justice in all facets of human relationships, especially in
the distribution of wealth and income.
The performance of Islamic banks must be judged primarily with
reference to the extent they help in building this sort of society. Once
they pass and stay above the break-even points, profit can be, in a
measure, traded for promoting Islamic norms. We need not judge the
Islamic banks’ performance entirely on the mainstream criteria or
compare them with conventional units on their basics. The social
objectives of business in Islam moderate worldly temptations; people
are required to overcome the relentless pursuit of profit in business.
Islamic financial institutions have mostly been designed on the
pattern of commercial banks in terms of their outlook, objectives,
procedures, training and modus Operandi. But they are expected to
undertake project financing, long-term risky ventures, and address the
social aspirations for economic development. They hardly have the
structure, aptitude, environment, or personnel to do what we think
they must to do. And discussion on the crucial structural issues is rare
in the literature. Rather, one comes across explanation, even