Conceptual Framework-continues.
iii. Structuring banks to follow Islamic principles.
Conventional banks that are interested to offer Islamic financial services have to meet certain conditions as suggested by Sharia scholars in order to distinguish the two business segments. While the relation between the conventional bank and Islamic banks customer's differs, it is not limited to that of a bank and partner as stated by the Author. This faulty may be attributed by the authors bias towards other modes used by Islamic finance such as Wakala investment or Qardh or reverse Tawarruq modes, which expand the relationship beyond a bank and a partner on the liability side. On the Asset side of Islamic banks, the relationship between the bank and customers is diverse depending on the mode of finance employed. For example, under Murabaha mode, before and during sale, the bank is seller and customer is buyer, after sale it is bank-creditor and customer-debtor relationship. This fact negate such generic statements the author made claiming that "...in Islamic banking, customers are regarded as investors and entrepreneurs."
Failure to appreciate diverse relationships that exists in Islamic banks between the bank and customers, lead the author into failure to grasp flexibility of these other modes and their usefulness to mitigate risks such as agency problem. Besides,author alleges that "...the Islamic banks have two types of principal investment account holders (depositors and borrowers i.e. investors and entrepreneurs) and shareholders who have limited information compared to the management on applications of Islamic principles to the bank operations." This is not just incomplete but also shows lack of understanding on the subject author wrote about. Those two investment account holders, technically referred as Restricted and non-resticted investment account holders (depositors) and hence borrowers are not under any of above two categories. Furthermore, Islamic banks also maintain accounts for non-investment account holders.
iv. Competence of Sharia Supervisory Board (SSB).
Competence of SSB members is key ingredient towards Sharia compliance of products offered by Islamic banks and windows. Assessment of competence is crucial for Sharia-compliant status of the bank. However, Khan (2010) contention, though understandable it is nothing apart from hocus-pocus to say that "'most' of the Islamic scholars who are serving on SSBs are rent-seeking scholars, hence becoming mere rubber stamps." Review of profiles of members of SSB sitting in Islamic banks around the globe and even in Tanzania have demostrated required level of Sharia knowledge and experience on Islamic financial matters.
Methodology.
In order to gather evidence on the subject under study, the author uses two commercial banks (with Islamic windows)out of five banks that offer Islamic financial services. While sampling techniques and collection methodology of questinnaire and interview is sound and effective for this study, the author did not specify how many respondent were intended and how many responded and what is the respondents profile.
However, the Author pointed out briefly his respondents to have included member of SSB, Staffs perceived to have relevent experience in Islamic finance, head of departments and Islamic bank's/windows customers.
Anaylsis and Interpretation of Findings.
This is an area where author's bias is most evident. Let us examine his analysis on each criteria.
i. Compliance with Islamic principles of finance.
On all three sub-criterias under this criteria, the results showed majority of respondent's 'Dont Know' (66.7 and above) followed by those who gave positive response(High) and confident that the bank comply with Sharia rules, follow Islamic accounting and auditing standard and make ethical investment (20% and above). Those who gave negative response (low) constitute less than 7 percent under each sub-criteria. With this statistics, you can hardly draw meaningful conclusion on the thesis of the study.
ii. Selection of customers according to Islamic principles.
While in theoretical framework, the author alleged that Islamic banks are more inclined towards seeking customer's who are affilliated with the religion of Islam. The results of his study, has once again proved that customer's joining Islamic bank are not per se motivated by religious reasons but other factors. In this study, 71% compared to 23% did not opt Islamic financial services for religious reasons. If the allegation were true that religious reasons a significant criterion for Sharia compliance within Islamic banks, there will be systematic measures to achieve that. However as has been argued before, such practice has no base in Sharia and cannot be advocated by any scholar who understands Sharia principles.
One of the item that might have resulted into large per centage of customer's engaged in beer business is because the study doesn't describe those respondent were customer's of Islamic window or the onventional banks side. Author writes "However, during interviews with officials from these banks on implementing Islamic banking it emerged that the banks did not open accounts in the Islamic banking window for individuals and companies dealing with cigarettes, alcohol and gambling business."If this is so the case, then very little remains to write more on the flimpsy and shaky response given by respondent(s).
iii. Structuring of conventional banks to follow Islamic principles.
Once again a large portion of respondents asked under different sub-criteria, responded as "Dont Know". This may have been contributed by many factors which however not clear from the study. It appears that there is limited awareness on how conventional banks with Islamic windows implement Islamic banking principles.
Disclosing adequate information is a real challenge for Islamic windows which reports their financials under the conventional banking balance sheet without notes to disclose Islamic windows financial performance. This needs to be addressed by banks and regulator should persuade banks with Islamic windows to disclose such information. This will also enable to trace progress of Islamic banking n the country at ease rather than approaching each bank for such information during research studies or else.
iv. Competence of SSB.
It is not convincing to accept that respondents knows SSB members knowledge level on Islamic jurisprudence. Was it because the questionnaire had "Yes" and "No" option without "Do Know." I argue that this is highly unreliable information that this study has provided on this area. It is more confusing when you find higher positive reponse is given by respondents on members knowledge on Islamic Finance but lower score on members knoweldge of Islamic jurisprudence. I argue that, Islamic Finance is part of Islamic jurisprudence, hence it is not convincing to score high on Islamic Finance and low on jurisprudence.
Conclusion.
This study despite its weaknesses as discussed above, it shows that there is limited knowledge on Islamic banking among the employees of conventional bank's Islamic windows as well as the public which requires continuous measures to address. However, this is not peculiar to such banks in Tanzania, but more likely to be shared in other countries as well such as Kenya but also in countries with advanced Islamic banking such as UAE.
The author has tried to link his study with other studies to justify his findings and analysis, but such other studies need to be considered in their own context which may be very differrent with Tanzanian context. Furthermore, the studies referred have many allegations which are unjustifiable except in particular context which however not made clear by the author. For example, the author writes "These studies contend that Islamic banks are using the Islamic approach to gain advantages over their competitors by becoming more competitive through offering services based on religious financial discipline despite the investment procedures remaining similar to those for conventional banks." The author seems not to see the difference between those studies with what he found as he says; "However, during interviews with officials from these banks on implementing Islamic banking it emerged that the banks did not open accounts in the Islamic banking window for individuals and companies dealing with cigarettes, alcohol and gambling business." Definately, those studies have been proven incorrect in Tanzanian context particularly on investment procedures.
Taking the objective of the study in mind, this study doesn't provide convincing evidence with regards to Sharia non-compliance of Islamic banks (actually the study was based on Islamic Windows), but it contributes to the debate on how to ensure Sharia compliance in conventional banks, shed light on the need to spearhead Islamic banking awareness to the general pubic as well as having in place regulations that might tight hand conventional banks from exploiting Islamic windows for competitive gain per se at the expense of Sharia compliance.
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