These questions are specifically for academic debate.
Greetings, I am a student of Islamic Finance, and believe that true Islamic Banking would be the most ethical banking system than any other system we currently have at present.
However I do not believe that the Islamic Banks we have at present represent the true spirit of Islamic Finance. As I am very interested in seeing a world with true Islamic Banking, I feel it is important to discuss things that can help bring about true Islamic Banking.
The issue I want to address here is to do with fiat money. I personally think that banks cannot truly be Islamic so long as they operate within a fiat money system, and my reasons are as follows:
Fiat money goes against many of the core principles of Islamic Finance:
Fiat money is not backed by anything and can be printed at will by central banks. This means that central banks can cause arbitrary inflation, i.e arbitrary growth, which as I understand it is basically Riba, which is prohibited under Islamic Finance.
Furthermore, Islam clearly supports the use of Gold and Silver as money. Another key Islamic Finance principle is that all financial transactions should be backed by real assets. However fiat money in itself is not a real asset, as it is subject to arbitrary inflation and therfore its value can change a lot over time.
A lot of people complain about Islamic Mortgages. The primary complaint is that the fact that people who buy the house on credit are subject to a higher price. Some people argue this is riba. The banks however argue that the higher price charged is not because the transaction is on credit, but that the increased charge is to reflect what the price of the property is likely to be in the future. My point of view is that the price of the property is only likely to increase in the future mainly because of inflation, which is itself riba, and so the banks charging extra is still riba.
In summary, Fiat money is un-Islamic money. Can we really have Islamic Banking using un-Islamic money?
I believe that the world needs to abandon this fiat money experiment that is ultimately going to fail, before we can have true Islamic banking.
What do any of the readers think? I welcome all opinions, and appreciate any insight that anyone would like to share. I am highly interested in investigating all the conditions neccesary for the world to enjoy the socio-economic benefits of true Islamic Banking.