Page 3 - Islamic Finance Practices

Convergence in Practice

But reality bites as signs of converging into
mainstream banking practices are painfully visible

that brought questions of substance over form.

When tawaruq and Murabaha instruments began

behaving like interest-bearing loans, convergence

seemed imminent. Converging means possible

exposures to the danger of fragility as well as the

injustices that riba creates in a lender-borrower

relationship. One is fragile if he avoids disorder

and disruption for fear of the mess they might
make of his life: he thinks he is keeping safe, but

really he is making himself vulnerable to the shock

that will tear everything apart. Fragility in Islamic

banking will mean failure to stay resilient to shocks

arising from its debt dependent system that it

should be free from in the first place.

According to IMF (2017), hybrid financial products

emerging in Islamic banking have

replicated aspects of conventional finance, raising

financial stability concerns. It supports earlier

studies indicating that both the Islamic and

conventional banking systems are vulnerable to

macroeconomic and financial shocks. This is

despite the popular belief that the Islamic financial
system can weather financial shocks relatively well

due to its interest‐free nature. It somewhat

contradicts suggestions that the interest‐free

banking system is able to insulate the monetary