Current accounts in most Islamic banks have been conceptualized as loans, ergo it is impermissible – in the view of most modern jurists- to pay or charge an interest rate on the account. While most conventional banks do not provide any sort of interest payment unless a initial minimum deposit is made, most still provide free services for account holders, such as free checkbooks, with many offering discounted or free no-frills services to students and the elderly.

One of the main criticisms of Islamic banking has been the fact that instead of it meeting the needs of the lowest common denominator, it has largely served to enrich corporate interests and line the pockets of multi-national banks with “Islamic” windows.

Far be it from me to say seeking wealth is impermissible, but further inquiry into this issue is past due. It becomes particularly scandalizing to see an industry prided with claims of ethical behavior and divine preeminence used as an instrument of enrichment while neglecting the larger ethical principles involved in justifying the industry as a whole.

Discussing these larger ethical guidelines that Islamic law strives to ensure, Ibn ashour says:

As I mentioned in the previous chapter, the most important objective here is preservation and economization of this nation’s wealth. This nation’s wealth, whence viewed as a whole, is preserved through regulating the manners by which it is managed generally, in addition to the manners in which individual wealth is preserved and managed. Preservation of the whole depends on preservation of its components; the majority of Islamic legal principles dealing with wealth relate directly to the preservation of individual wealth, which in turn preserves the wealth of the nation; there being a direct correlation between the benefit of personal wealth and the benefit of public wealth in relation to the prosperity of the nation.

Key here to this discussion is his mention the “Preservation of the whole depends on preservation of its components“. While this may be true, it is evermore problematic to preserve components that serve the exact opposite of the whole they claim to maintain.

Back to current accounts. Considering current accounts to be loans, means account holders can neither receive nor ever expect to receive any return on their deposits, regardless of the amount. Fine. But when you take into account (no pun intended) the fact that most Islamic banks do not offer investment accounts for retail clients (at least for clients that have less than 10k US in their possession) the dilemma remains. Add to this that Islamic banks charge fees for accounts that do not maintain a minimum monthly balance, and your wealth will probably earn more under mattress than in a current account. To say the least you won’t earn enough to at least pay zakat with at the end of the year.

What to do? Either create an Islamically “viable” solution to offering a return on deposits, make the deposit holder a shareholder in the bank (much like a credit union), or uphold the status quo and support the current framework.

This is the premise of a paper I am working on, part of a larger research interest. The standing system has been veraciously defended (something to be fed up to the back teeth about), and arguments for mutuality have been made. Granted mutuality has not been researched in the relentless fashion that the current system has, I doubt that Islamic banks (and those that support them) will move anytime soon to converting to Credit Unions.

A more equitable solution is in line that would satisfy the needs of all parties involved, the larger ethical objectives of Islamic law, and the pre-modern legal precedents that are the mainstay of Islamic Financial product creation.

A tall order indeed!