ARAB NEWS: Interest-free finance will boost development: Kerala minister

By ARAB NEWS

Published: Mar 2, 2011 00:58 Updated: Mar 2, 2011 00:58

MALAPPURAM: The launch of an interest-free financial firm in the south Indian state of Kerala would have a dramatic impact on development activities in the state, Finance Minister Thomas Isaac said on Tuesday.

Opening a seminar on "Prospects of interest-free banking" at the Town Hall here, Isaac said the availability of funds without interests would boost development projects across the country.

The seminar was organized by the Kerala State Industrial Development Corporation (KSIDC), which has 11 percent stake in the newly launched Al-Baraka Financial Services, which operates on Islamic principles.

"We hope that we can mobilize 400 billion rupees through interest-free investments," the minister said, adding that the money would be invested only in Shariah compliant projects such as development and infrastructure projects.

Industry Minister Elamaram Kareem, who presided over the seminar, said Al-Baraka would play a significant role in financing major projects such as the Southwest rail corridor and Coimbatore-Kochi corridor.

"In a secular country like Britain, where Muslims account for only three percent of population, there is an Islamic bank with seven branches," Kareem pointed out. He hoped Indian banking regulations would be changed to accommodate Islamic banking services.

The seminar comes a month after the Kerala High Court dismissed writ petitions filed against the government's sanction for the operation of Al-Baraka on Islamic principles with the support of KSIDC.

Al-Baraka's 14 promoters have contributed 40.2 million Indian rupees toward the company's capital. Prominent Gulf-based businessman P. Mohammed Ali is the chairman of the company's 17-member board of directors, while C.K. Menon is vice chairman.

Last year, Prime Minister Manmohan Singh asked the Reserve Bank of India to study the prospects of introducing an interest-free banking system in the country. "There have been demands for experimenting with Islamic banking in the country," Singh said.

There are nearly 500 Islamic finance institutions worldwide, managing $1 trillion in assets. Indian Muslims, who number more than 160 million, have been demanding permission to run interest-free banking services for quite some time.

In Kerala, Muslims form the second largest community and account for close to 24 percent of the 32 million population. Out of 1.85 million non-resident Keralites in 2007, nearly 50 percent were Muslims and accounted for half the remittances into the state.

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