Islamic Banking in Mauritius

What is Islamic banking?

Last week one of my colleagues at the APM club could not attend a seminar because he was attending a curse in South Africa on Islamic banking. I recall a few years ago, my very good friend Eric, was sent to Malaysia to study Islamic banking and financing. Chota also years ago, was involved in setting up investment portfolio of shares from the Mauritius stock exchange that were compliant with Islamic rules. I heard that Chee Peng Tan who I knew years back will be organizing some seminars in Mauritius on the same subject.

The accumulation of the recent events moved me to look closer in the subject and possibly to refresh and upgrade my knowledge thereon. As far as I recall there was a strong element of social equity in the practice of Islamic banking, earning interests on money was not allowed and also there was prohibition in investing in economic activities which were in opposition to the Muslim faith such as: liquor, gambling, pork, drugs.

Admittedly, if Mauritius has aimed to be a world financial center or at least a meaningful regional financial center: the operators have to provide service to this type of funds which are growing in leaps and bounds. Could Mauritian institutions join the Lariba Islamic Banking network? I would well imaging that a large amount of the petro-dollars are invested through Islamic Banking.

What I gathered in summary:

Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Islamic banking is an instrument for the development of an Islamic economic order. Some of the salient features of this order may be summed up as:

  1. While permitting the individual the right to seek his economic well-being, Islam makes a clear distinction between what is Halal (lawful) and what is haram (forbidden) in pursuit of such economic activity. In broad terms, Islam forbids all forms of economic activity, which are morally or socially injurious.
  2. While acknowledging the individual’s right to ownership of wealth legitimately acquired, Islam makes it obligatory on the individual to spend his wealth judiciously and not to hoard it, keep it idle or to squander it.
  3. While allowing an individual to retain any surplus wealth, Islam seeks to reduce the margin of the surplus for the well-being of the community as a whole, in particular the destitute and deprived sections of society by participation in the process of Zakat.
  4. While making allowance for the ways of human nature and yet not yielding to the consequences of its worst propensities, Islam seeks to prevent the accumulation of wealth in a few hands to the detriment of society as a whole, by its laws of inheritance.
  5. Viewed as a whole, the economic system envisaged by Islam aims at social justice without inhibiting individual enterprise beyond the point where it becomes not only collectively injurious but also individually self-destructive.

The Islamic financial system employs the concept of participation in the enterprise, utilizing the funds at risk on a profit-and- loss-sharing basis. This by no means implies that investments with financial institutions are necessarily speculative. This can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions.

It is possible, that investment in Islamic financial institutions can provide potential profit in proportion to the risk assumed to satisfy the differing demands of participants in the contemporary environment and within the guidelines of the Shariah.

The concept of profit-and-loss sharing, as a basis of financial transactions is a progressive one as it distinguishes good performance from the bad and the mediocre. This concept therefore encourages better resource management.

Islamic banks are structured to retain a clearly differentiated status between shareholders’ capital and clients’ deposits in order to ensure correct profit-sharing according to Islamic Law.

Could some of the funds handled in Mauritius be ‘Islam finance’ compliant?

I fully subscribe to the statement below which have to be read without any religious undertone:

We Advocate Socially Responsible Investing. We DO NOT Invest in Alcohol Related Businesses, Gambling, Gaming, unhealthy food products and Unethical Activities. We do not invest in Businesses that harm the Environment and that does not treat its employees and customers fairly. We are Sensitive about who we deal with. We scrutinize our customers and investors as to their character and community standing.


#1 Najaah Juman on 10.09.08 at 1:31 pm

I think its really interesting and will be favorable for Muslims in Mauritius.

#2 HM on 10.09.08 at 2:08 pm

In my opinion, Islamic banking is a very good system and Mauritius needs to introduce it. Everyone will benefit from a ‘pure’ economy as it complies with the Shariah. I cant wait for its implementation!!!Insha Allah it will be soon coz i want to find a job in this sector.

#3 Imraan on 11.29.08 at 6:26 pm

Hi Joseph,

Islam is a complete way of life and gives us guidance on all aspects of life – not only the spiritual portion. The chievement of justice is one of the objectives of shariah. Hence Islamic Finance is a just system, because risks are aportioned and both the lender and borrower share in the risk- in the traditional banking we have seen how many people suffer when they take a loan from the bank and through misfortune cannot repay the loan- The bank which uses the shylock principle will never lose – only borrowers are losers- We can see how much profits banks are making when they create money without money.Everybody can benefit from such a system. Imraan

#4 shaheen unuth on 12.11.08 at 1:34 pm

Dear Sir/Madam

I would like to have precise information concerning Islamic Banking in Mauritius.

Thanking you in advance.

Yours sincerely

Shaheen Unuth

#5 joseph on 12.12.08 at 1:33 pm

What precisely do you want to know concerning Islamic Banking in Mauritius? I am not an expert in the subject myself,all that I know is that regulations are in place in Mauritius to allow the practice of Islamic banking.

#6 abm on 01.30.09 at 1:45 pm

Islamic Banking provides a just and fair deal to the customers and satifies the principles justice and fairness.

Leave a Comment