Saudi lender to impress on RBI to introduce Islamic finance

Stating that Islamic finance offers advantages like lower bad loans, an arm of Islamic Development Bank (IDB) today said it will impress upon RBI to introduce the alternate way of finance in India.
"We would like to understand their views on Islamic finance in general and if they feel it is applicable to India, we would be very happy to support it. We can see how we can collaborate," Khaled Mohamed Al-Aboodi, chief executive of the IDB's private sector arm, Islamic Corporation for the Development of Private Sector (ICD), told reporters here.
Stating that he is meeting RBI officials during his visit and would discuss the issue with them, Al-Aboodi said the "collaboration" can be on making the apex bank understand the concept and benefits of Islamic finance.

He said the problem of bad loans is very minimal in Islamic finance because the bank, which owns the collateral 'loaned' to the borrower, works as a partner rather than as a financier alone.
Islamic finance can also help the small businesses and is of help from the stability perspective, he said, adding this stream of finance was unaffected by the 2008 global credit crisis.
"I think it will be beneficial to the economy...It will help social exclusion, SME sector. It will add value to economy and the country," he said, adding it is for the regulator to decide on introducing this system.

He said the IDB has been successful in impressing the need for Islamic finance to other central banks in the world.

The IDB is also keen to start interest-free lending in the country, he said, adding this can be done through setting up of a special fund which allows it to undertake activities in non-member countries.
Ahead of Prime Minister Narendra Modi's visit to Saudi Arabia, Al-Aboodi said the bank, headquartered in Jeddah, has decided to launch a USD 1 billion fund to finance construction of residential facilities for Indian Haj pilgrims at Mecca.
The Indian Consulate General in Jeddah has been provided with a draft Memorandum of Understanding on this, he said.

The IDB has set aside USD 50 million for launching e medical mobile units in rural India and is in the process of identifying NGOs which can act as partners for the initiative, he said.
The IDB Group has been present in India since 1983, when it started a scholarship programme under which 4,190 students have benefited, he said, adding t has also helped 250 other projects in the country.