» Criticism Against Islamic Banks

Sharp Criticism Against The Islamic Banks for Their Ineffectiveness in Supporting
The Small Enterprises
A number of experts that participated in the Tenth International Conference for Islamic Economics and Finance held in Doha at the end of March, have strongly
criticized Islamic banks for failing to support and finance small enterprises and micro-enterprises.
They stated that the banks have adopted the same criteria used by traditional banks with respect to exaggerated requests for guarantees and a preference for zero risk products. They called for the revival of the principle of Islamic Waqf to be applied in order to support these enterprises.
In this respect, Dr Abdul Rahim Al-Sa'ati, the manager of Research and Consultation Centre in Saudi Arabia said that Islamic Finance, on the theoretical level, is able to combine money and other production elements to create an added value. Hence, it is a risk-based financing that participates in establishing a real Economy.

Social Finance
Al-Sa'ati stated that Islamic Finance is social by nature as it focuses on the production of goods and real services that generate job opportunities, meet society's needs, and expand investments.
He also stated that the majority of Islamic banks in their current forms target the rich, focus on financing large companies, and disregard financing small and medium enterprises due to the larger risks that they bear.
He defined the current Islamic banks as Shari'a compliant banks that use Shari'a contracts to offer all the services performed by their counterpart traditional banks.
Islamic banks target the same clients.
Professor Soliman Nasser at Université Kasdi Merbah Ouargla in Algeria stated that a lot of Islamic banks do not finance small enterprises and micro-enterprises for several reasons including the lack of sufficient guarantees with the enterprises' owners.
He asserted that a lot of banks, including the Islamic ones, exaggerate the need for guarantees from the enterprises managed by young people, as they fear that these enterprises are exposed to failure due to the lack of experience of their owners.
Therefore, he called for Islamic banks to be courageous enough to finance small enterprises for social and ethical responsibility in order to participate in limiting unemployment and poverty.

Central Banks Intervention
Professor Nasser suggested that unless Islamic banks respond positively, the central banks will intervene to impose targets for their financing portfolio to support small enterprises as in Sudan. There, Islamic banks set aside 12% of their annual financing to small enterprises under the supervision of the central bank.
In addition, he suggested that the governments should sponsor the owners of small enterprises starting from studying the enterprises to their actual achievements due to the huge role these enterprises play in providing jobs and combating unemployment.
However, Head of the conference Hatem Al-Qarnashawy, believes that the cause is that there are many institutions that work on supporting small and medium enterprises, so a number of Islamic banks have turned away from this type of support. “Islamic banks do not play a satisfactory role in this respect.” said Al-Qarnashawy to Al-Jazeera Net.
Professor Raheem Hussien at Université d'Alger presented a research paper to propose establishing a “Monetary Waqf Fund for Microfinance” as a principal mechanism of Islamic Finance mechanisms and a sociable financial broker to support small enterprises.