The Islamic Finance Handbook: A Practitioner's Guide to the Global Markets

Chapter 9IndiaDawn of a New Era?

H. Jayesh

Founder and Partner, Juris Corp

There is no reliable data that gives us an accurate estimate of the Islamic finance market in India. The market is at a nascent stage with only a few Shari'ah-based funds in existence. The potential for the market to grow is immense, given the large Muslim population of 13.4 percent, according to the 2001 census. Islamic finance is not completely alien in India. Various communities in different parts of India have been using interest-free financing to facilitate trade and commerce, especially within their respective communities.

In the early 1980s, a few small financial institutions and self-help groups were providing Shari'ah-compliant credit to local communities. Greater competition in raising funds for financing and increasingly stringent regulatory norms for financial institutions have resulted in most such institutions shutting down. Another challenge that these institutions faced was their inability to grow quickly enough to establish a meaningful local or regional presence, let alone a pan-India presence.

The market today remains highly fragmented, with a few small areas having Islamic financing while the country at large remains ignorant of its benefits. Among the challenges are a general lack of awareness among the population and a lack of scholars with sufficient knowledge of and expertise in Islamic finance.

Nevertheless, certain groups have been actively involved in Islamic finance activities ...