The extent to which these banks can benefit from technology differs according to laws and the electronic infrastructure in which these banks exist between a legal advanced electronic system and one that is underdeveloped. However, the services offered by Islamic banking have not benefited from modern technology in the way that they should have; most transactions that take place within the Islamic banking sector are conducted manually and this leads to delays in procedures, paperwork, and in some cases violation of rulings issued by the legitimate authority as a result of human error.
Perhaps the reasons that Islamic banking services are not benefiting from modern technology lies in the short-sightedness of those in charge of this sector as they overestimate the expensive costs of technological advancement that is required in order to benefit from it without actually considering the anticipated advantages.
Moreover, supervisory bodies have failed to adopt the approach of technological development in Islamic banking and in turn this leads to a lack of incentive for development from these institutions.
Some might question how technology may benefit Islamic banking services especially since Islamic banking is based upon mutual transactions such as Murabaha [where a financer, such as a bank, buys a commodity and sells it to the client at an agreed higher price] and Ijarah [where banks lease an asset to a client at a certain price and for a fixed period] and these result in ownership and partnership contracts [joint ventures].
The truth is that if we look at the level of online sales in the United States in 2007 that was estimated at US $259 billion (according to a report by the National Retail Federation) we will see that the use of technology in Islamic banking simply requires foresight and strong will so that e-commerce, after its significant development, can be utilised in completing Islamic banking transactions in terms of funding and investment.
For example, when a customer requires Murabaha financing in order to buy a car, he goes to the bank and fills in a request form (some banks allow this to be carried out via telephone or online banking). After this form is approved, the customer visits the bank once again to sign the form and the Murabaha document. The bank then asks the customer to choose the car that he wants by visiting the showroom that the bank deals with. The bank then purchases the car from the showroom and then signs the Murabaha document and the gives the customer permission to take the car from the showroom (some banks carry out the procedure at the showroom itself). This process, however, sometimes entails error on the part of some employees who aim to facilitate and shorten the procedure for the customer; for example, they may make the customer sign the Murabaha contract before the purchase is processed by the bank and this in turn nullifies the contract and outlaws the entire deal since the bank is trying to sell a product that it does not own.
What I hope for is that this process could be carried out through the Internet where the customer would make his request and then would be notified whether that request has been approved or rejected. If it is approved the customer is to sign the request form and the Murabaha document that is available on the website and accordingly the customer would be allowed to browse the various cars available at the showroom through databases. When the customer chooses the car, the bank then automatically purchases it from the showroom. This process is governed by a contract between the bank and the showroom explaining the mechanism through which this process is carried out as well as the ensuing legal commitments. The bank then sells the car to the customer on the basis of the Murabaha process via the bank’s website where the customer electronically approves the Murabaha contract and prints the receipt, which outlines the specifications of the car. This is then handed over to the showroom and the customer takes his new car. This series of procedures adheres to Shariah to realize the bank’s ownership of the car avoiding paperwork and human error; this is how technology could be used in the services of Islamic banking.
Shouldn’t the endeavour to advance technology to solve the problems of Islamic banking services be a priority rather than attempting to find loopholes?