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Islamic Banking in Kerala
Kerala set the stage to start first Islamic non banking finance company (Al Barakah Financial Services Ltd) in India with the partnership of state government department (Kerala State Industrial Development Corp-KSIDC) after dismissal of petition filed by Subramaniam Swamy and RV Babu in High court. Barakah would be a unique company with an authorized share capital of Rs.1, 000 Crores and would perform on the principles of Islamic financial institution. Al Barakah will not operate as a bank and extend loans but make direct investments into infrastructure projects not linked with pork, alcohol and other non Halal products, after which profits would be shared in the form of dividends and not as interest. KSIDC has 11 percent stake and rest would be raised by NRIs and state Muslim population. The Al Barakah promoters' team has P Mohamed Ali as chairman, CK Menon and MA Yusuf Ali as vice chairmen, and PNC Menon (Shobha group), Siddique Ahmed ( Saudi Arabia )), EM Najeeb (Air Travel Enterprises), Abdul Wahab, PA Ibrahim Haji, and PK Ahmed, and two representatives of the KSIDC, namely T Balakrishnan and VKC Mohammed Koya, as the other members. The final board will be constituted after investors pick up stakes in the company.

Kerala has cosmopolitan society with the mixture of different faiths. It has a reputation of being, communally one of the least sensitive states in India. According to the 2001 Census of India figures, 56% of Kerala residents are Hindus, 24% are Muslims, 19% are Christians, and the remaining follow other religions including Sikhism, Jainism, Buddhism, Judaism. In oppose to common perception that initiative of Islamic financial company has been taken by state government to woo the Muslim voters, we analyzed that financial company based on Islamic finance will attract the Muslim emigrants of state from gulf region NRKs to invest the money in infrastructure projects based on Shariah principles instead of keeping the same in cash form. As per CDS report for the year 2008, Muslim constitutes around 40% shares of total emigrants of Kerala. Muslim has almost 45% percent share (18998 crore INR) of total state remittance flowing to state from overseas.

As per the report “Inflow of about Rs 43,288 crores to the Kerala economy by way of remittances has had a very significant effect on the state’s economy and the living conditions. For a total population of 3.371 crores in Kerala in 2008, the total Remittance of Rs 43,288 crores means an average per capita remittance of Rs 12,840. For an average household, it is Rs 57,215 per year. Remittances thus contribute substantially to the annual income of the households in Kerala. Remittances were as much as a third (31 percent) of Kerala’s NSDP. The per capita income of the state was Rs 41,814 without including remittances but would be as much as Rs 54,664 if remittances were also included. The importance of remittances in Kerala is evident from the fact that remittances were 1.74 times the revenue receipt of the state, 5.5 times of the money Kerala got from the Central Government, 2.3 times the annual non-plan expenditure of the Kerala Government. The remittances were sufficient to wipe out 70 percent of the state’s debt in 2008. Remittances were 36 times the export earnings from cashew and 30 times of those from marine products.”

All these aforementioned facts indicate to the positive results which would reflect in state economy by incorporation of Islamic financial company. After getting the consent of High court, Kerala industry minister Elamaram Kareem said "There is enormous interest among Gulf-based NRIs in investing in Kerala through the Shariah route. There has been an offer to bring in Rs 10,000 crore from Oman alone, through the initiative of Muscat-based Keralite businessman, P Mohamed Ali",

"The interest in the proposed NBFC is so strong, that immediately after it was floated a large corporate with interest in multiple domains sought 74% stake in it, and the Doha Bank expressed desire to pick up a 46% equity", says Kareem. 

After introduction of Shariah index in Bombay stock Exchange (BSE), it is second serious attempt to include the Indian Muslim in mainstream financial setup and certainly would be milestone to achieve the inclusive growth vision of country.


Islamic Banking in Kerala
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