Islamic Banking in South Africa: between the Accumulation of Wealth and the Promotion of Social Prosperity

Abstract

The banking sector is the cornerstone of modern economy. Muslims in South Africa have been utilising Islamic banking through Albarakah since 1989. In 2004 and 2006 successively First National Bank and Absa Bank started offering Islamic banking services through their Islamic windows. South African legislature has introduced the Draft Taxation Laws Amendment Bill introducing Islamic Banking instruments for the purposes of taxation. The Bill does not create a comprehensive legal landscape for Islamic banking. Nonetheless, the Bill indicates at the practices of South African Islamic banks. The investigation of the application of the shari’ah-compliance banking reveals that the mechanical application of Islamic rules does not necessarily achieve the goals of shari’ah. This is due to the major role of the institution of Islamic banking in promoting social prosperity. The matter requires Islamic banks to revisit their current practices in order to restore the origin of norms intended to justify profit by promoting social development.