The raison d'etre of Islamic finance is Shari‘ah compliance—avoiding what is proscribed in Islam and practising what is mandatory. While there has been almost consensus on what is proscribed, there has always been a debate about what is mandatory or even desired. Is it the form that must be adhered to or is it the substance that should be aimed first? Islamic finance has evolved in different countries in different circumstances and with varied motives and human skill sets. Sometimes the legal architecture has also played a definite role in giving specific direction to the progress and development of Islamic finance. In the Indian subcontinent, the idea of Islamic economics can be traced back to the early twentieth century. Economic historian Timur Kuran has suggested that the seeds of Islamic economics were laid during the pre-independence struggle of the Indian Muslims (Islamic Economics Bulletin, 2002). Ulema were at the forefront then whose works on economic front encouraged religious groups like Jamat-e-Islami and Jamiat-e-Ulema-e-Hind to choose Islamic aspect of economics and finance as one of their group’s agenda, which eventually encouraged mainstream educated economists, financial experts and technocrats to pursue Islamic economics and finance as their career. Historical events such as the partition of the country and large-scale riots after the independence altered the priority and the course of Islamic finance in India.
This chapter presents an overview of Islamic finance in India in general and of shari’ah governance in particular. The accounts reported here are based on the first-hand experience of the authors who are active practitioners in the field, as well as secondary sources that are available in the literature.