A presentation I made for a Central Bankers Seminar held at Cambridge in 2011 on Regulating Islamic Financial Products and Markets. The presentation leans towards raising issues relating to the process regulating Shariah compliance in Islamic financial institutions and for Islamic instruments, while trying to provide pragmatic solutions to address some of the core challenges the industry has yet to resolve, with the exception of Malaysia.
Islamic financing instruments and development perspective in sub-Saharan AfricaFrancois Stepman
6 June 2017. Making Finance Work for Africa (MFW4A) and the Islamic Cooperation for the Development of Private Sector (ICD) organised a webinar on Islamic Finance: financing instruments and development perspective in sub-Saharan Africa. The keynote speaker was Salah BABALE, from ICD (Islamic Cooperation for the Development of Private Sector).
The Presentation covers the different issues related to Internal Audit and Shari`ah Audit in Islamic Banks, Shari`ah non Compliance Risks in Islamic Bank and Shari'ah Risk Rating of the Branches in light of BRPD Circular No. 3 dated 8 March 2016.
Deloitte provides advisory services like Assistance in ongoing monitoring of operations, Asset tracing, Due diligence on bidders , Assistance in ongoing monitoring of operations, etc. See more : https://www2.deloitte.com/in/en/pages/finance/solutions/insolvency-advisory-services.html
Islamic Code for Trade and Business: One Month Weekend Course
Organized by IBA-CEIF and SCS
Lecture 04 – Friday, 24 March, 2017
At IBA-CED Main Campus Karachi
Instructor: Nafees Ul Haq Saqib
Program Coordinator Faculty of Islamic Commercial Law and Management Sciences
Jamia Tur Rasheed, Karachi
<nafeesulhaqsaqib@gmail.com>
The Central Government has introduced an important Bill in the Indian Parliament on establishment of the New Delhi International Arbitration Centre. The Bill, if enacted, has the potential to change the face of arbitration in India. This presentation provides an overview of the said Bill.
Islamic financing instruments and development perspective in sub-Saharan AfricaFrancois Stepman
6 June 2017. Making Finance Work for Africa (MFW4A) and the Islamic Cooperation for the Development of Private Sector (ICD) organised a webinar on Islamic Finance: financing instruments and development perspective in sub-Saharan Africa. The keynote speaker was Salah BABALE, from ICD (Islamic Cooperation for the Development of Private Sector).
The Presentation covers the different issues related to Internal Audit and Shari`ah Audit in Islamic Banks, Shari`ah non Compliance Risks in Islamic Bank and Shari'ah Risk Rating of the Branches in light of BRPD Circular No. 3 dated 8 March 2016.
Deloitte provides advisory services like Assistance in ongoing monitoring of operations, Asset tracing, Due diligence on bidders , Assistance in ongoing monitoring of operations, etc. See more : https://www2.deloitte.com/in/en/pages/finance/solutions/insolvency-advisory-services.html
Islamic Code for Trade and Business: One Month Weekend Course
Organized by IBA-CEIF and SCS
Lecture 04 – Friday, 24 March, 2017
At IBA-CED Main Campus Karachi
Instructor: Nafees Ul Haq Saqib
Program Coordinator Faculty of Islamic Commercial Law and Management Sciences
Jamia Tur Rasheed, Karachi
<nafeesulhaqsaqib@gmail.com>
The Central Government has introduced an important Bill in the Indian Parliament on establishment of the New Delhi International Arbitration Centre. The Bill, if enacted, has the potential to change the face of arbitration in India. This presentation provides an overview of the said Bill.
Asset Reconstruction company means acquisition by any securitization company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realization of such financial assistance. Asset Reconstruction company is a company registered under section 3 of the Securitization & Reconstruction of financial assets & Enforcement of security interest ( SARFAESI ) Act 2002.
It is regulated by RBI as a Non – banking Financial company
RBI has exempted ARCs from the compliances under section 45- 1A ( Requirement of registration & net owned fund ) , Section 45 – 1B ( Maintenance of liquid assets ) , Section 45 – 1C ( Creation of reserve fund ) of the Reserve Bank Act, 1934 .
ARC Functions like an AMC within the guidelines issued by RBI.
The ARC transfers the acquired asset to one or more trusts at the price at which the financial assets were acquired from the originator
https://enterslice.com/nbfc-registration.html
CDR was instituted by Reserve Bank of India (RBI), National Central bank of India in August 2001 as a voluntary mechanism to reorganize outstanding debt obligations.
The reorganization of the debt can be made by the following ways:
Increasing the tenure of the loan
Reducing the rate of interest
One time settlement
Conversion of debt into equity
Converting un-serviced portion of interest into term loan
It has been a successful instrument allowing corporates to return to profitability for benefit of all stakeholders involved.
CDR( Corporate Debt Restructuring)
can be described as a proactive measure to not let companies land into a troublesome financial situation from where they cannot make a recovery. It can be explained as a voluntary and non-regulatory method for organizations to deal with their dues.
Emerging Trends in Corporate Finance - Corporate Debt Restructuring and Rece...Resurgent India
Under a corporate debt restructuring plan, the lenders give the company, the benefit of reduced interest rates and a moratorium period for repayment, and in some cases, lender even sacrifice a part of the principal amount.
Presentation provided at the AAOIFI World Bank Conference Dec 2, 2010 discussing the application of Wa\'d in the context of FX markets and where I perceive the most important need for it, for the benefit of legitimate trading activities by corporates and investors.
A Positive Approach to Shariah compliance screeningsaydfarook
Presents a revolutionary positive approach to Islamic screening for investments presented at the 2nd Oxford Islamic Finance roundtable held at Oxford on the 15th of April, 2009.
Presentation Version of the Thomson Reuters Zawya Sukuk Perceptions and Forec...saydfarook
This is the brief presentation version of the Sukuk Perceptions & Forecast Study 2013, a comprehensive study on the Sukuk market as its stands at the beginning of 2013 with an outlook of what the year holds for the Islamic capital markets.
If you want to know:
• Who - will issue sukuk? Are they sovereigns, corporates or financials? From where?
• What - sukuk characteristics investors prefer in 2013 and beyond?
• How - is the sukuk market shaping up?
Then I would urge you to sign up to get the Sukuk Perceptions & Forecast Study 2013, the definitive study that will inform the decisions you make to shape your long-term strategies.
What's included?
• Key Milestones in the growth and development of the sukuk market
• Rich survey findings and comparative statistics about sukuk
• Outlook for the sukuk market in 2013 and beyond
• Thought leadership commentary about contemporary sukuk issues
As a concrete outlook for the prospects of the sukuk market, the study will guide your understanding on its key facets - expected growth, levels of liquidity, and potential emerging markets.
To download the study, please register your details on the link below:
http://www.zawya.com/middle-east/sukuk/perception-and-forecast-study/2013/
To discuss the Sukuk report with other market practitioners, join the Islamic Finance Gateway Community: online.thomsonreuters.com/ifg
A presentation I delivered at the World Islamic Banking Conference on the 8th of December discussing the growth opportunities in Islamic Retail Banking.
Presents an alternative solution to the dilemma of Islamic Credit Cards, which, some argue, that by encouraging unnecessary consumption, are inherently against the ethos of Islamic principles. This solution balances the need for temporary cash recourse with the need to preserve/promote the objectives of Islamic law in a suitable commercial package.
Asset Reconstruction company means acquisition by any securitization company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realization of such financial assistance. Asset Reconstruction company is a company registered under section 3 of the Securitization & Reconstruction of financial assets & Enforcement of security interest ( SARFAESI ) Act 2002.
It is regulated by RBI as a Non – banking Financial company
RBI has exempted ARCs from the compliances under section 45- 1A ( Requirement of registration & net owned fund ) , Section 45 – 1B ( Maintenance of liquid assets ) , Section 45 – 1C ( Creation of reserve fund ) of the Reserve Bank Act, 1934 .
ARC Functions like an AMC within the guidelines issued by RBI.
The ARC transfers the acquired asset to one or more trusts at the price at which the financial assets were acquired from the originator
https://enterslice.com/nbfc-registration.html
CDR was instituted by Reserve Bank of India (RBI), National Central bank of India in August 2001 as a voluntary mechanism to reorganize outstanding debt obligations.
The reorganization of the debt can be made by the following ways:
Increasing the tenure of the loan
Reducing the rate of interest
One time settlement
Conversion of debt into equity
Converting un-serviced portion of interest into term loan
It has been a successful instrument allowing corporates to return to profitability for benefit of all stakeholders involved.
CDR( Corporate Debt Restructuring)
can be described as a proactive measure to not let companies land into a troublesome financial situation from where they cannot make a recovery. It can be explained as a voluntary and non-regulatory method for organizations to deal with their dues.
Emerging Trends in Corporate Finance - Corporate Debt Restructuring and Rece...Resurgent India
Under a corporate debt restructuring plan, the lenders give the company, the benefit of reduced interest rates and a moratorium period for repayment, and in some cases, lender even sacrifice a part of the principal amount.
Presentation provided at the AAOIFI World Bank Conference Dec 2, 2010 discussing the application of Wa\'d in the context of FX markets and where I perceive the most important need for it, for the benefit of legitimate trading activities by corporates and investors.
A Positive Approach to Shariah compliance screeningsaydfarook
Presents a revolutionary positive approach to Islamic screening for investments presented at the 2nd Oxford Islamic Finance roundtable held at Oxford on the 15th of April, 2009.
Presentation Version of the Thomson Reuters Zawya Sukuk Perceptions and Forec...saydfarook
This is the brief presentation version of the Sukuk Perceptions & Forecast Study 2013, a comprehensive study on the Sukuk market as its stands at the beginning of 2013 with an outlook of what the year holds for the Islamic capital markets.
If you want to know:
• Who - will issue sukuk? Are they sovereigns, corporates or financials? From where?
• What - sukuk characteristics investors prefer in 2013 and beyond?
• How - is the sukuk market shaping up?
Then I would urge you to sign up to get the Sukuk Perceptions & Forecast Study 2013, the definitive study that will inform the decisions you make to shape your long-term strategies.
What's included?
• Key Milestones in the growth and development of the sukuk market
• Rich survey findings and comparative statistics about sukuk
• Outlook for the sukuk market in 2013 and beyond
• Thought leadership commentary about contemporary sukuk issues
As a concrete outlook for the prospects of the sukuk market, the study will guide your understanding on its key facets - expected growth, levels of liquidity, and potential emerging markets.
To download the study, please register your details on the link below:
http://www.zawya.com/middle-east/sukuk/perception-and-forecast-study/2013/
To discuss the Sukuk report with other market practitioners, join the Islamic Finance Gateway Community: online.thomsonreuters.com/ifg
A presentation I delivered at the World Islamic Banking Conference on the 8th of December discussing the growth opportunities in Islamic Retail Banking.
Presents an alternative solution to the dilemma of Islamic Credit Cards, which, some argue, that by encouraging unnecessary consumption, are inherently against the ethos of Islamic principles. This solution balances the need for temporary cash recourse with the need to preserve/promote the objectives of Islamic law in a suitable commercial package.
Qatar Bank on Islamic Banking Windows: Good or Badsaydfarook
Article analysing the reasoning and justification of the Qatar declaration to ban Islamic banking windows and its impact on the Islamic Finance Industry
A Presentation I delivered alongside Simone Carminati discussing some of the Shari\'a issues related to LME metals based commodity murabaha/reverse murabaha/tawarruq transactions from a very practical perspective, while attempting to explain the rationale of the International Fiqh Academy.
Is Islamic Finance really the value proposition it claims to be? Assessment a...saydfarook
This presentation provides a stocktake of where the Islamic Finance industry is currently positioned and what are the long term prospects for the industry. It also provides a short-medium term broad overview of what can be expected from Islamic Finance.
Abridged version of my presentation at the IFSB Seminar held in Istanbul 1st October 2010. Discusses the key bottlenecks constraining liquidity and what can be done to ease the flow of liquidity.
By Scott Goldstein: Legal League Quarterly Fall 2011 - Exploring New Territoryassure360
Exploring New Territory - Mortgage Servicing professionals and their attorney network adopt new policies, practices, and processes in the wake of the recent OCC consent orders
By Scott Goldstein, President - NDeX
As seen in Legal League Quarterly, Fall 2011
Businesses today are getting increasingly sensitive towards Managerial Efficiencies, Accounting Issues and Legal Compliances and their implications in long and short run. To remain competitive in market and to Corporates opts for domain experts and professionals from Accounts, Legal and Management to advice them in these functions domains to keep in mind legal angle at various stages such as Tax Compliances, Contract Drafting,
To tackle the same Businesses need to take the services of Professionals who have expertise and knowledge of current market and forces which impact a lot.
1. Sharia Governance for Islamic Finance
Quis custodiet ipsos custodes?
REGULATING ISLAMIC FINANCIAL PRODUCTS AND MARKETS
DR. SAYD FAROOK, GLOBAL HEAD ISLAMIC CAPITAL MARKETS
2. Agenda
• Challenges affecting the growth of Islamic Finance
• Shariah Governance Fundamentals
• Revisiting the Shariah Governance Challenges
• Requirements by standard setters
• Next Steps and logical solutions
• Recommendations
• What Central Banks and Regulators can do
• Q&A
3. Introduction
The Looming Significance & Growth of Islamic Finance
Global Shariah Compliant Assets
Year Assets ($B)
Source: The Banker
4. The Setbacks
• Lack of wider cheaper distribution channels
• Yet-to-be standardized products
• Challenges to core Sharia compliance process
6. Shari’a Non-Compliance Risk (1/2)
Legal Precedence
Beximco Pharmaceuticals Ltd and others v Shamil Bank of Bahrain E.C. 2004 EWCA Cir 19:
Murabaha financing contract
The contract provided "Subject to the principles of the Glorious Shari'ah, this Agreement shall be governed by and construed in accordance with the
laws of England."
Beximco argued that contract was contrary to Shari‟a law.
Decision: Court ruled in favour of Shamil stating that it is not its responsible to verify compliance with Shari‟a and also Shari‟a not a national legal
system.
Ratio Decidendi: it is for each party to satisfy themselves that the substantive terms of the underlying contract comply with Shari'ah principles.
English court will not judge on Shari‟a compliance or otherwise of the contract, but on the substantive provisions of the contract.
The Investment Dar Company (TID) v Blom Developments Bank SAL (BLOM) 2009 EWHC 3545 Ch:
Investment Wakala contract
TID argued the following:
Constitutional documents did not allow for Shari’a non-compliant transactions
Agreement did not comply with Shari’a
Beyond the corporate powers of TID and therefore void.
Decision: Court found an arguable case for TID, however, principal would have to be returned since court was of the opinion that TID‟s
argument would fail and BLOM could claim for restitution of the full principal, if not the profit payments.
Ratio Decidendi: The Court held that TID‟s counsel had made an arguable case that the Agreement did not comply with shari‟ah and the
Agreement was therefore ultra vires NOT that it would succeed in court.
7. Shari’a Non-Compliance Risk (2/2)
Micro- Mitigation Techniques
Key Considerations for mitigating Shari‟a Non-Compliance Risk:
Request a certificate confirming that the transaction is Shari‟a compliant from the Shari‟a
Committee/Advisor and preferably for material transactions, from the full Shari‟a Supervisory Board
A representation to be inserted into the Shari‟a compliant agreement stating that entry into and
performance by the IFI of that agreement does not conflict with any of its constitutional documents
The waiver by the IFI of any defenses that it might have in connection with the agreement not being
compliant with Shari‟a principles, for instance:
Each Party represents and warrants to the other that on the date of this Agreement and on the date of entering into each
Relevant Wakala Transaction:
it has the legal capacity to enter into this Agreement and the Relevant Wakala Transaction contemplated hereunder;
the execution by it of this Agreement and the Relevant Wakala Transaction has been duly authorized and executed;
it has entered into this Agreement and shall enter into each Relevant ------- Transaction contemplated hereunder after satisfying
itself of their compliance with Shari‟a, it is satisfied that this Agreement does not contravene Shari‟a and it does not have any
objection, nor will it raise any objections, as to matters of Shari‟a compliance in respect of or otherwise in relation to the
provisions of this Agreement;
8. Shari’a Supervisory Board
Institutions offering Islamic products employ services of religious advisors (the
Shari‟a Scholars) who are collectively known as Shari‟a Supervisory Board
(“SSB”). The key roles performed by SSB includes:
Issue Fatwa to certify compliance with Shari’a laws.
Periodic reviews for conformation with Fatwa on an ongoing basis.
Calculation and payment of Zakat.
Disposal of non-Shari’a compliant income (e.g. interest through donation
and charities).
Advise on distribution of cash flows, income and expenses between
shareholders and Sukuk holders.
9. Shari‟a Approval Process
Phase 1 Phase 2 Phase 3
Identify Shari‟a Options Finalise Shari'a Structure Review Legal Documentation
Activities Activities Activities
Determine our clients‟ Review selected product Review legal documents
needs and business structure for compliance with
objectives Liaison with Shari'a Shari'a laws and the
Identify potential high Client Scholars on the structure structure Fatwa granted
level Shari'a product selects design Client Liaise with Shari'a
structures methodology Identify required legal produces Scholars and the clients‟
& builds legal
Discuss available options detailed
documentation documents legal team during the
with our clients structure Prepare draft Fatwa documentation drafting
Work through the Review of structure by Legal documentation
commercial and practical Shari'a Board and issue reviewed by Shari'a
considerations with our of Fatwa on structure Board and issue of
clients Fatwa on documentation
Deliverables Deliverables Deliverables
Preliminary Shari'a Fatwa on Shari'a Fatwa on Legal
Report Structure Documentation
Throughout the process, Dar Al Istithmar adheres to relevant Shari'a industry standards, including the AAOIFI Shari‟a Standards
All processes are monitored through an internal quality assurance process and frequent consultation with the Chairman of the Shari'a Supervisory Board.
10. Operating Models
Model options Characteristics Shari’a Aspects
Shari’a Compliant Due to rapid development of Islamic Finance, From Shari‟a perspective, these are at the
Islamic Banks new banks are being set-up which are fully lowest risk due to:
Shari‟a Compliant and offer retail as well as • No dealing in conventional / interest based
whole sale banking facilities. products
Since 2004, five fully Islamic banks have been • No risk of mixing of Islamic Funds with
set up in the UK, out of which one is a retail conventional.
bank where as other four are whole sale banks.
• More involvement of Shari‟a Scholars in day to
day activities of the bank.
Conventional bank This model is used by conventional banks which From Shari‟a perspective, Islamic subsidiaries /
with an Islamic want to extend their services into retail and finance vehicles are considered at a lower risk
subsidiary / Finance whole sale Islamic Banking as well as retaining due to:
Vehicle the conventional customer portfolio. • Bespoke IT system and infra-structure for
This model is used by HSBC, Standard Islamic Products.
Chartered, Citi etc. • Segregation of Islamic Funds, cash flows,
assets and liabilities from conventional.
• Involvement of Shari‟a Scholars in day to day
activities of the Islamic Finance Vehicle.
Conventional bank This set-up is primarily used by conventional From Shari‟a perspective, Islamic windows are
with an Islamic investment banks which want to provide its high considered to be high risk primarily due to:
Window net worth individuals and institutional customers • IT Systems and infra-structure of conventional
access to Shari‟a Compliant investments and banks may not be not be flexible enough to cater
Structured products. requirements of Islamic Products.
This model is followed by Deutsche Bank, • Funds generated from Shari‟a Compliant
Barclays Capital etc. sources are not segregated from funds
generated from conventional activities.
11. Contrast of Shariah Governance with Existing
Governance Structure
FUNCTIONS TYPICAL FINANCIAL ADDITIONS IN IFIS
INSTITUTION
Governance Board of Directors Shari‟ah Board
Control Internal Auditor Internal Shariah
Review Unit
External Auditor External Shariah
Review
Compliance Regulatory and Internal Shariah
Financial Compliance Compliance Unit
12. Voluntary Standards on Shariah Governance
AAOIFI Governance Standards
1. Shariah Supervisory Board: Appointment Composition and
2. Shariah Review 3. Internal Shariah Review
Report
• At least 3 members (no directors or shareholders) • SSB forms opinion, but Shariah compliance rests with • Internal division or part of internal audit
• Requirements for report suggest Sharia board must play a management • Examination and evaluation of the adequacy and effectiveness
deep role in review of bank‟s operations. • Examination includes of the IFI‟s system of internal Shari‟a control and the quality of
• Recommendation to publish fatwas, rulings and guidelines contracts, agreements, policies, products, transactions, memo performance in carrying out assigned responsibilities.
randum and articles of association, financial
statements, reports (especially internal audit and central bank
inspection), circulars, etc.
• complete and unhindered access to all
records, transactions, and information from all sources
including professional advisers and the IFI employees.
The SSB review procedures shall normally include:
• obtaining an understanding of the management‟s awareness, commitment and compliance control
procedures for adherence to the Shari‟a;
• reviewing of contracts, agreements, etc.;
• ascertaining whether transactions entered into during the year were for products authorised by the SSB;
• reviewing other information and reports such as circulars, minutes, operating and financial reports,
policies and procedures, etc.;
• consultation/co-ordination with advisors such as external auditors; and
• discussing findings with an IFI‟s management.
13. Voluntary Standards on Shariah Governance
IFSB Standards 10
• The Sharī`ah governance structure adopted by the IIFS should be
commensurate and proportionate with the size, complexity and nature of its
business
I. General • Each IIFS must ensure that the Sharī`ah board has:
Approach
• clear terms of reference regarding its mandate and responsibility;
• well-defined operating procedures and lines of reporting; and
• good understanding of, and familiarity with, professional ethics and conduct.
• The IIFS shall ensure that any person mandated with overseeing the Sharī`ah
Governance System fulfils acceptable fit and proper criteria.
II. • The IIFS shall facilitate continuous professional development of persons serving
Competence on its Sharī`ah board, as well as its ISCU and ISRU, if any.
• There should be a formal assessment of the effectiveness of the Sharī`ah board
as a whole and of the contribution by each member to the effectiveness of the
Sharī`ah board.
• Play a strong and independent oversight role, objective judgement on Shariah.
III. NO INDIVIDUAL or GROUP should be allowed to dominate decision making
Independence • Compliete adequate and timely information prior to all meets and on an ongoing
basis
IV.
Confidentiality • Internal information kept confidential
• IFI should understand legal and regulatory framework for issuance of Shariah
V. Consistency pronouncements in jurisdiction of operation.
• Should promote convergence of Shariah governance standards
14. Voluntary Standards on Shariah Governance
IFSB Standards 10
• INTERESTING POINTS:
• Independence requires (among other usual BOD
requirements), where multiple memberships, sufficient time and
attention given to affairs of each IFIs.
• Fit and Proper requires „Good Character‟, „Competence and
Capability‟ and „expertise‟ for Shariah Advisory firms outsourcing this
work
15. Revisiting the Challenges
Challenges
Multi-board Conflict of
Increased Costs Shariah Diligence Interest
Representations
Multiple
Shariah Insufficient
Conflicts of Hired by IFI
Advisory Coverage
Interest
Concentration Standard of
Structuring Paid in BPs
Risk Due Diligence
Cost
Documentation
Implications
Supply Constraints Governance and Due Process Constraints
Previous proposals
Current Process: Certifying future Supranational Sharia
Participation and learn generations Body
by doing
16. Costs of Sharia Due Diligence
Example:
• Cost of sukuk issuance is usually in six
figures; and it includes Shariah
advisory, structuring, and legal
documentations.
• Sukuk costs can be up to 60% higher
than conventional bonds.
-------------------------------------------------------
The same concept applies to every other
Islamic product.
17. Conflict of Interests
• Scholars are appointed by the
financial entities themselves.
• Some scholars are paid in term of
BP per fund managed.
------------------------------------------------
Central Shariah Committee as a
solution??
18. Multiple Board Representation
The Top 20 Scholars based on positions in Islamic Financ
Institutions
Interesting Facts:
• Top 50 scholars occupy 834
positions (over 73% of positions)
• Multiple conflicts of interests
• Cost implications of
concentration.
Time + Effort + Rep. = 6 Figures
• The advantages of MBP
19. Shariah Diligence
• Are all documents and
structures properly
covered by the Shariah
scholar?
• What are the standards
used for appropriate due
diligence?
20. Shariah Non-Compliance And Due Process
• No framework to issue contrary
opinions.
• Issuers of fatwa & Fatwa Shopping.
• Fatwas deal with the micro-juristic;
not the macro-implications.
21. Previous Proposals
• Current qualifications
Participation and learn-by-
doing, rather than
education, research and gaining
experience.
• Transferring knowledge to the
next generation.
Two solutions:
1) A supranational Sharia
association
2) Certifying newer generations
of would-be scholars
22. One Solution
The Certified Shariah Advisory & Audit
(CSAA) Program
• What is this program?
• The disadvantages:
1) Does not qualify to form new opinions
2) Exam-based, rather than research-based
3) No qualification process for the
unqualified
23. What about a doctorate system?
Key Elements:
1) Very high research standards
2) Great knowledge of certain field(s)
3) Supervision by mentor(s)
4) Universal in a competitive world
24. What is the next step?
Way Forward:
Increase New Set of Governance and
Quality Supply Standards Due Process
Recognition Pre-requisites
of Shariah to Fatwa
scholars issuance
25. Recognising Shariah Scholars
Hypothetical Set of Criteria
• Peer recognition
- Letters of recommendation
• Education
- Doctoral degree
- Diploma and reference letters
- X years under the “wing” of a scholar
• Experience
- X years of Shariah auditing and advisory
- X years of Islamic Shariah law counseling
• Continued qualification process
26. Pre-requisites before issuing a fatwa
Due Process
• Reporting procedures for issued fatwas
• Checklist before issuing a fatwa
• In return, the support of AAOIFI
27. Recommendations Rundown (Examples)
• Scholars hired and supervised by a central Shariah committee (CSC);
appointing them to specific IFIs and paying them to prevent conflicts of
interest and Fatwa shopping.
• One certified Shariah scholar per IFI; certified and qualified by the CSC.
• Junior certified Scholars at IFIs; senior certified Scholars at CSC.
• Qualification structures:
- Doctoral degree + X years of experience to qualify as a Senior Scholar
- Doctoral degree to qualify as a Junior Scholar
- Masters in Shariah Advisory and Auditing as a minimum for proper due
diligence
• Standardized framework for Fatwa issuance and approval
Checklist Issuance Validation Review Update
28. Conclusion
What Central Banks and Regulators Can Do
Leave as much as possible to the Shariah scholars; only prompt
and encourage them to come together in each jurisdiction.
Regulate the process; not the law
One step at a time; local, then global
Set standards for Shariah qualifications and Fatwa process
Provide guidelines and assistance for self regulation
Promote cooperation and collaboration through greater
dissemination
Create a national Shariah supervisory board
Learn from other countries‟ experiences
30. Sayd Farook PhD
Global Head Islamic Capital Markets
sayd.farook@thomsonreuters.com
islamic.finance@thomsonreuters.com
Editor's Notes
Ladies and gentlemen, the growth of Islamic finance at more than 15% per annum is undisputed. Yet, the startling fact remains that as compared to the percentage of the Muslim population standing at around 25%, Islamic finance is not even 4% of the global financial system, which means even if IF is adopted by 25% of the population, there is still a long long way to go. In countries where Islamic finance has been provided the right enabling infrastructure to flourish, it has achieved up to 55% of penetration.
Despite this looming growth, the industry faces a number of challenges, not least of all: lack of wider cheaper distribution channels; standardised and ‘conventionally efficient’ products and threats to the core Sharia compliance process.
Framework Notes:A checklist of criteria and processes to followIssuance of the fatwaExplaining the arguments and sources used to an independent board for validation (AAOIFI for instance)Review process in the future to determine whether or not the fatwa is still validUpdating or revoke the fatwa if necessary