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Malegaon:
"There is nothing more powerful in the world than an idea whose time
has come. Islamic finance is not a Muslim-only affair. It shows
qualities which are beneficial to all kinds of customers. For all
the Shariah-compliant products we sell in countries such as
Malaysia, some 70 percent of our clients are non-Muslim," Arab
News quoted Manfred Dirrheimer, chairman of the executive board,
FWU AG, a German financial services company which has pioneered a
number of Takaful products.
Dirrheimer was speaking at the Amanie-Falaika Islamic Finance
Symposium held at the Jumeirah Emirates Towers in Dubai last week
and attended by dignitaries such as Ahmad Hizzad Baharuddin,
director of Islamic banking & Takaful, Bank Negara Malaysia; Farhan
Al-Bastaki, executive director of Islamic finance, Dubai
International Financial Centre (DIFC); and Nor Azamin Salleh, CEO,
Asian Islamic Investment Management (AIIMAN).
According to the Saudi Arabia's leading English daily, Dirrheimer
predicted that several Islamic financial products might become
"mainstream" but warned that Shariah compatibility and integrity of
these products must always be ensured. However, he rued the fact
that the product innovation process in the Islamic finance industry
is much slower than in the conventional industry and warned that any
"industry without innovation is dead."
The symposium exuded cautious optimism of an industry which is
showing a faster rate of recovery than its conventional counterpart
from the twin effects of the credit crunch and the global financial
crisis that has affected the world for the last two years, albeit in
a market, Dubai, that was perhaps one of the worst hit in both the
conventional and Islamic space especially relating to real estate
assets.
This was further manifested by the recent and imminent launch of a
spate of Islamic equity and investment funds including the Amana
Developing World Fund by Saturna Capital in the US; the HwangDBS
AIIMAN A20 China Access Fund; Comgest Shariah Emerging Markets and
the Comgest Shariah Europe Funds for Saudi investors; Crescent
Investments Shariah-compliant Australian Equity Fund; LM Australian
Alif Fund; BBGI Islamic Share Energy Fund in Switzerland; the Oasis
Crescent Global Income Fund to be launched by Oasis Asset Management
of South Africa; and the Yurie Shariah Compliant Korea Index
Investment (Equity) Trust.
Perhaps the increasing confidence of the Islamic investment sector
was underlined by the revelation by Khazanah Nasional Berhad, the
investment arm of the Malaysian Ministry of Finance and effectively
the country's major sovereign wealth fund (SWF), that Shariah-compliant
investment is its mainstream activity, whereas its conventional
investments comprises its alternative investment portfolio. This
makes Khazanah the first and only SWF in the world whose focus is
largely Shariah-compliant investments.
As far as SWFs in the Muslim world are concerned, it is usually the
other way round, with most such SWFs do not even have Islamic
investments on their radar. If only a small proportion, say 30
percent, of these SWF funds migrate to Islamic investment
opportunities, then the sector would receive a serious boost in
terms of market size, which is currently estimated at between $1
trillion to $1.2 trillion.
It was inevitable that the Shariah governance process in Islamic
finance should surface given recent developments in the High Court
in London and also recent resolutions issued by various bodies
including the one on Tawarruq by the Islamic Fiqh Academy in Makkah.
Prominent Saudi Shariah scholar Mohamed Elgari reiterated the
importance of developing a scientific methodology for the Shariah
governance process in the industry. He added that the process of
internal compliance in Islamic Finance is extremely important to see
how it is practiced by various institutions.
He rued the fact that the IDB-sponsored idea of developing a Shariah
rating system which would evaluate the internal processes in
institutions and for products "from innovation to litigation" did
not take off. The purpose was not to decide what is halal or haram.
Elgari rejected any notion that derivatives are not possible in
Islamic finance. "We should not look at derivatives like anything
else in life in black and white terms. In moderation, they could be
useful, especially to reduce risk on a Shariah basis. In principle,
derivatives are possible in Islamic finance. There is a need for
Muslims to manage risks and take a level of risk they want. This is
Takaful," he added.
Daud Bakar, the well-known Malaysian Islamic scholar and
entrepreneur and managing director of Amanie Islamic Finance
Consultancy & Education LLC, stressed that the Islamic finance
industry was allowing Muslims to rediscover their identity and
Shariah advisories were the custodians of the Shariah governance
process within the prescribed legal limitations.
He agreed that hedging (Tahawwut) is allowed under the Shariah
although the industry wants "hedgers not speculators." Shariah-compliant
hedging, he added, is not going to the market to arbitrage one
against the other, but as part of good risk management, which is
important to protect the interests of investors and institutions.
Earlier, Farhan Al-Bastaki of the DIFC urged the Islamic funds
industry to listen more to what the clients and end users of these
funds need and want; to be more rigorous in assuring that investment
fund products are truly Shariah-compliant; to ensure that they are
Shariah-based products as opposed to merely "Islamizing"
conventional products; to promote greater consistency of Shariah-compliant
funds documentation a lack of which will leave clients and the
market in general in a state of confusion and uncertainty regarding
how ethical their investment funds really are; and to educate
clients on how Shariah funds really are fundamentally different
products from conventional funds, while making sure that their own
staff are properly trained in Shariah finance to adequately explain
the benefits of Shariah funds to both Muslim and non-Muslim
investors, who too should be considered as potential clients of such
funds.
"By promoting the unification of funds documentation, we can provide
a great deal of confidence in the market. Shariah scholars must
focus on what's good for the industry, by which I mean they should
focus more on the various areas of agreement among them, rather than
their points of philosophical difference," Arab News quoted
him saying.
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‘Don’t
let the name scare you. Islamic banking is beneficial for all':
"People should know that
the name Islamic Banking is used just to give an impression that it
works on the Islamic principles. Otherwise, it is an open option and
everyone whether ....
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