the global financial crisis: can islamic finance help? - Institute of ...

NEWHORIZON Muharrum–Rabi Al Awwal 1430
ACADEMIC ARTICLE
give much time to financial institutions as
they are so thinly spread. Currently, however,
there are only a handful of reputable
and able scholars who are familiar with
modern economics and finance and they are
working extremely hard to cope with the
demand of the growing Islamic finance industry.
The lack of scholars creates a severe
hindrance to the development of business
activities of financial institutions. On the
whole this puts constraints on financial
institutions and Shari’ah scholars alike.
On the one hand, scholars are being put
under unrealistic time pressures to respond
to Shari’ah queries and unjustifiably being
held responsible for delaying transactions.
However, we should not forget that scholars
also have family, social, religious and many
other commitments like everyone else and it
is not always reasonable to expect immediate
attention and replies at all times from
the scholars in respect of particular Shari’ah
issues. On the other, there will be times that
financial institutions need advice promptly
in order to make business decisions, and
cannot wait for days or weeks. By working
full-time for one particular institution, a
scholar is able to build on his in-house role
and expertise which will not only alleviate
these pressures in-house, but also in other
institutions by offering advisory services to
third parties.
Secondly, by appointing a full-time Shari’ah
scholar, financial institutions will be able
to design their own programmes for training
junior graduates of Shari’ah to enable them
to satisfy the demands of their businesses.
On a wider scale, unless further graduate
training programmes are put in place,
there will be a constant shortage of supply
in meeting the increasing demands of
financial institutions for Shari’ah scholars.
An urgent assessment is required of the
extent to which financial institutions have
contributed towards bringing on board new
Shari’ah scholars. What support is being
provided to new graduates of Shari’ah to get
them more involved in the Islamic finance
industry? Are they supporting any trainee
programmes for new Shari’ah graduates to
gain experience? If we were to look back
Mufti Muhammad Nurullah Shikder,
Gatehouse Bank
over the last 30 years or so, the truth is that
some of the established Islamic financial
institutions haven’t done enough to create
opportunities for newly graduated Shari’ah
scholars.
Unless we adopt similar approaches to those
of legal, accountancy and other professional
bodies in developing our Shari’ah scholar
base, there is a real danger that the industry
will be filled by unqualified people who are
not in a position to opine on Shari’ah matters.
This will result in financial institutions
carrying out transactions without correctly
observing Shari’ah principles.
Thirdly, the appointment of a full-time
scholar will greatly assist in the education
and training of employees in the application
of Shari’ah principles in all areas of the
working environment. This is relevant to
legal and compliance matters, and will
greatly assist in all areas of the audit
process, both internally and externally. In
addition, Islamic financial institutions need
to follow instructions from the Shari’ah
scholar in their day to day activities such
as the manner in which they conduct their
business. For example, adherence to
Shari’ah principles of truth, transparency,
honesty and fairness should be observed,
whilst guests and clients should be entertained
in a manner that complies with the principles
of Shari’ah.
It is also important to ensure that Shari’ah
principles are followed by an institution when
it is dealing with its own employees. Sometimes
they are not adhered to inadvertently
due to the lack of knowledge or because the
personnel that deal with the particular issues
may not necessarily be aware what Shari’ah
principles are at stake. It may not have
crossed their minds that a particular issue
may involve certain Shari’ah laws. The presence
of a scholar on a full time basis would
alleviate this potential problem.
Adequate training of Islamic awareness in
general and more specific training is paramount
in order to facilitate the understanding
of Islamic culture and the principles of Islamic
finance. This is to ensure that Muslim and
non-Muslim employees are equipped with
the required knowledge and understanding
of Islamic principles. The above ongoing
training can only be achieved if a scholar is
engaged to identify all the needs of the business
as a whole and also to cater for the
needs of individuals within the financial
institutions as and when required.
Certain critics argue that some Islamic
financial institutions offer Shari’ahcompliant
products for commercial benefit
only and there is no desire to follow the
true spirit of Shari’ah principles. However,
it should be remembered that earning a profit
in a Shari’ah-compliant manner is encouraged
even from a Shari’ah perspective, although
Shari’ah will never allow Islamic financial
institutions to make gains in its name when
their activities may not conform to the
principles of Shari’ah. Financial institutions
seeking to provide Shari’ah-compliant products
and services may overcome potential
criticism by taking pre-emptive steps to engage
a Shari’ah scholar on a full time basis to
oversee their day to day activities. This will
boost the confidence of everyone associated
with such financial institutions, whether
employees or customers, and enhance the
quality of the Shari’ah-compliant activities
of such financial institutions.
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