Published On:03 July 2012
Posted by Indian Muslim Observer

ISRA's role in global Islamic finance

Below are excerpts from an interview between the columnist Rushdi Siddiqui and Dr Mohamad Akram Laldin, the executive director of the International Shari'ah Research Academy for Islamic Finance (ISRA).

Rushdi: You were a syariah scholar and now you are an executive director of ISRA. How did this come about?

Dr Akram: I am an academician at the International Islamic University Malaysia and, at the same time, developed my expertise in syariah advisory. I am member of several syariah boards in and outside Malaysia. In 2008, the central bank of Malaysia wanted to establish a Syariah Research Academy and I was selected to be the executive director, and I am still actively participating in my syariah advisory engagements.

Rushdi: What are the high level objectives of ISRA in contributing to Islamic finance?

Dr Akram: The objectives of ISRA can be summarised as:

* Spearhead and conduct-apply syariah research in Islamic finance. Since the establishment of ISRA in 2008, it has produced a number of academic research publications.

* Enrich resources of knowledge in Islamic finance through publications and collecting materials in Islamic finance. ISRA also has a large collection of fatwas translated into English on its website.

* Provide avenues for the development of syariah practice in Islamic finance by having constant engagement with market practitioners, academia and syariah scholars.

* Propagate harmonisation and mutual respect in Islamic finance practices through dialogue, forums and strategic roundtable discussions with scholars from the globe.

Rushdi: What is ISRA doing to educate scholars, academics, practitioners and students?

Dr Akram: ISRA has a specific training programme and intellectual discourses for scholars and practitioners from time to time in order to update them on the recent syariah development in the industry. As for students, ISRA is providing scholarship for undergraduate and post-graduate students who are majoring in syariah and finance. This is to enable the creation of a new breed of scholars who are well-versed in syariah and capital markets.

Rushdi: How is ISRA coordinating efforts with INCEIF and other "education" institutions globally?

Dr Akram: INCEIF is our sister organisation and we have a very close working relationship with it, as faculty conduct-join research, teaching and supervision of post-graduate students. As for global institutions, we have close collaboration with IFSB, AAOIFI, Fiqh Academy of OIC, IRTI Jeddah, IIBI London, University of Durham, UK, and other institutions. We contribute to their discourses and conduct-join programmes with these entities for the benefit of the Islamic finance communities.

Rushdi: What is ISRA doing to narrow the "alleged" syariah interpretation divide between Malaysia and GCC?

Dr Akram: First, we have to understand there are minor differences between Malaysian interpretation and the GCC interpretation. Based on a recent study conducted by ISRA (research paper no 31/2012), it has been discovered that the differences in the fatwas related to Islamic banking between Malaysia and GCC are only applicable on selected types of contracts and instruments, and not as presumed for all or most of the fatwas.

Notwithstanding, ISRA is constantly engaging with regional and international scholars in order to find solutions to close the gap in syariah interpretation. At the regional level, we conduct annual Southeast Asia Scholars Conference to discuss syariah issues of common interest for Southeast Asian countries like Malaysia, Indonesia, Brunei, Thailand and Singapore. At the international level, ISRA, together with IRTI of IDB, conduct annual international syariah scholars forum, gathering scholars from around the globe to discuss issues of common interest, including differences in syariah interpretation.

Finally, ISRA's Council of Syariah scholars meet regularly to discuss issues pertaining to syariah interpretation and harmonisation. The repository of fatwas developed by ISRA, available on its website, is another avenue that will assist in closing the gap among the syariah interpretations.

Rushdi: We are hearing more about the need for countries to have a National Syariah Council, like in Malaysia. What are the benefits, challenges, and experience?

Dr Akram: Those who support the idea of having a national board are looking from the point of view of standardisation and governance. With the existence of a national board, there will be certain amount of standardisation of practice, at least, in the respective jurisdictions. In addition, it will ensure proper governance are intact for the appointment of members of syariah committees and the monitoring of the code of conduct of members of syariah committees.

On the other hand, those who are against the idea are concerned about the restrictions and freedom of the syariah committees (that) might be overruled by the national board. Thus, from this point of view, syariah boards should have total freedom in governance without interference from the regulator, as (that) might affect the integrity of the board.

From my humble experience in Malaysia, which established a national syariah board more than 10 years ago, there is no conflict between the national board and syariah committees. The existence of the national board is important as it is the check-and-balance mechanism for the syariah advisory services, in the absent of any regulating body.

Rushdi: We read about scholars' conflict of interest by sitting on multiple boards. How should the industry approach this possible "risk"?

Dr Akram: There is no doubt that demand for scholars in the Islamic finance industry is overwhelming, while supply of capable scholars, understanding both syariah and finance, is limited, hence, multiple board representation. In this respect, regulators, working with the industry and standard-setting bodies, must play a role to ensure the syariah (conflict of interest) risk, actual or perceived, is minimised.

For example a syariah scholar who sits on the syariah board of a particularly entity should not have a vested business interest in the entity in order to preserve the integrity of the scholar and avoid any conflict of interest.

Furthermore, another possible way to ensure the effective implementation and enforcement of syariah governance is to have a global market-driven entity to establish syariah advisory standards for the scholars. For example, in Malaysia, we have established the Association of Shariah Advisors that will draft the standards and code of conduct for syariah advisers and eventually issue licence for those who want to practice in syariah advisory services. This body will ensure that all its members will uphold integrity in providing their syariah advisory services by abiding to a strict code of conduct and guideline.

Rushdi: Should scholars be treated the same way as other professions like lawyers, management consultants, etc, hence, entitled to compensation, but must also abide by industry code of conduct?

Dr Akram: Scholars are providing their service to this embryonic industry (at a crucial time) and they should be reasonably compensated for their skills, experience and expertise. Scholars, as consultants, are similar to other individuals or bodies that provide services to banks, companies and governments. To date, there is no comprehensive governance framework regulating the syariah advisory services across the globe.

Therefore, similar to other professions such as lawyers, medical practitioners, etc. It is vitally important to have a self-regulated industry syariah advisory body to preserve the industry's integrity. Although syariah advisory services are different from the dimension that is religious-driven, it should have its own code of conduct as Islam emphasises integrity in all undertakings.

Rushdi: Everyone raises the topic of the need for standardisation to bring efficiency, growth, innovation, etc, in Islamic finance. Is the lack of standardisation the weak link in Islamic finance?

Dr Akram: One of the factors hampering the growth of the industry is the lack of standardisation... however, not all syariah interpretation needs to be standardised as the nature of Islamic law is deducible from various sources, while respecting different views and opinions. More important is harmonisation, respecting and recognising others' views, the path-way of our earlier scholars.

Rushdi Siddiqui
Rushdi: More countries, Muslim and non-Muslim, want to be Islamic finance hubs and they often look at Malaysia's model. How much of it is exportable?

Dr Akram: We can and should have more than one hub for Islamic finance. Hence, focusing on a country's core strength for Islamic finance. For example, we can have hubs in retail banking, capital market products, asset management, etc. Thus, hubs, Muslim and non-Muslim countries, can complement rather than competing with each other.

Malaysia has developed an excellent and robust infrastructure in Islamic finance, including syariah governance framework, legal framework, taxation framework, regulatory framework, etc, and combined it with continuity since 1983. Many countries can benefit from Malaysia's experience and build on that strong foundation.

We have come a long way since the birth of Islamic finance. However, we have much work to do and that is both challenging and exciting. We will be making history in real time, InsyaAllah.

Rushdi: How would you like to be remembered for your leadership at ISRA?

Dr Akram: As a person who has contributed towards enhancing human capabilities in syariah and finance.

[Rushdi Siddiqui is Global Head of Islamic Finance and OIC Countries at Thomson Reuters. He can be contacted at rushdi.siddiqui@thomsonreuters.com]

(Courtesy: Business Times, Malaysia)

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Posted by Indian Muslim Observer on July 03, 2012. Filed under , , , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Indian Muslim Observer on July 03, 2012. Filed under , , , , , . Follow any responses to the RSS 2.0. Leave a response

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