Beyond Shariah Compliance

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Islamic Finance Intelligence Summit, London. Nov 5th, 2009

Beyond Shariah Compliance Leveraging Internet Technology to Bring Islamic Finance Towards Maqasid (Objectives) Al Shariah

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Discussion Topics Beyond Shariah Compliance

1. Shariah Compliance Vs Maqasid Al Shariah 2. Achievement (Technology) To-date 3. Internet Technology Today 4. Embedding Internet Technology into Islamic

Finance 5. Conclusion

1. Shariah Compliance Vs Maqasid Al Shariah

• At contract level – Murabahah, ijarah, – mudharabah etc..

• Micro level • Minimum standard to be met;

otherwise contract is void or product is not accepted

• Standard set by various bodies – AAOIFI, Fiqh Academy,

Shariah Boards

Shariah Compliance

Source: Assoc. Prof Dr Engku Rabiah Adawiah, International Islamic Univ, Malaysia

1. Shariah Compliance Vs Maqasid Al Shariah

• Universal Values • Social order capable of

providing social justice along with economic prosperity

• Macro level • Optional but highly

recommended • No agreed standards among

scholars • Inner feeling

Maqasid Al Shariah The objective (Maqasid) of the Sharīah is to promote the well-being of all mankind, which

lies in safeguarding

their faith (dīn), their human self (nafs), their intellect (‘aql), their posterity (nasl) and their wealth (māl).

Whatever ensures the safeguard of these five serves public interest and is desirable.” (Chapra – Future of Economics – An Islamic Perspective, 2000 p.118)

According to Imam Al-Ghazāli

Maqasid (Objectives) Al Shariah Holistic view of Islam which has to be looked at as a whole not in parts

as Islam is a complete and integrated code of life and its goal encompasses the whole life, individual and society; in this world and the Hereafter.

Commitment of every individuals and organisations to justice, brotherhood and social welfare.

A society whereby every member will cooperate with each other rather than compete, as success in life is to obtain the ultimate happiness (falah).

Mere maximisation of profits cannot, therefore, be sufficient goal of a society.

Maximisation of output must be accompanied by efforts directed to ensure spiritual health at the inner core of human consciousness and justice and fair play at all levels of human interaction (muamalah)

Source: Abozaid & Dusuki - The Challenges of Realizing Maqasid al-Shari`ah in Islamic Banking and Finance

Challenges & Opportunities In Moving Towards Maqasid Al Shariah

• Hard to measure • No agreed standards • Higher risks and may not be in line with

“prudent banking” practices • May negatively impact bottom line in the

short to medium term • Shareholders/investors unwilling to

subscribe

Challenges

• technology is available to assist

• selective focus can be at the customer touch points

• some banks (conventional) have taken similar steps to present themselves are socially responsible banks

Opportunities




2. Achievement (Technology) To-date

Focus on Shariah compliance Core banking Risk management Asset management Wealth management Internet banking Mobile banking Financing Origination Collection

Pattern proprietary

secure

robust

limited disclosure

scalable

non-customer facing touch points

Current Technology Rests on Sound Foundation to Support Future Initiatives of Islamic Finance




3. Internet Technology Today

Trend Largely free Available world-wide Transparent – full disclosure Encourages feedback Allows Reviews & Comments

by multiple parties Highly interactive Instant response Current information and data

available, along with full history

Tools Search engines

• Google/Yahoo/Bing Social Networks

• Facebook/Twitter/Myspace • LinkedIn (for business)

Instant Translation Google translate

(translate.google.com) Free Applications

Google apps Wikipedia Alert Services

Many Universal Values Are Embedded in Current Internet Technology

3. Internet Technology Today Example of Islamic Finance-oriented Sites (www.isra.my)

3. Internet Technology Today Example of Sites to Assist Islamic Finance www.ifsb.org

3. Internet Technology Today Example of Islamic Finance-Oriented Site

3. Internet Technology Today Example of Islamic Finance-oriented site islamic-finance-resources.blogspot.com

3. Internet Technology Today Free & Instant Translation Services to assist Islamic Finane

3. Internet Technology Today Alert Services to Assist Islamic Finance




4. Beyond Shariah Compliance Embedding Internet Technology Into Islamic Finance

Values Transparency Encourage

Investment/Savings Feedback &

Discussion Promote Learning/

Education

Example

Ubank of Australia Conventional Bank Service via direct

banking


Values Transparency Encourage Investment/

Savings Feedback & Discussion Promote Learning/

Education

Example Ubank of Australia Conventional Bank Service via direct

banking





Education

Example


banking





Education

Example


banking

4. Beyond Shariah Compliance Embedding Internet Technology Into Islamic Finance – The Solution




Education

Example


banking

4. Beyond ShariahCompliance

24 24




Oracle FLEXCUBE Supporting the Islamic Banking

26

Islamic Investment Company of the

Gulf

26 © 2009 Oracle Corporation – Proprietary and Confidential

Conclusion Internet Technology offers Islamic Finance Industry to go

beyond Shariah Compliance and towards Maqasid Al Shariah

Benefits and Strengths of Islamic Finance Vs Conventional Finance become obvious when Maqasid Al Shariah becomes a more prominent feature in Islamic Finance.

Profits, God Willing, will come as Islamic Finance expands, together with Barakah … as we help fellow mankind when we conduct our business

Are you, Bankers, ready to take the challenge?

Thank You

Jamil Hassan Principal Consultant, Islamic Banking

[email protected]

Documents

Beyond Shariah Compliance