Memahami Kepentingan Operasi dan Instrumen Perbendaharaan

ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance

Assoc. Prof. Dr. Mohamad Akram Laldin Executive Director of ISRA

1

Proposed Suitable Islamic Financial

Instruments for Central Asia Countries

ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance

Introduction

Developing Islamic Finance in Central Asia: Issues &

Challenges

Developing Islamic Finance Infrastructure: Malaysian

Experience

Suitable Islamic Financial Instruments

Conclusion


Introduction

Islamic Finance is a progressing industry.

Viable alternative to conventional finance.

Adopted across the globe.

Many developments has taken place and Islamic Finance has a lot of potentials.

Advantages: Based on the Principle of Shari’ah

Variety of contracts and allow dynamism and flexibility in products development and innovations.

Promise growth in accordance with stability

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DEVELOPING ISLAMIC FINANCE

IN CENTRAL ASIA: ISSUES &

CHALLENGES

4


Wide ranges issues

5

Current Trends

Legal Uncertainity

Standardization Efforts eg. Contracts

Emphasis on Shariah Audit

Emphasis on Shariah

Governance

Promotion of ADR

Cross Border Deals

Exploring new Shariah

Contracts

Worldwide Acceptance

Issues in Islamic Finance Development:

WHAT TO BE DONE to SOLVE these issues & trends?


Challenges

System’s Framework

& infrastructure

Innovation & Shari’ah issues

human capital requirements

Standards& Regulations

Product development

Global integration

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CHALLENGES in Developing Solid Islamic Finance INFRASTRUCTURE:

1. Building national financial architecture

2. Addressing Industry challenges – human capital, regulations, standards, tax, incentives etc

3. Movement towards Global integration


Towards a Robust Islamic Finance

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Internationa-lization &

Collaboration

Database:

Academic Research

Market Research

Regulation, Governance, Supervision

Human capital development

Product Development: Innovation &

Originality

As the challenges

seem to be

complex, the

responses should

also be

comprehensive,

systematic and

systemic in

nature….

Well-conceived, consistent &

integrated framework

SUITABLE ISLAMIC FINANCE

INSTRUMENTS

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The Islamic Financial System

ISLAMIC ASSET MANAGEMENT

1. Unit Trusts

2. Mutual Funds

3. I-Reits

ISLAMIC BANKING

Islamic

Finance

1. Deposits

2. Financing

3. Payment facility

OTHER SEGMENTS

1. Islamic Endowment (Waqf)

2. Baitul Mal (Islamic

Treasury)

ISLAMIC CAPITAL MARKET

1. Sukuk (Islamic Bond)

2. Structured products

3. Investment Funds

ISLAMIC MONEY MARKET

1. Various liquidity facility

1. General Takaful

2. Family Takaful

TAKAFUL (ISLAMIC

INSURANCE)


Islamic vs. Conventional banks: Different nature of liabilities & assets....

FU

ND

ING

F

INA

NC

ING

Loan

(Interest-based)

Conventional

Banks

Deposit (Interest-bearing)

Leasing

• Ijarah (lease)

Sale

•Murabahah (cost-plus)

•Istisna (Manufacture)

•Salam (Fwd delivery)

•Kafalah (Guarantee)

•Rahn

(Pledge)

•Wakalah (Agency)

•Hiwalah

(Debt transfer)

•Wadiah (Safe custody)

• Mudharabah (profit sharing & loss bearing)

• Musharakah (profit and loss sharing)

•Qard Al-Hasn (Loan)

•Ibra’ (Waiver)

Trading contracts

Investment contracts

Supporting contracts

Gratuitous contracts

Islamic Banks

Mudharabah deposit

(profit sharing)

Qard deposit

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ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance 11

Purchaser Seller

Commodity or Asset

Price: Cost + Profit

Purchaser Seller

2. Commodity or Asset

3. Price: Cost + Profit

1. Order + Promise

to purchase

1

2

Simple Murabahah

Murabahah To The Purchase Orderer

Murabahah Contract


Ijarah is a lease whereby lessor buys and then leases out an asset required by lessee for an agreed rental amount and period in exchange for the benefits resulting from the use of the asset.

TYPES OF IJARAH:

Ijarah – OPERATING LEASE. Does not conclude in a transfer of the leased assets to the lessee.

Ijarah Muntahiah Bittamleek/ Ijarah Thumma al-Bai’ (AITAB)/ Ijarah wa Iqtina – FINANCE LEASE. Offers the lessee an option to own the asset at the end of the lease period either by (a) gift or (b) a sale at a specified consideration

Ijarah (Lease) Contract

ISLAMIC BANK


An agreement between a

capital provider (rabbul mal)

and an entrepreneur (mudarib)

whereby the rabbul mal would

contribute capital to the

business which is to be

managed by the mudarib.

Mudarabah Contract

• Profits generated by the business are shared accordance with the terms

of the mudarabah agreement whilst losses to be borne solely by the

rabbul mal unless the losses are due to the customer’s misconduct,

negligence or breach of contracted terms.


Musharakah - A contract between two or more parties to contribute capital in a

partnership.

Profits generated by the partnership are shared in accordance with the terms of

musharakah contract.

Losses are shared in proportion to the respective contributor’s share of capital.

Musharakah Contract

Application:

• Home Financing: Diminishing Musharakah • Sukuk • Equity Shares • Project Financing


Musharakah Mutanaqisah


TAKAFUL

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TAKAFUL

(e.g. Family, General)

TABARRU’

(Donation)

PROFIT SHARING ON

SURPLUS

A contract among participants to

reciprocally help each other against defined

loss

Commercial profit sharing contract

between participants and takaful operator

Agreement to relinquish certain portion of

contribution as donation to fulfill obligation

of mutual help and joint guarantee

ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance ISRA األكاديمية العالمية للبحوث الشرعية

International Shari’ah Research Academy for Islamic Finance 17

-retakaful

-reserves

-claims

-investment income

-stabilization reserves

Takaful

Participants

Contribute

Risk Fund

Manage

Takaful Operator

Wakalah

fee

Surplus

MODUS OPERANDI

(WAKALAH MODEL)

1st contract

Tabarru`

2nd Contract

Wakalah


Sukuk

Asset Based

Sale Based

Murabahah

Salam

Istisna’

Lease Based

Ijarah

Ijarah Muntaahiya Bittamlik

Ijarah Mausufah fi Zimmah

Partnership Based

Mudarabah

Musharakah

Agency Based

Wakalah bil Istismar

Asset Backed

AAOIFI

Sukuk is certificates of ownership of a pool of

underlying assets, in which the certificates are of

equal value, issued with the aim of using the

mobilized funds for establishing a new project,

developiong an existing project, or financing a

business activity as per their respective shares.”


Sample 1: Sukuk ijarah

Company/

Obligor SPV/Issuer

Investor

2 5

1

3

4

1. The Company sells asset that it

owns to the SPV/Issuer for

cash.

2. SPV issues sukuk to raise fund

from investors to buy the asset.

3. SPV leases the asset back to

the company (ijarah)

4. The company gives a purchase

undertaking to buy the asset

back and ensure redemption of

sukuk.

5. The company makes periodic

rental payment and SPV

distributes payments to

investors

6. Upon maturity, the purchase

undertaking is exercised and

the company buys the asset

back.


Sample 2: Musharakah Sukuk

Profit shared based on pre-agreed ratio X:Y

Capital Proceeds

Capital

Outcome

Y% X%

Investment

Venture

Investor

Issuer

Loss shared on basis of equity participation

DEVELOPING ISLAMIC FINANCE

INFRASTRUCTURE: MALAYSIAN

EXPERIENCE

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Malaysia Islamic Finance infrastructure

1. Regulatory Framework

3. Shari’ah Governance framework

GOVERNING INFRASTRUC

- TURE

2. Legal Framework

• Malaysia has, over the last decade or so, spearheaded development and reforms in the Islamic finance industry

• The Malaysian Islamic financial sector is seen as one of the most progressive and attractive in the world given the numerous incentives planned and further liberation in the coming years.

Malaysia Islamic Finance infrastructure


3. Malaysia Shari’ah Governance Framework

Shari’ah Governance refers to structures and process adopted by Islamic financial

institutions to ensure compliance with Shari’ah rules and principles…

Shari’ah Governance must be observed by all stakeholders in the industry.


Malaysia adopts two-tier Shari’ah Governance Infrastructure in the decision making process …

• National Shari’ah Advisory Council of the Central Bank & Securities Commission

• Roles:

• Highest Shari’ah authority

• Standardization of fatwa

• Law harmonisation

Macro- Levels

• Shari’ah Committee of respective Islamic financial institutions (IFIs)

• Shari’ah advisory firms to IFIs

• Roles:

• Product development

• Reviewing and approving matters related to shari’ah

• Ensuring Shari’ah compliance

Micro-levels

SAC -

BNM

SC -

IFIs

SAC -

SC

SC -

IFIs


New laws aim to strengthen Malaysian financial

systemTakaful – IFSA 2013


Codification & Specification of Specific Roles and

Responsibilities of Key Functionaries

CONCLUSION

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Islamic banking and finance impressively gain global acceptance

Customers: to meet the financial needs

Government: to absorb as tools in monetary policy and means to realize society’s welfare

People of the world: to have a good financial system that is more just, fair, pro-poor, anti-exploitation, stable and not fragile.

The future of Islamic banking and finance is very promising

More efforts to be put to ensure the sustainability of Islamic finance

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Competition is high and requires innovations in products and services to meet the ever-changing customer needs and expectations

More initiatives from government or private are needed to set a solid and coherence International Islamic Finance Architecture

More global collaboration is needed to develop Islamic finance to be a viable international financial system

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ISRA األكاديمية العالمية للبحوث الشرعية International Shari’ah Research Academy for Islamic Finance

Thank You

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Documents

Memahami Kepentingan Operasi dan Instrumen Perbendaharaan