Recommendations from the Islamic Finance in Ras al Khaimah Workshop April 12, 2014 - WTNZ FOX 43 Knoxville, TN

Recommendations from the Islamic Finance in Ras al Khaimah Workshop April 12, 2014

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It is not often that prominent practitioners of Islamic finance have a chance to meet on the sandy shores of Ras al Khaimah, UAE and here is the result of the dynamic brain power, which collaborated at this special event produced by FAAIF Events and Ilovetheuae.com.

Jassim Mahadik presented on the topics of Risks in Islamic Banking, Sukuk, and Takaful, and Muhammad Ayub discussed the Use of Derivatives in Islamic Finance and Sharih Implications. Muhammad Zubair Mughal explained the Current State of Islamic Microfinance while Camille Paldi talked about the Issues and Concerns in the Financial Reporting of Islamic Banks and Dispute Resolution in Islamic Finance. The group made several key conclusions and policy recommendations for the advancement of the Islamic finance industry.

Jassim Mahadik emphasized the need for the improvement of customer service and customer care in the Islamic banking industry, stating that the current state of customer service in Islamic banks may tarnish the reputation of the industry. Mahadik also expressed concern over the need for proper controls for Sharih compliance to be introduced in Islamic banks as well as warned about the damage to the industry reputation, which technological failure might induce. Mahadik discussed the special attention, which needs to be placed on the composition and approval of Sharih boards as well as the systems, which should be put in place to regulate Sharih scholars and boards, such as a centralized Shari’ah Board for each country, region, and the entire global Islamic finance industry. Jassim Mahadik mentioned that the takaful industry requires more people skilled in the Muslim actuarial sciences and that Islamic finance practitioners should take care to adhere to Sharih guidelines when structuring sukuk. Mahadik also stated that the deficiency in Sharih compliant risk management tools is a major concern for the Islamic finance industry.

Muhammad Ayub discussed the Sharih compliancy of many risk mitigation tools including derivatives and stated that in Sharih compliant risk mitigation tools, risk cannot be separated from ownership, which occurs in derivatives structures. Ayub emphasized that the US financial crises resulted from short-selling and the selling of debt as well as the creation of a side-economy separate from the real economy, resulting from the separation of risk from ownership, therefore commoditizing risk and allowing it to multiply and allowing debt to grow disproportionately and separately from the real economy. Ayub stated that derivatives equate to a speculation tool for maximizing earnings without adding any value to the real economy. Ayub referred to Adam White, who said, “All speculative selling of commodity futures is naked short-selling…it can help fuel speculative manias.” In fact, derivatives have been outlawed in many US states at different times in history. Ayub said that we need to focus on the real economy and avoid using non-Sharih compliant risk mitigation techniques, which leads us into non-Sharih compliant activities such as short-selling, sale of debt, riba (interest), and the commoditization of unbundled risk, where risk is traded and sold in a side-economy separate from the real economy. Ayub ended by discussing the importance to stick to the rules and original objectives of Islamic finance, Sharih, and the Maqasid al Sharih.

Zubair Mughal then talked about the Microfinance industry, stating that microfinance is an important tool, which can help to alleviate poverty in the MENA region, Africa, Caucusus, South Asia, and Southeast Asia. Mughal emphasized that microfinance can be used by Muslims and non-Muslims alike as a tool of social uplift and income generation. Mughal and Paldi stated that microfinance could also be utilized in the inner cities and economically depressed areas of the United States, to bring about economic rejuvenation. Mughal, Paldi, and Ayub discussed the prospect of introducing a new product called micro-sukuk or social sukuk, which could be integrated into the microfinance industry.

Camille Paldi discussed the need to bring the financial reporting of Islamic banks into harmony and stated that a good example of how Islamic banks should conduct their financial reporting is the Kuwait Finance House Bahrain Disclosure Report, which could easily be found on google. She stated that Islamic banks should use standards specifically tailored for Islamic banks rather than using conventional standards, as this may lead to increased non-transparency in Islamic banking and mislead the stakeholder in the true financial health of the financial institution. Paldi also discussed the importance of establishing a unique and specifically tailored dispute resolution system for the Islamic finance industry and offered a solution of producing a standardized dispute resolution contract, modeled after the FIDIC contract used in the construction industry, which could be attached to all Islamic finance contracts. Paldi said this would streamline Islamic finance dispute resolution as well as encourage completion of contract. In addition, Paldi suggested creating the Dubai World Islamic Finance Arbitration Center (DWIFAC) and Jurisprudence Office (DWIFACJO) to monitor and administer the new specialized Islamic finance dispute resolution process as well as produce a model Islamic banking law, which could be adopted around the world.

Overall, the Islamic finance Workshop in Ras al Khaimah constituted a successful meeting of the minds to produce suggestions for the improvement of the Islamic finance industry. Paldi hopes to produce more events with similar outcomes, however, hopes that more Islamic finance practitioners and the public would also get involved in such workshops and brainstorming sessions to guide the advancement of the Islamic finance industry. Camille Paldi can be contacted at camille@faaif.com for further information

Distributed by Kjprnews

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Company Name: FAAIF
Contact Person: Camille Paldi
Email: camille@faaif.com
Phone: +971 (0)56 950 0562
Country: United States
Website: http://www.faaif.com

Source: www.getnews.info

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