I nstitutions providing Shariah compliant finance could provide much more detail in their publicity material on the procedures involved in issuing fatwa. Their annual reports could also provide more details on the work of their Shariah boards during the previous year, including information on frequency and length of meetings and the kinds of issues considered. Shariah scholars themselves could in addition write more about their work in newspapers and All of this would help to inform the market of what Shariah compliance involves, increase client confidence, and indeed help the spread of Islamic finance. Many do not appreciate what the work of Shariah board members actually involves, how the scholars legitimize new financial products and monitor the use of existing products. There is also little awareness of how the scholars have to be able to read, understand and if necessary challenge the draft contracts produced by major law firms for Islamic financial products. How the work of the Shariah boards relates to that of bank officials and their legal advisors needs to be made more explicit. All this will enhance the reputation of the Islamic finance industry. PROFESSOR RODNEY WILSON Director of Postgraduate Studies, Durham University
Isincerely think that most market participants spend more time educating themselves about how to manage their traditional lawyers than they do to prepare themselves for the Shariah process. Yet it is a legally binding, Shariah compliant relationship that they seek; so both elements should have at least equal priority. If legal, but not compliant, no deal! ABDULKADER THOMAS President & CEO, SHAPE Financial Corp.
Shariah boards are made up of people who are very familiar with the religious requirements, but who have very little understanding of the intricate financial transactions that bankers are familiar with. Today, Islamic banks rely on the reputations of members of their Shariah boards to market their products as Shariah compliant. But with some board members commanding annual salaries of as much as US$80,000, critics question the role of money in their decision-making processes. Although scholars that serve on Shariah boards are considered as competent individuals who issue sincere fatwas, the problem with the boards occurs on a much more fundamental level. The problem is that Shariah boards are chosen and paid by the bank, and the bank is not going to choose a scholar who is going to say its products are haram. This makes them indifferent from the market participants, in terms of decision independence. In most cases, market players have to justify the development of certain products with detailed research and precedents (if any exist), in order to obtain endorsement from the Shariah board. In fact, the major portion of the whole Shariah advisory process is done by the market participants and endorsement is often only a formality. As such, the Shariah advisory process could be better managed by market players, with the support of the Shariah scholars. ABU DZIKRILHAKEEM AL-UTHMAN FAST Research and Training, Karachi, Pakistan
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