HALAL Stocks? Shari'ah Screening Mechanisms...

Any activity be one is a trade or manufacturing or service in view of Halal gain or income generation, shall be in total compliance with the integrated Divine principles of Shari’ah and that is; faith, law, morality and cooperation with utmost care, share and concern by complying the holistic universal character for the common benefit of all humanity by waiving the issue of one’s religion, race, colour, gender, status or nationality. An unfair gain through dishonesty, misappropriation, oppression, illegality and appreciating advantage at the expense of others, is totally opposed by the concept and the spirit of Halal.

Money managements involving usury (Riba') and gambling (Maysir), manufacturing and / or  selling of forbidden products (for example, liquor, pork and pornography related materials), engaging in operations evolved by  the elements of uncertainty and cheating, are forbidden by the Shari’ah. These activities are considered as un-Islamic (non-Halal), as regulated by the Shari’ah frameworks. Thus, neither capital market, stock market nor other related money matters are also governed by the Shari’ah principles with no exception per se. 

Therefore, the stocks and shares of companies involving in the above-mentioned practices are deemed non-halal. But, what if the core business of a company is halal in nature, while a smaller portion of the business activities are not align with the Shari’ah principles. Can such a company or its activities be regarded Halal? Or is it Halal to invest or participate in the above nature of companies or their activities? Or what are the Shari’ah screening mechanisms to determine one is Halal?

Companies under the category of non-halal  (Haram) activities are those who are involved in the non-permissible activities, under the Shari’ah principles. While activities comprise of both permissible and non-permissible activities means that the companies under this categories are performing mixed halal and non-halal activities.

The general procedure is the evaluation of the data of the company concern by the Shari'ah Council, if the Shari'ah Council is satisfied that the evaluated company is engaging its core businesses in halal (permissible) activities, then the stocks of this company will be duly approved as a Shari'ah compliant one. But if the company concern is found by the Shari'ah Council's assessment that it engages its core activities in non-halal elements the Shari'ah Council shall disapprove such company as the Halal one. Furthermore, if the company's activities comprise of both permissible and non-permissible elements, the Shari'ah Council will then adapt the following two mechanisms of evaluation:

i. The first phase adopts quantitative method of evaluation. The Shari'ah Council will calculate the percentage of contribution or ratio of haram activities to the turnover of group accounts and to the profit before tax of group accounts.

ii. The second phase applies qualitative method of evaluating companies, that is, looking at the society or public perception of the companies, and determining the importance and maslahah (benefit) of these companies to the ummah (nation); the haram element only involve matters such as ‘uruf (custom), ‘umum balwa (common plight), and fasad al-zaman.

10 TIPS for a Socio-Eco National Reformation in Reality?

1. Visioning a K-nation with high-tech  by focusing on “Human Capital Development in reality”.

2. Moving forward with high achiever plan towards creating an enterprising & entrepreneur based sound Nation.

 3. Industrialization & Privatization shall work concurrently as the core mission of the nation building.

4. BOT (Build, Operate & Transfer) arrangement through foreign groups (investors, contractors, tech-groups, suppliers & operators) partnering with possible participation from the local players towards sustainable development of major sectors / projects with class 'A' standard.

5. Policies (Laws & Enforcement) shall be controlled by the government with total compliance of the Public interest. Foreign investors & participants shall be encouraged by standard laws, policies and cultures with appropriate treatment, securities & privileges.

6. No Violation nor Strike shall be appreciated as the tool for demand or achievement, but Peace process & Professionalism with Wisdom, Mutual Respect & Utmost tolerance shall be adapted as the national culture towards a  result oriented Reform.  

 7. Culturising a national slogan “Harmony but no Conflict to Prosperity”.

8. Self-reliant shall be the micro-culture inculcated among ALL levels in reality.

9. Visit & Campaign shall be organized as a planned national events to attract foreign investors, corporate players, industrialists & professionals in view of "Reformation" in reality.

10. World Summit on Reformation shall be organized for the Global awareness towards "a meaningful Reformation" by  visioning a dynamic change in the nation and its people in the wake of globalization.

Ummatic Jihad is by Intellectuality & Gentlity, but not with Terrorism?

Islam opposes any form of terrorism with violence while recognizes peace & harmony, progress & achievement through intellectuality, gentility, wise strategies & mutual respect with utmost tolerance and that is Ummatic Jihad (peace process for prosperity of mankind with no violation) for the common benefits of all within the spirit of Divine principles of the holy Qur'an & Sunnah, the mission & vision of the holy Prophet Muhammad (saw).

It had been the historic-culture of Muslim to devote themselves with Knowledge, Research & wise strategies with maximum degrees of tolerance towards their sustainable victories with pride & prosperity. Muslims used to lead the world not only politically but also economically, culturally, scientifically and or other positive aspects of the world environment just because of their intellectual enrichment with gentle application.

Eventually, when Muslims ignored importance of Knowledge & Research while adapting emotional mechanisms for their victory resulting them losing dignity & prosperity with uncertain future.

A nation can naturally be able to claim rich with superiority through its human resources, brain, wealth & system. It is factually submitted that, Muslims to day, are possessing all 4 pillars of superiority by having their number about 1.3 billions, which is almost 27% of the total population of the world, brains with world class intellectuals and scientists, wealth & uncompromised Divine system for all humanity.

Despite having such prime capacities, Muslims in the contemporary world of reality are suffering with no dignity, povertiness, being dictated & oppressed physically, globally, politically, economically, culturally, religiously, morally & psychologically.

Such unacceptable phenomena is encountered by Muslims perhaps due to ignorance of Divine reality.

In order for Muslim Ummah to get back to their original shape as the Dignified nation (Ummah) they have to return back to the Divine spirit of Qur'an & the Prophetic traditions as their way forward and that is, among others to enrich their culture with knowledge, research, wise strategies, rationalism, gentility, mutual respect, tolerance, punctuality, honesty, less talk with more result oriented action & unity with utmost share, care and concern.

For the noble victory of Muslim Ummah with sustainable pride, progress & prosperity "no room for emotionalism, terrorism & violence".

Islamic Finance? Its Universal Declaration to All Mankind (Ummah).........

Islamic Finance & Commerce is a Mission with Universal Character, which provides a Holistic Integrated Paradigm with high standard of ethico-spiritual, socio-economic & polio-cultural value for all humanity by respecting the issue of one’s religion, race, color, status, gender and or nationality.

The dynamism & uniqueness of Islamic finance can effectively be achieved through the heartfelt appreciation & practices of wisdom in reality, mutual respect, Ummatic cooperation, brotherhood, Utmost share, care & concern among the regulators, designers, operators & consumers in the global Islamic corporate & financial environment .

Such Uniqueness with Universal Character of Islamic finance is indeed inspired by the following Universal Declaration to All Mankind (Ummah) to Pave the Way Forward with Dynamic Cooperation:

وتعاونوا على البر والتقوى ولا تعاونوا على الإثم والعدوان

“... co-operate amongst you one another in righteousness and piety (visioning at beneficial outcome), but help you not one another in sin and rancor (aiming at harmful results)”.
(Surah al-Ma’idah:02)

MINORITIES' (non-muslim) PROTECTION IN IRAN?

In Principles: the rights are ruled out.

In Practice: the rights are practiced, though not accurately observed yet in practicality as per required by the principles of Shari'ah (Sunni or Shi'ah whatever the case may be).

Suggestion: A further improvement in practice, treatment & relationship with non-muslim is required so to comply with the spirit of the Shari'ah standard and the noble practice of the holy Prophet Mohammad (saw) (towards honouring & protecting the dignity, life, property and socio-economic, religious & cultural rights of non-muslim in view of a sustainable universal peace keeping mission among all humanity) considering the contemporary reality.

Serious Concern: No terrorism, destruction, discrimination & unjustified emotionalism shall have any shelter or support in the noble teaching of Islam, rather Islam ensures a holistic PEACE KEEPING with utmost care, concern, cooperation and mutual respect among all humanity with Universal value.

Comment: It's intellectually essential before making a judgement on any subject matter, to examine on one's concept, rules & reality from both pros & cons, which may lead to a fair & acceptable conclusion.

Recommendation: the following links may provide a basic phenomenal idea on the above subject.
http://www.dhimmi.org/Islam.
html http://fis-iran.org/en/irannameh/volxix/nonmuslim-legalstatus http://thirteenthree.org.au/blog/wp-content/uploads/2011/09/133_Iran_Profile.pdf http://www.dhimmi.org/Islam.html
http://www.answering-islam.org/NonMuslims/rights.htm

World Islamic Accountants' Club (WIAC) ?

WORLD ISLAMIC ACCOUNTANTS' CLUB (WIAC) ? a need for the global corporate ummatic benefits.

Considering the global Shari'ah corporate phenomena and particularly the Islamic accounting environment, it is timely to initiate the establishment of WIAC with effective structure, policies, plan, strategies, system & operation by visioning towards a global cooperation among the Accountants, Auditors, Regulators & Technical groups in the Shari'ah based Financial, Corporate industries, Goverment & NGO sectors by targeting dynamism for all.

Islamic Common Market Global? .... rational & reality.

A step towards the formation of Islamic Common Market (ICM) was taken to bring about a global Ummatic unity among the Islamically trading countries so that they would be able to achieve maximum eco-goals with standard, progress & prosperity. But after years what had actually brought such awareness again? Is it the 11th September attack on the WTC?

After this incident, Muslims are being attacked on a very large scale as they are being blamed for this tragedy. Whosoever caused it, is the whole population of Muslim going to suffer the consequences?

Moreover, the Muslim in different countries have now come to realize that, their position in the world has been tarnished greatly. They are being heavily oppressed and controlled by the foreign powers, especially the Western. This oppression is well evident in the murderous killing of the Palestinians by the Jews. It was the cry of these pitiful people and other Muslim victims that there should be a need to re-identify the position of the Muslim in the world.

Whatever the case may be, the Muslim countries have now realized that they need to rebuild their identity and reposition their eco-political status in the world and save themselves from the yet coming potential harassment and oppression.

Islamic Common Market (ICM), which is the first step towards the reawakening of the Muslim Ummah. This proposition will have to deal with, such as globalization and to create an utmostphere to fully make people aware the need of an Islamic Common Market to strengthen the ties between Muslim countries and establish a Shari’ah based trading and commerce system.

It is to help people vision as prospectus and a means by which the Muslims can prosper and live with dignity without being picked at by the non-Muslim countries. It also aims to show the economic prospects of the proposition.

Islamic Common Market may contribute towards a readiness to take away the carpet from underneath the legs of the ICM. furthermore, Muslim all around shall appreciate the importance of their contribution to ICM in reality.

The economic level we need to accelerate the process of taking practical steps toward the realization of economic integration of Member States. Such integration should take the form of an ICM.

Due to the continuous economic and political competition between Muslims and non-Muslims nations, the concept of “Islamic Common Market” (began at the 12th Conference of Foreign Ministers of OIC in June 1981) emerged to actualize the need to materialize the economic unity of Muslim Ummah through economic integration.

The chief objective of the ICM is to provide the perfect banking, finance, marketing, trading and other economic related system necessary for the Ummah to progress smoothly in its Islamic role, to furnish it with the essential powers and faculties for its proper functioning and to clarify its vision and its methodology.

In a nutshell, Islamization of Common Market means an Islamic framework of transaction for human life and civilization. It determines every human activity, struggle and action in Islamic way. Islamic Common Market aims to enrich the followings with sustainability:

1. Relation between Eco-Politics.
2. Sovereignty.
3. International Society and Order.
4. Shari'ah Standard Ideology.
5. Specific Operational Mechanisms.
6. Ummatic Unity Global.
7. Ummatic Mutual Cooperation, Respect & Understanding.

Gold Dinar?... an alternative currency for ALL.

Money plays a vital role to the economy of any country, not only for providing a medium of exchange but also for the basic survival of the economy of the country. Traditionally, many things have been used by man to accommodate trade and be used as money such as sea shells, gold, silver, special type of stones and so on. Currently the world is using the paper money as the official medium of exchange between individuals and institutions. So far the system has managed to survive many financial crises and it seems to be in use for many years to come. Unfortunately, the paper money system does have its flaws including some that make it an unacceptable medium in the eyes of Islam. These flaws are shared here along with an alternative system (Gold Dinar) that can be used by the world communities as a sustainable one for all. This new system is one that is sure to be just and also in accordance with the Shari’ah standard.

Shari'ah Response to Fiat Money

• The introduction of paper money has led to the problem of instability of currency that did not exist with the usage of the gold standard. The The production of gold was quite stable and it then automatically guaranteed stability.

• Paper money unfortunately can be created anytime based on the decision of the government. This is what makes it so unstable unreliable as a medium exchange. With an ounce of gold could buy the same amount of goods over an extended period of time whereas with a twenty dollar note may not be able to enjoy the same privilege.

• The government decides the money matters of a country and is also responsible for increasing or decreasing the value of its currency. For example, a country may require more money to finance all of its programs. On the other hand, the country might be spiraling into a depression, which will result in reduced public spending.

Significance in Gold Currency (Dinar)

• Most Islamic scholars asserted that, the usage of fiat money as a medium of exchange should be replaced by another medium that would be fair and just;preferably gold. One advantage would be that the government will not be able to exercise total control over it as is the case of paper money. The government will no longer be able to issue more gold than is available as was the case with the paper currency where the government can print as much currency as it wishes. After all, how much will it cost to print a piece of paper? The value of gold will only change when a new gold mine is found, but that too will not be a severe change. Moreover; the value of gold will eventually stabilize after a period of time.



• A second advantage of gold is that, there will be no Riba al- Fadhuly (interest with extra commodity) as the government will no longer be able to fully influence the circulation of gold or its creation. However, the chance of exploitation will still occur because the gold coin may be debased. Debasement of a gold coin would mean that, it will have less gold in it than is stated on the coin.



• This form of exploitation was quite common during the days when the gold coin was in use. The prince or king of a place would reduce the amount of gold in the coin and cheat his people. He would then keep the extra amount in the royal treasury for his own personal use and comfort. Hence; if a coin stated that, it was a 1.00 ounce coin, in reality it may have contained about 0.8 of an ounce.



• This issue must be resolved before we decide to use the gold Dinar again as it is not much different from the exploitation that one suffers at the hands of paper money. Moreover; the whole purpose of Dinar or gold coin would then be destroyed.



• A solution to this could be an auditing body that would inspect the gold coins to check whether they have the stated amount of gold in them or not. This is just like the quality control department in some firms, which check whether the quality of their goods is up to the standard or not.

• The Muslim countries will be using a currency that will be acceptable to all. The countries dealing with the Muslim countries will know that the gold in itself has value and will not worry about its depreciation or vice versa. This will result in a lot of trade among the Islamic countries and also the rest of the world.

• It will encourage trade and commerce among the Muslim nations. Even though there are many Muslim nations in the world, who have a very low level of trade and commerce exist among them. A single currency will make it easier for the Muslim countries to trade with one another and thus bring them closer in line with the broad principles of Ukhwah (brotherhood).

• By fostering closer ties among the Muslim nations and also better trade relations, the Muslim countries will no longer be as dependant on other non-Muslim countries as they currently are.

• Presently, some Arab countries sell oil in US Dollars as they feel secure knowing that it will not lose as much through depreciation than other countries. These countries can then revert to the Islamic Dinar and ask for payments in that currency. At one hand, they will benefit because, there is a very low chance that the gold coin will lose value. On the other hand, it will help the Muslim countries as a whole by ensuring that the rest of the world will use their currency. Hence, the Islamic Dinar will make the Muslim countries financially stronger and will alleviate their current plight.

Final Remarks

The concept of Islamic Dinar is not new and was in use long before the paper currency came into existence. The inherent flaws in fiat currency makes it unsuitable for the use as a medium of exchange and hence needs to be rejected.

A viable alternative would be to revert to the gold standard and use gold coin that we can name the “Islamic Dinar”. There are numerous benefits associated with the usage of this mode of currency if implemented successfully. Those of importance for the Muslim world are the factors that it will help the Muslim countries unite; make them stronger financially and also aid in increase trade between them. The Muslim countries will have to join hands in this effort to create the Islamic Dinar which will not only provide the world with economic stability but will also be responsible for bringing the Muslim world closer together. Although, Malaysia together with few other Muslim Nations struggle hard to make the dream comes true, but may not be accurately possible unless all Muslim nations are united to achieve the goal and hence, the unity among Muslim countries is essential or rather the foundation for success.

Birthday Party?...waiver of misconception.

1. It is dangerous practice to rule out HARAM based on personal view by having no justification from the Divine authorities".

2. How to justify "Birthday is Haram"? How about "Miladunnabi (saw)"? Is there any evidence from Qur'an or Sunnah prohibiting the concept of birthday?

3. The objective of celebrating birthday is: to express thanks to Allah (swt) by "al-Hamdulillah" for the year passed through with HIS mercy while seeking blessings & guidance for the next term of life journey.

4. Such objective is celebrated with some joy & happiness among the family members, relatives & friends, which contribute to the enrichment of brotherhood while diminishing the element of ill-feelings among the human environment.

5. Does not such celebration fall within the spirit of 'Bounty' in the Qur'an "Rabbana Atina Fiddunia Hasanah...." we seek from Allah (swt) in our prayer?

6. If yes... we may submit that,
(i) the concept of birthday is Halal.
(ii) Provided that, the activities & style involved herein shall not be contrary to the standard of Shari'ah.
(iii) "An analogy or legal reasoning shall not be based on personal emotion, but be justified by the Divine principles".

7. In practical reality, some times birthday parties involve certain activities or culture, which are contrary to the eithics & principles of Shari'ah.

8. In such a situation, the justified 'Haram' activities shall be declared 'Haram' no matter one is carried out in the birthday party or in the Mosque.

9. But this does not mean that, because of some 'Haram' activities involve in some birthday parties resulting of which the concept of Birthday shall also be declared 'Haram'.

10. A Logical understanding: if a person is a proven criminal, because of one's criminality can his / her affiliated family & generation be charged?

11. Islam recognizes action with justification, but no room for baseless expression.

12. To conclude here that,
(a) any Fatwa / view is expressed shall be acceptable should one is justified by the Divine principles.
(b) Unjustifiable, emotional self-claim Fatwa / view shall be rejected to save every one from undesirable confusion.

World Intellectual Forum (WIF)? a global platform for sharing of thoughts...

Upon witnessing the world phenomena with diversified crisis of today, the cyber "World Intellectual Forum (WIF)" has recently been launched, through which the global intellectuals / professionals in the applied fields of economy, politics, socio-cultural, religious & global may on regular effect take up the most current & crucial issues of the world and thus share their respective justifiable thoughts with dynamic & acceptable solutions by aiming to contribute towards creating a reformed environment with "peace, prosperity & progress" for the world of humanity & creatures. Such initiative may lead to a "New World Direction with Globalization for All".

All are friendly invited to share your intellectual / professional thoughts, ideas, views, comments & recommendations for the common benefits of the global Ummah (humanity) through the following Link:

http://www.linkedin.com/groups/World-Intellectual-Forum-WIF-4049832?trk=myg_ugrp_ovr

'ZAKAT' Provides Social Security for a Multi-Racial-Religion Needy Society?

The modern social system was introduced based on human thought to care for the poor and needy in the society, regardless of one's race and religion. The question here is, can Zakat and its fund offer similar safe guard for the poor and the destitute in today’s modern society, which is multi-racial-religion?

It is Divinely proven (al-Qur'an 9: 60) that, the Zakat is a compulsory tax, to be collected from those whose income and or property has reached to a certain amount in value. The issue here whether the Zakat fund allows to be distributed to care for a multi-racial-religion society?

The 'Ulama (Islamic jurists) have mixed views on the issue:

(i) Some of them are of the opinion that, Zakat is a compulsory tax collected from Muslims and it is therefore, should provide social security for Muslims only.
(ii) However, the majority of the 'Ulama are of the view that, Zakat is an Islamic institution, which provides social security not only for Muslim, but also for non-Muslim who are poor and needy, by complying the spirit of universal humanitarian value regardless of one's religion, color, gender or nationality. This view is indeed justified by the following evidences:

1. The words of Fuqara' and Masakin mentioned in verse 9:60 of the holy Qur'an are ‘Am (general) in nature, so as to include any ‘poor’ or ‘needy’ person be one Muslim or non-Muslim.

The view is indeed justified by an experience of the second Caliph of Islam, Sayyedana Umar (r.a.) that, once He saw a Jew begging from other people due to old age and financial constraint. He (r.a), upon witnessing such situation, recited the Holy verse which means:

“...... undoubtedly the Zakat is for the poor and the destitute.”

He (r.a.) then ruled out that, the recipient of Zakat must not necessarily be a Muslim only, but shall also be extended to non-Muslim.

2. In another occasion, the second Caliph (r.a.), saw some Christian lepers. He (r.a.) then with immidiate effect ordered that, they should be cared by Zakat fund.

3. During the period of Sayyedana Abu Bakar (r.a.) the first Caliph, Khalid ibn Walid (r.a) wrote in respect of the Christian inhabitants of al-Hira in Iraq, saying that:

"Any old man incapable of work or any one who has suffered from any calamity, or any person who was rich and suddenly became a poor asking for charity from his people, Jizyah must not be collected from him. He and his family, as the contrary, should be maintained through the Baitul Mal of Muslims".

4. The First and Second Caliph (r.a.) of Islam had also established an organization for social security, which functioned for the betterment of the needy, both Muslim and non-Muslim.

5. Imam Zufar (r.a.) ruled out that, the non-Muslim who are needy and poor should also be helped out of the Zakat fund, which may bring them closer to Muslim.

6. The Maliki and Zaidi Schools of Islamic Jurisprudence are also of the opinion that, the non-Muslim who are poor and needy should also be given the opportunity to share the benefits of the Zakat fund, so as to soften their hearts in order to become more friendly with and closer to Muslim.

7. Shaikh Shaft al-Din al-Nawawi also expressed that, it is a common obligation to help the needy and feed the hungry regardless of their religion.

8. Shaikh Shamsuddin Ramli, meanwhile, acknowledged that:

The non-Muslim are like Muslim when it comes to relieving them from their sufferings. It is essential for all Muslims to remove any harm coming to them. Apart from food or clothing of the needy non-Muslim, it is also Fardu Kifayah to help them in the treatment of their sickness and giving fees to the doctors, and buying medicine etc.

9. Prof. Abdur Rahman I. Doi accepts the view that, although the non-Muslim do not contribute to the Zakat fund they should be assisted by it. He went on to claim that, non-Muslim are indeed part and parcel of the Islamic State. Hence, it is the responsibility of the state to provide social security for all Muslim and non-Muslim alike.

Final Submission

All the above-mentioned justifications prove that, the institution of Zakat and its fund is able to provide a meaningful social security for all qualified humanity living in the society, by waiving the issue of one's color, race, gender, nationality and religion so long as one falls within the paradigm of needy and destitute, shall be cared out of Zakat, so to adhere with the universal humanitarian value in reality.

10 TIPS TO MINIMIZE CREDIT CARD HABIT?

Global Financial Catastrophe is being faced by today’s global public, corporate, private & domestic sectors is, contributed grossly among others by the appreciation of debt based economy. Happy to receive loan, but sorrow to settle it, which eventually ruins the progress & prosperity in any sectors of socio-eco-humanity.

Among the disastrous phenomena in the socio-eco life is the unwise credit card habit, which compels particularly many public, corporate & domestic sectors to accept bankruptcy, family destruction, socio-cultural disharmony & psychological curse, while threaten to the progress & happiness in notable sectors of humanity.

To rescue the eco-humanity from being threatened by the unwise credit card habit, the following 10 TIPS may be welcomed:

(i) Increase the use of Cash habit.

(ii) Appreciate Debit card as an alternative Comfort step to Cash carry.

(iii) Leave the Credit Card at home & use the Cash or Debit Card instead.

(iv) Notify the Bank to minimize the Credit Limit to manageable one.

(v) Close all Credit Cards except One for Necessary use.

(vi) Spend what is within the rational Capacity.

(vii) Use the Credit Card just for Need & Necessity, but not for Luxury.

(viii) No appreciation of Supplement Card.

(ix) Regular settlement with no outstanding.

(x) Stop using the Card till the settlement of outstanding.

Global Achievement in Islamic Finance? its rational & result...

Applied Islamic financial sectors (Banking, Finance, Investment, Takaful & Capital market) have developed into a global dimension, which is highly dynamic and growing rapidly with utmost appreciated by almost every major sectors of the contemporary world of advance tech-economy.

There are more than 450 Islamic financial institutions worldwide in operation with asset size estimated at about $ 1.3 trillions, financial investments are above US$ 800 billions and a growth rate estimated to be around 18% p.a.

Among the master players of Islamic finance in the contemporary world are the Middle East, Malaysia, Iran, Indonesia, Brunei, Singapore, North America, Pakistan, Bangladesh, South-West Africa, Germany, Central Asia, Egypt, India, Srilanka and the U.K.

The cliental of Islamic financial institutions are not confined to Muslim countries, but are spread over Europe, U.S.A, South Asia, South East Asia, Asia Pacific, Central Asia and the Far East.

Providers are not confined to local institutions as global players increasingly playing major roles in the industry today by aiming the global appreciation from all regardless of the issue of one’s religion, color, culture, nationality or status with holistic universal value for all humanity. ……… (ma’sum billah @ 2011).

The above achievements are due to an effective appreciation & operation of Islamic finance by adapting the principle of "asset backed risk sharing techniques" in its capacity as the approved theme.

Today- the World Economy is in Danger: Does Capitalistic Style Need a Re-think? What the Islamic Economic Direction is?

The global economy stumbled deeper into crisis as stock markets slumped further yesterday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession, according to international news agencies. Even as Asian equity markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy. The worsening market trauma has piled pressure on the US Federal Reserve to announce fresh measures of support for the US economy at a regular policy meeting yesterday, but analysts said its options are limited. Investors fear that, with confidence in the global economy's prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism. As of Monday, stock losses had wiped some $3.8 trillion from investor wealth globally in the recent rout as buyers rushing for perceived safety in the Japanese yen, the Swiss franc and gold, which hit another record high yesterday. (source: editorial asia post dacca – august 2011).

MSCI's all-country world index was down 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a "bear market". As the flight from risk continued in Asia and Europe yesterday, there was more bad news, this time from China, the stuttering global economy's main engine room. Official data showed China's industrial output grew at a slower pace and its annual inflation rate unexpectedly quickened to 6.5 percent in July. The inflation pressure puts the country's central bank in a bind as it tries to keep prices in check without dragging down an economy that already faces increasing threats from abroad. It may not be in a position to reprise its 2008 role of lifting the global economy. When the Lehman Brothers bankruptcy triggered a worldwide slump, China implemented a stimulus package that helped buffer its own economy and buoy the world. However, some analysts called on Beijing to act."It's time for Beijing to announce to the whole world that it will try to stimulate domestic demand again," said Tang Yunfei, an analyst with Founder Securities in the Chinese capital. Global leaders have failed to reverse sliding markets since a blow was dealt to investor confidence by Standard and Poor's downgrade of the US sovereign credit rating last week. (source: editorial asia post dacca – august 2011).

The downgrade heightened concerns that the twin-pronged crisis of a worsening euro-zone debt problem and a faltering US economy raised the risks of a double-dip recession. The European Central Bank (ECB) swept into the bond market to buy Italian and Spanish debt and sling a safety net under the euro-zone's third- and fourth-largest economies on Monday. But bickering has persisted in Europe over a longer-term rescue plan.ECB chief Jean-Claude Trichet defended his institution's decision: "It is the worst crisis since World War II and it could have been the worst crisis since World War I if leaders hadn't taken the important decisions," he said in an interview with the French radio station, Europe 1. (source: editorial asia post dacca – august 2011).

Major indexes in Asia slumped in early trade following a drop of more than 6 percent on Wall Street on Monday, and although some staged a sharp rebound, Hong Kong shares recorded their biggest one-day decline since the 2008 crisis.European bourses put in a short-lived attempted at gains at the open, but succumbed to the bearish mood. The FTSEurofirst 300 index of top European shares lost ground for the eighth session in a row, hitting a two-year low. Concerns mounted that Asia would inevitably feel the cold wind of the West's slowdown."This is the first time in several years that all three major economic regions are feeling economic distress at the same time," said Keith Ducker, chief investment officer of Tora, a dark pool operator. (source: editorial asia post dacca – august 2011).

The world economy is in deep crisis. The question is why it is so? We have no answer ourselves. But something is wrong with current capitalism. The economists need to look into this affair seriously. Capitalism has sponsored irresponsible consumerism, greed for more enjoyment. This has put pressure on world resources, apart from rising population. The role of uncontrolled markets and derivatives require to be re evaluated. (source: editorial asia post dacca – august 2011).

To day’s global eco-crisis perhaps attributed grossly by the historical debt-based economic or financial system with risk transferring mechanisms as as had been so dominant in the world of economy, which gave an opportunity for certain group of capitalists to gain at the expense of others. This eventually ruined not only the backbone of the global economy, but also developed an uncertainty in the future of the world humanity. Resulting of such an undesirable phenomena, the world is encountering grievous soci-economic catastrophe by retrenchment and or other disasters that the innocents are compelled to accept. (source: editorial asia post dacca - august 2011).

To rescue the world of economy & humanity the alternative platform may be suggested and that is, “ASSET BASED ECONOMIC & FINANCIAL SYSTEM WITH RISK SHARING MECHANISMS” within the holistic universal spirit of brotherhood, solidarity & mutual cooperation with utmost share, care and concern among all humanity by waiving the issue of one’s race, religion, color, status or nationality.

Such a holistic economic paradigm with universal call is indeed enshrined by the Divine principles of Islamic economy as ruled out in the Holy Qur’an: … cooperate among you in righteousness and piety, but do not cooperate among you in sin and rancor…” (5:2).

Islamic Venture Capital? the musharakah structure

Islamic finance provides two basic mechanisms for any corporate or legal entity to be adapted for raising required capital against any underlying project. One of those methods is equity financing, through the issuance of shares to public, especially by listed companies. The second method is debt financing through the issuance of bonds in the stock market or loan from banks or private investors.

As far as Islam financial system is concerned, all those adapted methods of financing shall be with Shariah compliant, or at least, there are some restrictions in using the mode of financing specifically in the case of debt financing where the avoidence of riba or any other haram elements such as uncertainty (Gharar) or gambling (Maisir) shall be observed in any deal. Many scholars are of the opinion that buying, selling or holding shares is lawful given that the company’s core businesses are in line with the Islamic law.

Islamic venture capital is a type of equity financing through the use of Musharakah (Partnership). In fact, venture capital as a concept is not a new, but it had a historical track record. It can be said: “although the concept (venture capital) as such is not new, a formal market for venture capital in the U.S. started only after World War II. Venture capital institutions currently manage over $50 billions in the U.S and over $60 billions in Western Europe".

Investors involve in venture capital to finance projects, which may require a large amount of capital and, it may not be available with the project’s owner. In common practice, businesses adapt venture capitalization through financing technology based projects fully or partially. Thus, it is strongly advisable for G2G cooperation with mutual contracts or win-win strategy to help each other in the era of globalization. Furthermore, some Muslim nations have enough recourses, but they are in many sectors possess lack of skills and expert in managing projects. Mean while several other Nations possess standard skills & resources. Therefore, it will be of great advantage for Muslim countries to establish mutual cooperation in tech-resources & skill exchange deals to florish nations with mutual cooperation. For example, The United Arab Emirates and Malaysia had built jointly a Technological City in Dubai. We need to take the hands of each other to live in the new era of globalization.

However, Islamic Venture Capital is operated generally based on the principles of Musharakah (Partnership or Joint venture), which is going to be illustrated further in the following sections.

Corporate Idea of Musharakah based Venture Capital

Musharakah means sharing or partnership. In the context of business and trade it refers to a joint enterprise in which all the partners share profit or loss in the joint venture. It is a contract based on mutual consent, whose validity does not depend only on conditions of a valid contract, but the parties herein shall have the legal capacity in entering in to a valid contract, with mutual consent, and shall be free from duress, fraud or misrepresentation.

Governing Principles & Terms of Reference of al-Musharakah backed Venture Capital

The governing rules & terms of reference shall be spelt out during the formation of the Musharakah contract. Thus, the principles of distribution of profit and loss, the nature of capital, management and termination of Musharakah illustrated as follows:

Distribution of Profit

The share of profit ought to be distributed in a Musharakah backed Venture Capital contract shall be transparent and agreed upon by contracting parties. If any aspect of the profit clause is not determined, then the contract is in invalid. The profit sharing ratio shall be based on actual profit accrue to the business not on how much each contributed. If the profit is distributed on capital ratio and at predetermined rate then such contract is invalid, but a question may arise as;

Does it necessary that, the ratio of profit of each partner shall correspond to the ratio of the capital invested by the partner? There are differences of opinion among Islamic jurists on the issue.

According to the Imam Malik and Imam Shafi', the contract is valid if the distribution of profit is based on the capital contribution. For instance, if “A” contributed 40% of the capital in Musharakah, he is entitled to 40% of the profit generated from such business. If he receives more or less than the ration he contributed then, the contract is invalid. However, the view of Imam Ahmad, the contract still valid even if the ratio of profit differs from the ratio of capital invested provided that the partners are mutually agreed upon. For example A may invest 40% of the capital in the business, but the investor may receive above 60% of the profit provided that, the partners accept it. Imam Abu Hanifah shares the same view with Imam Ahmed that, ratio of profit to the capital contributed may differ, but with condition that, all partners are active participants. If there is a sleeping partner in the venture, the profit shall correspond with the ratio of the capital invested by such sleeping partner otherwise invalid. (Taqi Usman, 2004).

Sharing in Loss

There is no disagreement among jurists in case of sharing in loss. All Muslim jurists unanimously agreed that, in case of loss, partners must share it accordingly to the amount of capital each partner has invested in to the business. This argument is based on principles of a legal maxim as follows:

“Profit is based on the agreement of the parties, but loss is always subject to the ratio of investment.”

Nature of Injected Capital

Most of the jurists are of the opinion that, the capital shall be in monetary form, but not on commodities. However, there are differences of views on the issue.

Imam Malik argued that, partners can contribute capital in a form of money since it is not a condition for the validity of a Musharakah, but it may also be permissible to invest in kind with condition that, the partners' share is subject to market price of that, commodity.

According to Imam Abu Hanifah and Imam Ahmad who disagreed while ruled out that, no contribution in kind is acceptable in a Musharakah. Their arguments are base on the following two reasons:

(i) commodities are naturally not the same, even if the same in form but differ in qualities and values, hence Musharakah is invalid if the propertties in the deal are distinguished from one another.
(ii) the share-capital redistribution cannot be possible, since commodities are subject to price fluctuations. But he agrees on commodities as capital if the commodities are dhawat-ul-amthal. A Dhawat-ul-amthal is a type of commodity, which if destroyed can be compensated by similar commodity like rice. Imam shafi is also of the same opinion that if the commodity is dhawat-ul- amthal then is acceptable on the ground that it can be mix with other commodities of the same type, but he disagreed on dhawat-ul-qeemah (commodities, which can not be compensated with similar commodities like cattle). (Taqi Usman,2004).

To conclude here that, the share capital can be in form of money or commodities, the market value of the commodities shall determine the share of the partner in the venture capital.

Management of Musharakah backed Venture Capital

In a common practice of partnership, all partners have the right to take part in the management as well as to work for it. However, there are two possibilities that, a management can be in the hand of one partner due to mutual consent of other partners. But in this case the sleeping partners will receive their profit in accordance with the ratio of the their respective invested capital. Alternatively, all partners can work as a team and each shall be treated as an agent of the other in the venture, in which all shall enjoy with equal rights in day-to-day dealing of the business.

Termination of Musharakah Backed Venture Capital Deal

Underlying circumstances where a Musharakah backed Venture capital deal may be terminated:

1. Every partner has the natural right to terminate a partnership at any time on own wish. If the contract is terminated at will, and the asset is in a form cash, then it will be distributed according to the contributed ratio of shares of each partner.

But if the asset is in form of non-liquid, then there are two options:

(a) to distribute the physical asset based on the value of that asset.
(b) incase of dispute, then the physical asset will be sold and the cash shall be distributed on contributed ratio.

2. In case one of a partner dies, the partnership shall be liquidated. However, if the legal heirs of the diceased partner accept to continue with Musharakah then is also permissible with any terms mutually agreed upon by all new partners.

3. If one of the parties becomes insane the partnership shall be terminated. But if all remaining partners agreed to continue the venture along with the shares of the insane partner the partnership can be continued and the share of prfits shall be distributed to the insane's guardian accordingly.

Those conditions are considered both express & implied terms, which shall also be stipulated in the contract at the time of its formalization (Taqi Usman, 2004). As the holy Prophet (SAW) ruled out to the effect:

“All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful”.

Modern Operation of Musharakah Backed Venture Capital Model

In this Musharakah backed Venture Capital model, the bank identifies potential companies with approval upon due diligence.

Short listed Companies issue Musharakah preference shares to the bank at discount if the bank wants to buy the paper through Wadiah or discount sale. Incase the bank does not intend to buy the paper, the companies can sell it directly to the investors via the Musharakah deposits.

For example, the bank may require $ 70 million to finance four short and medium investments projects. Bank will issue $ 70 million worth of Musharakah shares to investors at $ 1 each. In this case the bank acts as an agent for both investors and the companies for which the bank shall hold the right to charge some fees for services rendered. If in case the project gains $ 105 million, the net asset value per unit will increase to $ 1.5. In this case investors will enjoy capital gains. However if the project fails to succeed the investors will suffer loss in their capital accordingly.(Rosely, S. A. 2001).


Practical Phenomena of Musharakah backed Venture Capital

In realty, venture capital is a real business deal in which both parties venture capitalists (the venture capital company) and the financed company work together and share efforts and returns, because simply there is no gain without pain, where the rejection of riba (usury) begins.
Furthermore, the minimization of the use of banking services specially the loan facilities while moving towards investments companies, which offer asset backed risk sharing facilities based on Musharakah, may protect all parties involve in the venture better with sustainable results. The following some steps are highlighted to be noted in an Islamic venture capital deal.

• the Company “Sharikah” is of a pharmaceuticals in nature, it has the relevant skills to develop a new type of product and has no enough capital to finance the project.

• the company found a venture capital company, which is going to finance about 90% of the total cost based on Musharakah contract, and later on the profit or loss, which shall be divided according to the principle of Musharakah.

• After the establishment of the venture capital, and the investment opportunities identified, the venture capitalist has the right to monitor the investment and analyze it step by step to make sure the project is successful and beneficial for both parties.

• The contribution of the venture capital company can be converted into common stock, but it is not Islamic to be converted to preference stock, which allows its holder to receive fixed dividend and that is, resemblance to riba.

• The full amount of the agreed capital may not necessarily be provided at lump sum, but by progress payments as per the development of the project.

• The Board of Directors shall contain members from both the venture capitalist & the financed company as per mutual agreement.

• To minimize the risk, the venture capital firm can build a portfolio investment by investing in other companies (Diversification).

• After the project completion the recipient company has the chance to go for public upon satisfying the venture capitalist as per agreement.

• The profit earned from the project will be shared between the involved parties based on pre-determined ratios.

Final Remarks

Indeed, the the paradigm of Islamic venture capital is a timely for the benefit of the corporate Ummah in particular, as a mechanism for raising of funds through the use of the Islamically accepted concept of Musharakah. It may help to a sustainable development not only among the sectors of Muslim owned, but also non-muslim owned projects with much safe guard equally to economy, soci-cultural, human value with professionalism and personality & environmental.

Islamic Bond (Sukuk)? an alternative way out of global Debt-pro Crisis...

Considering the fact that, the bond issuance and trading are important means of investment in the modern economic system, Muslim jurists and economists are trying to find the Islamic alternative. However, to meet the various demands of investors Islamic bonds (Sukuk) certificates should be diversified. Among the Shari'ah justified Sukuks in operation in to day's corporate environment are: mudarabah or muqaradah, musharakah, Ijarah, istisna‘, salam and murabahah sukuks.

However, it should be noted that although some of these instruments have been generally accepted as being in compliance with Islamic principles so that, they can be traded in the secondary market, the negotiability of certain others is still a point of debate and controversy due to their legal acceptablity or compliance with Shari‘ah.

Therefore, some of these bonds can be traded in the secondary market while the trade of others is limited to the primary market because they can be exchanged only at face value.

In Malaysia for instance, almost all of the domestic Islamic debt papers issued so far have been based on the principles of murabahah, bay‘ bi al-thaman al- ajil, bay’ al-’inah and bay’ al-dayn, despite the controversy surrounding the issuance of tradable bonds in the secondary market based on the above two contracts. At the same time, there is a perceptible increase in the willingness amongst Malaysian issuers of bonds to explore other Islamic principles of financing, namely the profit-oriented based musharakah as well as the asset-backed mode of ijarah. Hopefully, the future issuance of Islamic bonds will focus on the widely accepted bonds such as musharakah bonds, mudarabah bonds and ijarah bonds.

However, the problem with Malaysian Islamic bonds has been the application of bay’ al-’ina and bay’ al-dayn, which is not well accepted by the Middle eastern investors. The contract of bay’ al-’ina and bay’ al-dayn is seen as something similar to riba based financing. This will certainly pose a great challenge to the Malaysian companies seeking Islamic funds in the Middle-east via bond issues.

3 Principal Steps Involved in the Issuance of Sukuk:

i. Securitization

Asset securitization is the essence of Islamic bond issues, as a bond must assume the role of al-mal or property to qualify as an object of sale. An object of sale in the Islamic law of contract must be a property of value. When a bond certificate is supported by an asset as evidence via the securitization process, it is transformed into an object of value and therefore qualifies to become an object of trade whereby it can be purchased and sold in both the primary and secondary market. Investors then will have to the right to sell (haqq al- mali) these bonds. In the bay` al-‘ina asset securitization, the financier purchases an asset from the issuer and sells it back to the same party at a credit price. This buy-back agreement will ensure that the issuer will receive the money in cash while financier will be paid a prefixed or contracted amount in a future date. Debt payments will be made by installment through bond issues.

The difference between cash and mark-up price will represent the profit due to the financier. The underlying asset is therefore crucial in determining the Islamicity of these bonds. In the Malaysian experience these assets include factories, equipment, stock and inventory and even intangible asset such as a list including building and properties.

ii. Sukuk Issuance

Issuance of Islamic Debt Certificate ( Shahdah al-Dayn), which usually takes place in the primary market where in settling its debt, the issuing company will sell debt certificates or bonds to investors. As mention above, debt certificates issues are valid only when it is supported by an asset. In other words, the bonds must be securitized.

Here the underlying security is the BBA or al-murabahah asset. The underlying asset need not be BBA or al-murabahah alone. If the 1st stage involves a contract of Ijarah, then the debt certificate is called Sukuk al-Ijarah. If an Istisna’ contract is used, we can called it Sukuk al-istisna.

Islamic bond can be categorized into two, namely bonds issues with coupons and those with none. The former is known as the Islamic coupon bond while the latter Islamic zero coupon bond.

iii. Trading of Debt Certificate (Discounted Bay' al-Dayn)

For liquidity purposes, bond trading in the secondary market is crucial. However, almost all Islamic bonds today were bought for long-term investments. The lack of secondary market however should not imply that trading issues is no longer significant. This requires an illustration on the Islamic view of bond trading in the secondary market.

As mentioned earlier when a debt certificate is securitized, it now becomes property(al-mal), which is also an article of trade. As an article of trade, the bonds can be sold by investors to the issuer or the third party if a secondary market for Islamic bonds exists. The trading or sale and purchase of the debt certificates is called bay’ al-dayn.

In Malaysia, the contract is bay’ al dayn at a discount is acceptable while Middle-east 'Ulama’ consider it invalid even though the debt is supported by underlying assets.

Any profit created from the sale and purchase of a debt is riba as enshrined in the holy Qur'an:

"And whatever riba you give so that it may increase in the wealth of the people, it does not increase with Allah." [al-Rum 30:39].

Prophet Muhammad (S.A.W) said:
“That every loan entailing benefit is usury”.

The Nature of Bay' al-Dayn

The issue of bay’ al-dayn arises when the bonds are traded in the secondary market at a discount. We have to note that buyers in the secondary market are usually speculators, that those who do not intend to keep the bond for long-term investment purposes.

Their main objective is to make quick capital gains on the basis of market liquidity and interest rate movement. However, there is no indication that controversies exist in the bay’ al-dayn where bonds are sold or redeemed at par value. We may now discuss bay’ al-dayn to show its nature according to Islamic view.

According to al-Majallah, Dayn defines as the thing due i.e the amount of money owed by a certain debtor. So also a sum of money not existing is considered a debt, as also a certain sum of money from things which exist or are present, or from a heap of wheat which is present before it is separated from the mass. Al-Dayn can be either monetary, or a commodity, like, food or metal. Based on the aforementioned of al-Dayn, and the literal meaning of Bay’ al-Dayn we can define it as the sale of payable right either to the debtor himself, or to any third party. This type of sale is usually for immediate payment or for deferred payment (al-Nasi’ah).

Sale of Bay' al-Dayn to a 3rd Party

According to most of Hanafis, Hanbalis and Shafis jurists , it is not allowed to sell al Dayn to non-debtor or a third party at all. Such opinions are based on the forbidden sale of al Kali Bil al Kali, sale of a Gharar, sale which the seller does not possess.

Conditions:

As an exception Malikis, Hanafis and some Shafi’s jurists allowed selling al-Dayn to a third party. Since the creditor has the right to sell it to the debtor, as well as he has the right to sell it to a third party provided the following rules must be observed:

a) The Dayn must be Mustaqir (confirmed debt) and the contract must be performed on the spot, not deferred in order to avoid any relationship with the sale of a debt for a debt which is prohibited by Islamic law.

b) The debtor must be a financially capable, must accept and recognize the sale, in order that he will not deny the sale. This condition aims to avoid any dispute between the parties, and the debtor must be easily accessible so that the creditor knows whether he has the capacity to pay his debt or not.

c) The sale should not be based on selling gold with silver or opposite, because, any exchanges between these items necessitates the immediate possession, and if the debt is money, its price in another debt should be equal in terms of amount of quantity.

Furthermore, the selling of al-dayn must avoid the occurrence of Riba between the two debts, and must also avoid any kinds of Gharar which may be raised at the level of inability of the buyer from possessing what he bought, as it is not permitted that the buyer sells before actual receipt of the purchased item.

It is important to note that Muslim scholars have unanimously prohibited the trading of debt (bay` al-dayn) at anything other than face value. Where the price paid for a debt is not the same as the face value of that debt, the transaction would be tantamount to riba al-Nasi’ah and is therefore prohibited. It is noteworthy that trading in bonds is a subject of dispute on two counts:

First, the bonds are normally sold at less then their nominal values. Second, the state or the issuer would use the mode of Bay` al-` inah and Bay` al-Dayn and these both sales transactions are regarded as riba by the majority of Muslim scholars. This is the very reason for the controversy about the legitimacy of Malaysian Islamic bonds which renders it to be unacceptable by individual Islamic jurists and institutions outside Malaysia and the Middle-Eastern countries. Islam does not allow the legal devices to be treated as a justification for transactions, which Islam regards unjust and against Islamic belief.

The bonds would have been acceptable from an Islamic point of view if the application of the mode of financing would be based on the legal maxim of al-Ghunmu bil ghurmi meaning that no person is allowed to invest in a way that generates profit without exposing himself to the risk of loss. It would expose both parties to the outcome of their deal, be it a profit or a loss, and thus avoid of usury as as matter of Islamic principle.
Categories of Sukuk:

Sukuk al-Ijarah

Ijarah is a contract according to which a party purchases and leases out equipment required by the client for a rental fee. The duration of the rental and the fee are agreed in advance and ownership of the asset remains with the lessor. Hence, the relationship between the parties differs from that of a debtor-creditor relationship since it is based on buyer-seller of an asset. Ijarah bonds, on the other hand are securities of equal denomination of each issue, representing physical durable assets that are tied to an ijarah contract as defined by Shari‘ah.

Sukuk al-Istisna'

Istisna‘ is a contract to sell a manufacturable good with an undertaking by the seller to present it manufactured from his own material, according to specified description and at a determined price.The suitability of istisna‘ for financial intermediation is based on the permissibility for the contractor in istisna‘ to enter into a parallel istisna‘ contract with a subcontractor. Thus, a financial institution may undertake the construction of a facility for a deferred price, and sub contract the actual construction to a specialized firm.

Sukuk al-Musharakah

Musharakah bonds based on the musharakah contract are relatively similar to muqaradah bonds. The only major difference is that the intermediary will be a partner of the group of subscribers represented by a body of musharakah bondholders in a way similar to a joint stock company while in mudarabah the capital is only from one party. It should be noted that almost all the criteria applied to mudarabah bonds are also applicable to the circulation of musharakah bonds.

Musharakah Certificate vs Conventional Bond

A Musharakah Certificate represents direct ownership of the holder in the assets of the project. If all the assets of the joint project are in liquid form, the certificate will represent a certain proportion of money owned by the project.

A Conventional Bond on the other hand, Has nothing to do with the actual business undertaken with the borrowed money.The bond stands for a loan repayable to the holder in any case, and mostly with interest.

Sukuk al-Muqaradhah is an alternative to Islamic Debt Certificate

The Islamic financial system is a set of rules and regulation that govern the flows of funds from the surplus-spending unit to the deficit-spending unit. These rules and regulations are strictly governed by Shari’ah principles where there is neither a possibility nor a need to apply usurious financial instruments such as the debt related bonds.

Hence, the solution for Islamic financial system dilemma lies in the development of financial instruments in which the Shari’ah rulings are not violated. One such instrument is the Muqaradah bond. A Muqarada bond is an Islamic bond in which no interest is earned, but whose market value varies with the anticipated or expected profits. It is the product of Muslim scholars and thinkers who developed and designed the financial instrument where interest or similar forms of returns which Islam has unequivocally prohibited are excluded.

The Council of the Islamic Fiqh Academy of Organization of Islamic Countries (OIC) during its fourth conference in Jeddah, Saudi Arabia from 18 to 23 Jamadul Akhir 1406H/6 to 11 February 1988, approved the mode of Muqarada by issuing Fatwa after having reviewed various studies on Muqarada bonds.

The meaning of Muqarada bonds and its salient features is given in the following: Muqarada bonds, as the term denotes, are based on the conclusion of lawful “Muqarada” (the mudaraba) with capital on one hand and labor on the other, and the shares of profit are determined (securitized) beforehand by a definite proportion of the total. It is called a bond because it is terminal in nature that its maturity is determined by the tenure or project completion date.

Final Remarks

Indeed, the conventional bond market comprises of primary market and secondary market. The primary bond market is where the bonds are initially issued, while the secondary market where the bonds are resold to other investors. Islamic bonds are also having primary and secondary markets. The main difference, however, is the way the bonds are issued and traded afterwards. In the process of Islamic bond issuance bay’ al-‘Inah is used to securitize the instrument in the primary market, while in the secondary market, bay’ al-Dain is used in order to legalize reselling of the bonds. Such process is mostly used in the Malaysian market, while most of the Middle-Eastern countries do not accept it. The proposed alternative is Islamic bonds based on Muqaradah.

It is thus, concluded here that, an effective issuance & appreciation of Sukuk may discover a potential way out of global debt-pro crisis by enjoying the following achievements:

(i) raising the required capital. (ii) development of expected projects. (iii) settlement of outstanding debts. (iv) maximize the soci-economic achievement both in public & corporate sectors. (v) nation with future prosperity.

IBF Global? my interview with a TV channel......

ISSUE:

Conventional financial system is much developed with consumers’ appreciation world wide as compared to what has been achieved in so far Islamic banking & financial (IBF) operation.What can be the special tips so that, IBF may grow faster than conventional one with special mechanisms?

DIRECTION:

Following thoughts may lead the way forward to achieve the reality:

1. Re-discovery of products considering the socio- economic and Global realities.

2. Creation of new investment avenues, which may enable the IBF to generate better income by giving better return to attract public hearts smartly.

3. Strengthening the regulatory frameworks, policies & planning by compliance with Shari’ah principles.

4. Re-discovery of possible investment and business-links with conventional financial institutions subject to Shari’ah limits.

5. Expanding justifiable distribution channels with possible dynamic marketing strategies.

6. Enriching on-line banking services with utmost satisfaction.

ISSUE:

It is undoubtedly observed that, Islamic financial system in Malaysia is more successful as compared to what has been achieved in the Middle East and other Muslim countries. What could be the grass root reason for such a phenomena?

DIRECTION:

1. As regard to the interpretation of Islamic principles, Malaysia adopts in many cases the doctrine of Masaleh al- Morsalah (public interest) considering the common benefit, in contrast the other countries, which are quit rigid with original principles as far as the interpretation is concerned. Therefore, the development of IBF in Malaysia is faster as compared to several other notable countries.

2. The back up from the government of Malaysia with required regulatory frameworks is always exist with seriousness, but this may not be exactly observed in some parts of the world.

3. Public appreciation in Malaysia as regard to the Islamic financial products are greater than what is available in other parts of the globe.

ISSUE:

What is the latest development in Takaful industry of the global market?

DIRECTION:

1. Harmonizing the diversified models into basically the Wakalah (agency) model.

2. Discovery of new products by considering the socio- economic reality with a healthy competition.

3. Successful achievement in the investment-link products.

4. On-line takaful services.

5. Efficient re-takaful services among the takaful operators globally with the divine spirit of friendly cooperation.

6. Appreciation of takaful products by Conventional companies
including ICMIF and well as Lloyds of London.

ISSUE:

What are the prospects of Islamic capital market considering the wake of globalization?

DIRECTION:

1. Development and appreciation of IPDS.

2. Islamic bond market (Sukuk) is a global issue with greater acceptance by the Ummah in the Middle East, Malaysia and other parts of the world.

3. Shari’ah guideline prepared by the SC of Malaysia to regulate the Islamic Capital market accordingly.

ISSUE:

What are possibilities and obstacles we can observe in implementation of Gold Dinar in the contemporary reality?

DIRECTION:

1. In recent years, the implementation of Gold Dinar is importantly taken in to schedule not only in banking and financial transactions, but also in trade and commerce including in international trade. It has also been well appreciated in term of its sustainability as compare to the Fiat money so to curb the inflation rate in monetary system.

2. Nevertheless, it may not be possible to achieve the above goal unless there is a minimum number of G to G cooperation with wisdom, tolerance and mutual respect.

3. Furthermore, there should also be an international centre for controlling and monitoring the Islamic Gold Dinar with smart mechanisms.

ISSUE:

What are the best mechanisms do you like to recommend here for the Islamic wealth management to protect the assets of the Muslim Ummah?

DIRECTION:

1. To establish a total Shari’ah based trust company to be supervised by a qualified Shari’ah supervisory board.

2. Must have a Shari’ah justified legislation on Islamic asset management and trustee.

3. To give a maximum cooperation for such a strategy both from public as a whole as well as government authorities.

4. A Shari’ah court as well the Shari’ah based arbitration shall be empowered to deal with the dispute arising out of Islamic wealth and asset management.

5. In any form of income in Islamic wealth and asset management, Zakat shall be imposed, but not income tax.

6. As regards to the creation of Hibah,Wasiat or Waqaf, no stamp duty shall be imposed on any party herein as, these are sort of giving away out of love and affection or a spiritual objective, which may be better known as gift of inter vivos.

Non-Muslim Agent to Promote Takaful? a justified reality....

It is indeed an evidential phenomena that, the Islamic financial system including takaful products & services are designed & greatly appreciated by the contemporary world of reality as a universal common package for all humanity regardless of one's religion, colour, race, status, gender or nationality. Thus, it (Islamic financial system) shall no longer be treated as a mere religious subject, but a holistic system for all blessed by almighty Allah (swt). Therefore, it may be unjustified to confine the ownership, management, marketing & customers of Islamic financial system within Muslim only.

Hence, it may be submitted that, in the light of the Shari'ah principles: "a non-Muslim shall have the right to promote Takaful products & services in one's capacity as an agent (wakil) or a broker (wasit) among both Muslims and non-Muslims". This is subject to the following conditions:

1. A non-Muslim who intends to become a Takaful agent must obtain a training certificate on Takaful agency prior to become a Takaful agent (wakil).

2. A non-Muslim agent (wakil) in his/her operations shall always abide by the code of ethics set out by the Shari'ah Advisory Council (SAC) for promoting Takaful products & services.

3. A non-Muslim agent (wakil) shall also be subjected to the public policy set out by the respective government or authorities of the market concerned.

Is Mudharabah Key to Takaful? a waiver of industrial confusion...

ISSUE:

Is Mudharabah (co-pertnership) crucial (wajib) to the operation of takaful?

SOLUTION:

No, because Mudharabah is a technique used for the commercial purposes, but the initial objective of takaful is not to have a commercial gain rather it is a scheme with mutual cooperation to provide a material security against a defined risk. Therefore, Mudharabah is not crucial (wajib) to the operation of takaful . In other word, the takaful scheme does not fundamentally depend on the doctrine of Mudharabah.

ISSUE:

Can the operation of takaful be Halal (permissible) without Mudharabah?

SOLUTION:

Yes, becasue takaful scheme basically depends on the doctrines of al-'Aqd, al-Tabarru' and al-Amanah. But, the doctrine of al-Mudharabah provides facilities for an additional commercial advantage to the participants and the operators as well, which is certainly not the prime objective of the takaful scheme.

ISSUE:

Is tabarru' a crucial to takaful? If so how crucial is it compared to Mudharabah?

SOLUTION:

Yes, because the contribution made in general takaful shall be considered as Tabarru' but not as a Mudharabah, while in family takaful, the amount credited into PSA is the only amount segregated to meet the objective of takaful scheme (i.e. to provide the coverage against a defined risk is taken basically from the PSA, which is an account of Tabarru). Therefore, Tabarru is crucial for the Takaful scheme as compared to al-Mudharabah, which is only being used for the additional commercial benefits, and has nothing to do with the central objective of the takaful scheme.

ISSUE:

Between the intention of protection and investment, which one should come first when a person participates in a takaful scheme?

SOLUTION:

The intention of protection should come first before the intention of investment in takaful scheme. For the investment, the capital owner may find other avenues like Islamic Banks etc. But once one thinks of taking an initiative to provide a material sequrity against a defined risk, should go through a takaful shceme, and that is why the takaful industry is being established. Hence, the intention of protection in takaful scheme shall not be defeated by the intention of investment.

Emergence of Islamic Corporate Legislations? reasons & reality......

Despite the rapid growth in Islamic finance & commerce globally no sufficient regulatory frameworks had yet been passed by the respective parliaments to effectively regulate Islamic finance & commercial products & services.

Though the Islamic industries in the contemporary world of reality are basically depending on the Fatwa (juristic opinion) contributed by the appointed Shari'ah scholars, which perhaps help (as a reference) the Islamic industries move ahead with temporary effect within the local jurisdiction or in most circumstances within the industry concerned only.

But, in a long run the absence of required regulatory frameworks may lead the growing industries to face serious risks, which may eventually ruin the noble objectives of Islamic finance & commerce ought to be for the global Ummatic benefits.

Thus, to over come such unseen industrial hazards, it may be the right time to move forward with an effective plan to develop relevant bills (as per offered services) and duly endorsed by the respective parliaments of those countries where industrial operation exist with no Shari'ah legislation yet hence, the following subjects of principles are recommended to be developed to meet the global Islamic corporate industrial goal:

• Islamic Banking Act (exist in some jurisdiction).



• Takăful Act (exist in some jurisdictions).



• Re-takaful Act.



• Islamic Financial Regulations Act.



• Islamic Negotiable / Monetary Instruments Act.



• Islamic Companies Act.



• Islamic Leasing (الاجارة) Act.



• Islamic Unit Trust Act.



• Islamic Pawnshop (الرهن ) Act.



• Islamic Banking & Financial Institutions Act.



• Islamic Contract (العقد) Act.



• Islamic Revenue (الزكواة والعشر ) Act (exist in some jurisdictions).



• Islamic Financial Services Authority Act (exis in some jurisdictions).



• Islamic Financial Planning Act.



• Islamic Hire-Purchase Act.



• Islamic Sale of Goods Act.



• Islamic Sukuk Act.



• Islamic Securities Industries Act.



• Islamic Financial Derivatives Act.



• i-REITs Act.



• Islamic Wealth & Asset Management Act.



• Islamic Monetary Policies Act.



• Islamic Accounting Standard (exist in some jurisdictions).



• Islamic Auditing Standard (exist in some jurisdictions).



• Islamic Partnership (المشاركة) Standard.



• Islamic Commercial Arbitration (التحكيم ) Standard.

'10' Secrets of Shari'ah Compliance of Fund Management ?

Any fund management company intends to offer its products & services with Shari'ah compliance to the contemporary market reality, is recommended with the following '10' Secrets:

1. Establishment of a Shari’ah Council (comprising of at least 3 members with Shari’ah knowledge) to analyze and duly endorse on at least a quarterly basis all enforceable policies, guidelines, products and other related aspects & activities in accordance with Shari’ah principles.

2. Engagement of an independent Shari’ah Advisor (knowledgeable in Islamic finance, investment, Management, Mu’amalat & Shari’ah) to advise the company closely in it’s day to day product innovations, accounts, policies, strategies, planning, marketing and other related documentations, images & activities.

3. the intended fund protfolio shall be Segregated and be identified as “Islamic or Shari'ah Fund”.

4. Fund Management & Investment Policies @ Guidelines adapted by the company shall be with Shari’ah Compliance.

5. Product innovation Guidelines shall be with Shari’ah spirit to screen through the existing products & develop new products accordingly.

6. Forms, procedures & relevant Documents shall be developed with Shari’ah spirit and be segregated accordingly.

7. All accounts of the fund shall be Segregated and be duly managed in accordance with the Shari’ah Standard.

8. a Separate Management team for the operation, by complying the Shari’ah Standard in its planning & actions.

9. Establishment of a Shari’ah Audit to inspect the accounts accordingly.

10. Payment of Zakat on net income/ profit.

Equity Board Market Index Futures (EBMIF)? its Shari’ah direction….

ISSUE :

Whether “Equity Broad Market Index Futures (EBMIF)” can be allowed in the Islamic equity portfolio as an instrument?

DIRECTION:

EBMIF could be allowed in the Islamic equity portfolio as an instrument provided that:

1. Underlying subject matter / stock shall be recognized by the broad principles of Shari’ah (Halal stock).

2. The mechanisms shall not involve the element of Gharar (uncertainty), investment return shall not involve the element of Riba (usury) and in all situations of transaction the element of Ghassa (deceive) shall be avoided.

Hence, EBMIF may be allowed in the Islamic equity portfolio as an instrument by complying the above guidelines.

ISSUE :

Is it okay if some of the underlying component stocks are not with Shari’ah compliant?

DIRECTION:

1. Though it is a universal natural understanding that, when we talk about an Islamic market, product, sytem, operation or business, it shall be expected by a total compliance with the Shari’ah (principles & ethics).

2. But, the express developing areas like Islamic financial market, which is a growing faculty by day today updates and is impossible to be expected to be with 100% Shari’ah compliant with immediate effect. Therefore, the Islamic financial market has been so far developed with gradual effect (Shari’ah compliant) on the basis of the principle of Masalih al-Mursalah (public interest).

3. Furthermore, if the majority components of the stocks are in line with Shari’ah is a good criteria to justify as Shari’ah compliant. At this point of time some opinions concluded that, if in the stock components about 30% are non-compliant while the 70% are of Shari’ah compliant is okay to justify as Halal counter. This could be justified by the Islamic maxim “Lil Akthari Hukmil Kul” ( The decision shall be given on account of majority).

Hence, it is okay to justify the stock components if some (about 30%) of the underlying component stocks are not in Shari’ah compliant.

ISSUE:

The use of futures allows the following:

i. temporary substitute for cash (from income/injections/realization etc),
ii. while portfolio managers purchase the individual securities hence,
iii. reducing the drag on portfolio returns for holding low-yielding cash.

What is the Shari’ah view?

DIRECTION:

Having temporary substitute for cash and purchasing the individual securities shall not have any contradiction with the Shari’ah provided that, all parties (issuer, intermediaries & subscriber) involved in the transaction shall follow the above mentioned Shari’ah guidelines (in principles & activities).

Global Commodity Trade & Shipping? its Shari'ah Standard...

1. The Commodity trading or Barter trading is generally allowed in Shari'ah as enshrined in the Holy Qur'an: " ... Allah (swt) permitted trade and traffic, but prohibited Usury..." (2:275).

2. A Shipping arrangement & services affecting global commodity trade or barter trade is a form of cooperation with an intention of mutual benefit among the seller, buyer, trader, charter party, charterer & the ship owner. Hence, such a cooperation is justified by the Qur'anic principles "... help each other among you in righteousness & piety, but do not cooperate in sin and rancor..." (5:2).

3. In Practice, among the Shari'ah required Criteria applicable in the contemporary global commodity trade or barter trade & shipping are as follows:

* Commodities shall be recognized by the Shari'ah Principles (ie. alcohol, pork, stolen goods etc are not recognized as the valid commodity under Shari'ah).

* Ownership and duly consumption shall be secured only by way of mutual transaction / mutual consent.

* Transparency (disclosure) in all aspects of the transaction of any commodity shall be exist.

* Uncertainty in any component of a commodity deal is not acceptable.

* For the purpose of avoiding any future misunderstanding, any commodity deal it is advisable to be closed with relevant documentations save retail transactions, which is an option.

* Credit sale is allowed, but the payment shall be free from Usury (Riba).

* Issuance of LOD, LOR, LOI, SCO, FCO, ICPO, BCL, BC, SPA, NCNDA, IMFPA and the MT 799, MT 705, MT 760, MT103, BG, LC, DLC, RDLC, SBLC without Usury (Riba), TT, SWIFT & COD are all allowed provided that none of the documents or instruments or mechanisms adapted in any deal shall involve any clause or requirement, which is directly or indirectly contrary to the Spirit, ethics, public interest or the Principles of Shari'ah per se.

* Any commodity deal with CIF, CNF, FOB, Contractual, SPOT, Barter trading or traditional exchange are allowed provided that none of the aspects of the deal directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

* Any commodity deal with bartering is acceptable provided that none of the aspects of the deal directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

* For inspection of the agreed commodity, the procedures through SGS, CIQ or other mechanism are allowed provided that, no unfairness clause shall be adapted in those procedures nor shall use those procedures to find an excuse to default others.

* Transneft account, BL, Q88, other shipping or loading or unloading documents are also allowed provided that none of the aspects of the documents directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

To conclude, any commodity deal & shipping services, shall be coupled with total holistic approach with standard ethics, practical mechanisms adapted and the good intention with mutual cooperation, care and concern while avoiding any form of unfair gain.

Furthermore, in any commodity deal, the gross income shall be subject to the settlement of the required standard ZAKAT.

CAPITAL GUARANTEE IN ISLAMIC EQUITY FINANCE ?

1. In an equity financing deal (Mudharabah / Musharakah), which is only with sharing in profit & loss by risk sharing principles, the capital / profit / income can not be guaranteed therein. Thus, a bank / fund manager / fund custodian in the above type of deal, is not allowed to provide any capital / profit / income guarantee to the customer / fund owner concerned.

2. But, if the bank / fund manager / fund custodian wishes to take a takaful coverage to protect the managed capital (owned by the customers) against the deficit risk in the undertaken capital itself (but not on profit / income per se), is allowed.

3. If the Central Bank of a country concerned / IDB / Re-takaful, is arranged to provide partial or full guarantee (by way of donation / Qardh Hasan /re-takaful against the deficit risk in one's undertaken capital itself (but not on profit / income), is also allowed.

4. the abovementioned-Guarantee is a cooperation for the noble cause of providing greater benefit not only for the industries, but also for the customers, which eventually contributes to the development of Islamic financial system for the benefit of the Ummah in general.

Thus, it is justified by the Qur'anic principle".... cooperate each other in righteousness & piety, but do not cooperate each other in sin & rancor..." (5:2).