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).

FRANCHING ISLAMIC FINANCIAL SYSTEM? some thoughts....

ISSUE 1:

The most profitable businesses exhibiting success under franchise are those that have an excellent record of profitability and those that can replicate Islamic financial services and products successfully. Some thoughts on the success of franchising in Islamic financial system.

SOLUTION:

Franchising is a holistic culture of mutual cooperation towards noble cause of progress & prosperity in the spirit of corporate brotherhood for the socio-economic benefit of all, which is justified by the Qur’anic principle “…..help each other in righteousness and piety, but do not cooperate among you in sin and rancour….” (5:2).

Considering the contemporary phenomena in the rapid growth by 18% p.a. with global appreciation of the Islamic financial system, it may be the right time to enrich the franchising culture within the Islamic financial system for a common greater achievement by sharing the acceptable Shari’ah standard in terms of policies, system, talent, technologies, products, operation & culture.

Hence, with the dynamic slogan of “progress & prosperity in Islamic financial system for the common benefit of all by waiving the issue of one’s religion, race, culture, status, gender or nationality”, unjustifiable & unacceptable completion within the Islamic financial environment shall be avoided, which shall be replaced by justifiable cooperation with utmost wisdom, mutual respect, care, share & concern. This noble paradigm may successfully be facilitated by a Shari’ah compliance of Franchising culture among the Islamic financial industries across the world.

ISSUE 2:

Key franchising sectors in the Islamic finance and its future.

SOLUTION:

Prime franchising sectors in the Islamic financial engineering may include the followings:

(i) Policies & Guidelines.
(ii) System.
(iii) Talent.
(iv) Technologies.
(v) Products.
(vi) Operation.
(vii) Corporate Culture.

By the enrichment of the Shari’ah compliance of the franchising culture within the Islamic financial environment, may help the industrial growth of the Islamic financial system with greater significant results not only for the corporate players, but also for the customers including the innocent beneficiaries.

ISSUE 3:

The first step to franchising in acquainting regulators, operators, players, participants & customers with the Shari’ah principles.

SOLUTION:

There are ten components of the first step to franchising of Islamic finance in acquainting every involved one (be one regulator, decision maker, operator, player or customer with equal requirement from the respective counter part of the franchisor & the franchisee) with the basic relevant principles of Shari’ah, not only in mind but also in action, namely:

(i) Exclusive division (Shari’ah compliant / Islamic Finance).
(ii) Conceptual understanding of Shari’ah (Maqasid al-Shari’ah) affecting franchising of Islamic finance.
(iii) Regulatory frameworks (relevant Shari’ah rulings) governing franchising of Islamic finance.
(iv) Shari’ah approved Documentations (policies, guidelines, forms & procedures).
(v) Technical-know-how (with the Shari’ah standard) facilitating the franchise objective affecting Islamic finance.
(vi) Operational mechanisms (with Shari’ah compliance) for an effective management of franchise objective of Islamic finance.
(vii) Customers’ rights, obligations & behaviours as per approved by the Shari’ah principles in participating in, contributing to, cooperating with & benefiting from franchised Islamic financial operation.
(viii) Public awareness plan with franchising of Islamic financial system.
(ix) Establishment of a Shari’ah secretariat (Shari’ah compliance division with R & D). (x) Establishment of a Shari’ah council (for advising & decision making).

EGYPT REVOLUTION & its eco-way ahead.

In response to a recent friendly concern raised by Mr. Mohammad Fadeel of Egypt (Actuarist) is, the revolution of Egypt & some thoughts towards its socio-economic achievement for the interest of the country & its people is as follows:

(i) the process & the achievement was great & people of Egypt deserve enjoying prosperity & progress with dynamism.

(ii) Egypt is a country, which has the right to hold its pride with its uncompromised identity "Islamic Nation" ever since from the ancient history of Islam thus, no alternative, but only "Islamic" in its belief, system, operation & achievement.

(iii) The revolution opens up the opportunities for Egypt to clear its undesirable haze and march ahead with its new economic model besides socio-political & cultural orders by complying and respecting the Shari'ah principles while adapting the modern operational mechanisms to reform Egypt as an "Islamic Modern State" to wake up along with the Globalization.

To achieve the dynamic goal, the following avenues may be recommended in the master plan:

1. Increase Islamic Barter Trade (among G2G, B2B, G2B or B2G).

2. Implement Islamic Cooperative Micro-finance (on asset based with risk sharing) as opposed to Micro-credit (on debt based with risk transferring).

3. Creating an Enterprising & Entrepreneur based nation.

4. Increase issuance of SUKUK to help modern development of Egypt.

5. Develop Islamic Micro-credit (al-Rahnu) to enrich Entrepreneurs nationwide among all levels.

6. Develop sustainable Islamic MLM to fight the retrenchment while creating more job / income opportunities especially among the young generation / junior families / fresh graduand / low income group / unemployed.

7. All level of risks shall be minimized by appropriate Takaful operation.
8. Rating in all sectors (Government or Private, Commercial or otherwise) shall by by prioritying the public interest over corporate or otherwise interests.

"World Islamic Trade Centre (WITC)" in mind....

Due to rapid growth of Islamic trade, finance & business sectors with greater appreciation from the contemporary world of advance eco-technology, it is utmost essential to touch the right time to unify with global standardization of the Islamic / Shari'ah compliant trade sectors by the establishment of "World Islamic Trade Centre (WITC)" towards further advancement of Shari'ah compliance affecting the global trade / barter trade (commodity, asset, equity and or others) be one G2G, B2B, G2B or B2G.

With the establishment & successfull operation of the WITC may contribute to globalize the Shari'ah compliance of trade sectors in terms of general policies, guidelines, mechanisms & communication besides attributing towards a greater friendship with the universal holistic spirit of brotherhood among the traders, producers, players, marketers, policy makers, trade professionals, Shari'ah scholars & the consumers.

By the establishment of the WITC may help to curb the common virus hindering the global trade sectors namely; money laundering, misappropriation, unlawfull gain, unhealthy competition, self-orientation & dishonesty.

The WITC may eventually boost the world economy by fighting the malpractices in the global trade environments while discovering the dynamic way forward for all humanity (Ummah) regadless of one's religion, race, color, status or nationality in their respective trade missions & practices.

To establish the WITC, the following steps are recommended:

(i) Identification of the entity location.
(ii) Office & its supports.
(iii) Data base (global traders / manufacturers).
(iv) System (Shari'ah compliance).
(v) WITC Policies & Guidelines and Plan (Shari'ah standard).
(vi) WITC Shari'ah board.
(vii) Communications & networks.
(viii) "world islamic traders' summit" for the global awareness.
(ix) Resolution among the Gs.
(x) Commencement of Operation as per plan.

First "ISLAMIC JUNIOR (Children) SAVING BANK" in mind....

Underaged children are exposed to neumerous unpridicted risks due to losing of parents, domestic negligence, parental seperation, financial catastrophe and or other factors, resulting of which innocent infants are victim of circumstances against safe & security of their lives, education, health care, shelter and the bright future, which ultimately weaken the backbone of the nation in general.

To save the future of our children with national pride, it may be among the significant move by designing and duly establishment of a saving bank for the benefit of the children (junior) so to facilitate them with a basic financial security especially during one's minority or unsecured age.

Though, some facilities for the minor are avaiable in certain financial institutions, which are under the control & perhaps for the benefit of the guardian, but no track-record of any exclusive saving bank so far available yet for securing the interest of children in the contemporary world of eco-environment.

An Islamic saving bank (in mind) is to provide an opportunity to create a matured culture with safe deposit in view of legitimate income over the principal by way of risk sharing technique in the light of the Qur'anic teaching 5:2 "... help ye one another in righteousness & piety...". Therefore, an Islamic saving bank may be in a pragmatic position to contribute towards a better eco-safe guard for the junior (children) group to face the contemporary socio-economic reality.

Hence, it is the right time to establish "Islamic Junior (children) saving bank", which may initiate by designing and offering the following products & services:

(i) saving account with Halal attractive investment opportunities.

(ii) every account shall be packaged with appropriate Takaful coverage.

(iii) financing facilities for the account holders on education, healthcare, shelter & bread winer / guardian (with justification of relevancy).

WORLD ISLAMIC CORPORATE HUMAN CAPITAL DEVELOPMENT HUB ? its essence & prospects....

Applied Islamic financial sectors have developed into a global dimension, which is highly dynamic and growing rapidly with utmost appreciated by all. There are almost 600 Islamic financial institutions worldwide with assets estimated at more than US$ 1.3 trillions, financial investments above US$900 b. and a growth rate is 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 and Europe. The cliental of Islamic financial institutions are not confined to Muslim countries, but are spreaded over Europe, U.S.A, South Asia, South East Asia, Asia Pacific 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.

It is widely accepted that the adaptation of the Shari’ah compliant financial paradigm is one of the fastest growing areas of the banking, finance & corporate reality across the world. The forecasts predict that, there will be significant growth in this sector over the next five to seven years. However, this growth is dependent on successful professional development, risk management, professionalism, product innovation, regulatory frameworks, marketing strategies, research & discovery and customer satisfaction that all professionals, regulators, practitioners, customers and participants of the banking -financial industry must attend to. All these may be achieved only through an Islamic Corporate Human Capital development plan & its effective operation.

Thus, considering the above needs & prospects, it is timely to establish a first ever “World Islamic Corporate Human Capital Development Hub” to centralize an effective movement of Shari’ah standard of corporate professional development with a global coverage. The establishment of the hub may resolve the skill & professional crisis faced by the contemporary global Islamic financial & Corporate industries and environment. This may eventually contribute towards dynamic growth with sustainability and greater achievement in the Islamic corporate & financial sectors of the world.

WORLD ISLAMIC MANUFACTURERS' HUB ? its establishment plan.

to be published soon......

World Islamic Investors' Club? its rationality & prospects...

Because of so dominant debt based financing with risk transferring mechanisms, which eventually fail to ensure a sustainable achievement in the advance economic reality, resulting of which the fund owners (investors) of different sectors of the world had been suffering with uncertainty of the future of their respective funds.

Alternatively, many investors are kin to adapt asset backed financing with risk sharing techniques (recognized by the Divine principles of Shari'ah as a holistic package), aiming to achieve their integrated goals with utmost safe & security.

Investors from different background (with no issue of race, religion, gender, nationality & color) have been participating in the Shari'ah structured investment sectors (equity & capital markets) on their own micro-arrangements (mostly through introducers) by having no accurate access to sectorial data (investment groups with different goals, preferred projects, parties, management groups, locations & prospects), which ultimately may slower the growth of Shari'ah structured investment industries.

Thus, it may be the right step in uniting potential Islamic investors / fund owners accross the globe under a common but standard platform in view of establishing a strong investors' cooperation to drive the common vehicle in team with the spirit of brotherhood & soliderity towards miximizing their goal in reality.

Hence, to initiate the above thought it is timely to establish a first ever " World Islamic Investors' Club" to move rationally with a team spirit among the Islamic Investors of the contemporary world towards undiscovered goals & gains EnSha Allah (swt).

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

http://www.linkedin.com/groups/World-Islamic-Investors-Forum-WIIF-4052375?gid=4052375&trk=hb_side_g

Islamic Corporate Governance? a thought in reality.

ISSUE 1:

With whom does ultimate responsibility to comply with Islamic Shari’ah rules lie? Management/the Shari'ah Board or Shareholders?

SOLUTION:

• All 3 (the Management, the Shariah Board and the Shareholders) are equally but respectively responsible for the Shari’ah compliance of all aspects of the company of Shari’ah products and services. Hence, a further illustration to the effect is as follows:

(i) It has been an ongoing confusion among the i-eco-legal environment that, whether the Shari’ah Board is an employee of the management or anindependent authority? To resolve such a puzzle among the corporate Ummah it is submitted that, in no situation the Shari’ah Board shall be treated as an employee (to follow, fear, favor and please the management or the shareholders or whosoever may be other than to comply the total Shari’ah spirit), but an independent authority to uphold, promote and decide the true Shari’ah standard. Thus, in their capacity as the independent authority the Shari’ah board is, accountable (to themselves, to the Management, to Public and ultimately to ALLAH (swt) for the accurate Shari’ah views and Solutions with no fear or favor per se.

(ii) Management shall shoulder an AMANAH (trust) in the total operation / management as per the Shari’ah decisions made by the Shari’ah Board. Thus, the Management is accountable based on the holistic Principles of TRUST (to themselves, to the Board of Directors and ultimately to ALLAH (swt) for the accurate operation of Activities in accordance with the Shari’ah Solutions provided by the Shari’ah Board.

(iii) Shareholders are accountable (to themselves, to Public and to ultimately ALLAH (swt), the almighty GOD) for the accurate observation and decision over the total Policies, products, mechanisms and operation of Activities complying with the Shari’ah rules and spirit.

ISSUE 2:

Should shareholders put Shari’ah compliance processes in place? is this more important if Management or Key Personnel is non-Muslim?

SOLUTION:

• Shareholders should concern over the total Shari’ah Compliance of the Policies and Activities in their capacity as the supreme technical and corporate decision makers.

• As far as the corporate operations are concerned, Shari’ah does not concern on the person, race, background, color or even one’s religion of the operator nor the shareholders, but Shari’ah concern is on POLICIES, SYSTEM, ACTION and ACHIEVEMENT, which shall be in total compliance with the Shari’ah Principles and Divine ethics. Therefore, if any personnel of the Management, BOD or Shareholders is a non-Muslim, which may not prevent one to offer Islamic Products so long one is with justifiably compliance with Shari’ah.

ISSUE 3:

As a Takaful or Re-takaful operator do you publish the activities (fatwa, rulings and guidelines) of the Shari’ah Board?

SOLUTION:

• As for the FATWA / rulings/ guidelines of the Shari’ah board in to day’s Islamic Financial environment, Some are published and some are not depending on the respective company / person / Mufti/ Scholar’s Policy.

• Thus, there is no Shari’ah restriction on Publication or non-publication of any fatwa.

• But, my personal understanding, it is better to publish the Fatwas / Shari’ah decisions for public interest with an objective of Ummatic Skill development with Shari’ah rulings (Fatwa). Such attempt may contribute to better understanding of Shari’ah standard, operations, unity, mutual respect and dynamic growth in the Islamic financial industry with right Maqasid al-Shari’ah.

ISSUE 4:

A practical market raised a personal question to me that, Do you undertake a Shari’ah Review? if so can you provide details on how extensive and often in it?

SOLUTION:

• Yes …. I undertake both Shari’ah Review and Shari’ah Audit as well while some occasions am assigned to be the leader of the Shari’ah Review / Shari’ah Audit team on different products and operations in different jurisdictions.

• Details Mechanisms on Shari’ah Review or Audit exercise with authorities and authenticities may be provided in writing or on face to face dialogue on only by official arrangement so that the professional standard is observed.

ISSUE 5:

Should the Shari’ah board have a say in the moral functioning and activities of the organization to reflect the principles of Takaful?

SOLUTION:

• Shari’ah and ethics are interrelated or rather complement to each other. Thus, a Shari’ah board is not responsible to provide Shari’ah rulings only, but also the Moral as well as spiritual aspects affecting the operators, participants, shareholders, decision makers and the operations.

• But, Shari’ah Board’s responsibility with Shari’ah Rulings is mandatory by contract while the spiritual and moral concern and contributions to Takaful operators or operations is a directory task in general.

ISSUE 6:

In conventional insurance if there is a deficit, the shareholders provide an injection. In Takaful if there is a deficit the operator provides a Qard al-Hasan loan. As a loan it is an asset of the operator's fund, however in the Takaful fund it is accounted for as an injection. Is this the correct treatment?

SOLUTION:

• If the deficit takes place in the risk management (Tabarru’ / Waqf / Hibah / PSA) account of the Takaful Fund, the injection therein by the shareholders shall be a mandatory, which shall be treated as a Qardh al-Hasan (benevolent loan) refundable from the subsequent surplus of the risk management (Tabarru’ / Waqf / Hibah / PSA) account itself with no extra charge.

• But, if the deficit takes place in the investment account of the Takaful Fund, the injection therein by the shareholders shall be an option thus, once the inject takes place, which may either be with an arrangement of a package of Qardh al-Hasan (benevolent loan) refundable from the investment account itself with no extra charge, or as an Equity participation in the fund to enrich it with mutual terms and conditions between the shareholders and the operator for Participants.

ISSUE 7:

In some cases the Takaful operator pays out more in commissions to the direct agent than it has from the received from the Re-takaful operator (and Re-takaful is a high percentage of the risk). Is it fair that other participants pays for this deficit? what is the alternative?

SOLUTION:

• Participants in takaful practices pay the agreed contribution (Premium) but not liable to pay the commission to the agents appointed by the Takaful operator per se.

• Because of the contractual relation (Privity) between the Takaful operator and the Agents the Takaful operator shall be the one liable to pay the commission out of the received contributions to its agents in accordance with the commission payment policy of the operator.

• Meanwhile, the Re-takaful operator pays the commission to the Takaful operator is in fact the internal corporate policy of the Re-takaful operator. It is thus, irrelevant whether the amount of commission paid by the Re-takaful operator is lesser than the practices of Takaful operator. Because, they are two separate legal entities with their own respective policies.

• Furthermore, the commission paid by the Takaful Operator is generated from the agreed Contributions (Premiums) of the Participant. In this arrangement the privity of contract is between the Operator and the Participants over the Contributions (Premium) and, a separate Privity is between the Takaful Operator and the Agents over the Commission. Thus, no legal relationship exists between the Participants and the Agents per se.

• Therefore, if the Participants are required to pay more contributions, which is based on the underwriting policy, but this does not mean to top up the deficit of the fund caused by the extra payment of commission.

ISSUE 8:

For long tailed coverage, is it proper corporate governance for the operator to share in this surplus, when if the reserves are later increased causing losses, the operator will not share in these losses?

SOLUTION:

• There should not be any wrong if the operator share in the surplus as a form of service charge for managing the risk management fund.

• If in the event the contribution / premium rate is increased due to deficit in the risk management account caused by more claims, the operator shall not be liable to top up in the fund despite earlier sharing in the surplus.

• Despite the above phenomena, it is advisable for the operator not to share in the surplus in order to contribute to a sustainable existence of the risk management account while avoiding unexpected future deficit in the fund.

ISSUE 9:

Should the management / shareholders and Shari’ah board be more accountable? could this be done via an annual participants meeting?

SOLUTION:

• Since all three components of the corporate governance namely; the Shari’ah Board, the Management and the Shareholders are equally, but respectively accountable with Shari’ah compliance in all aspects of policies, procedures, technicalities, products, business, operation and management thus, it is utmost important for all to exchange mechanisms and share views in regular dialogues with day to day’s decisions , actions and achievement so to establish an atmosphere of harmonization, compliance, standardization while avoiding confusion and overlapping.

• It is therefore suggested here that,

(i) All three components namely; the Shari’ah Board, the Management and the Shareholders shall respectively on monthly basis hold corporate review or postmortem (muhasabah) session on three fundamental aspects :
(a) What have been planned?
(b) What have been performed? and
(c) What shall be done further?

(ii) Shari’ah board shall hold monthly session on decision making / Shari’ah solution to provide decisions / Shari’ah Solutions on all relevant aspect of the company. The decision shall be made with proper understanding (on relevant Dive Rulings, Shari’ah standard, Fiqh and other relevant policies) in accordance with applied Shari’ah principles and Divine spirit, which shall neither be in fear or in favor per se.

(iii) Shari’ah board shall not only to function in decision making but shall also undertake a monthly audit exercise to ensure the decided solutions have been carried out by the management in accordance with the Shari’ah spirit.

(iv) Shari’ah Board shall prepare a comprehensive annual report on total decisions with relevant facts and phenomena of the year, the Audit report on performance and future suggested plan affecting Shari’ah compliance.

(v) All three components (the Shari’ah Board, the Management and the Shareholders) shall hold an annual review session before the annual report is prepared.

(vi) Two components (the Shari’ah Board and the Shareholders) shall hold a combined annual General Meeting (AGM) with comprehensive postmortem, report presentation and future plan for the company. This shall be witnessed by the selected key Management team.

ISSUE 10:

Should policyholders have a say in the election of the Shari’ah Board? or should it be just a shareholders' decision?

SOLUTION:

• Policy holders may (if so wish) share their views on the selection of the Shari’ah board on a non-binding capacity.

• Shareholders shall have the capacity to decide on the nomination / selection of the Shari’ah Board facilitated by the Management, which shall be finally approved by the Central Bank or the Ministry of Finance or the Insurance Commission depending on the authority with locas standi in respective countries.

• This is because, the Shari’ah Board is not an employee but an independent authority, who is nominated by the company to an ultimate approval by the Regulatory authority of the country concern, to ensure the total Shari’ah compliance of the policies, technicalities, products, business, operations and all other relevant aspects and activities of the company.

• Furthermore, the decision, Shari’ah solution or opinion provided by the Shari’ah Board shall not be meant for the private interest, but for Public interest (Ummatic benefits) without fear or favor per se.

• Thus, neither the policy holders or the shareholders nor the management have the locas standi to elect any Shari’ah Board on their own comfort, but can only recommend, nominate and facilitate to the submission of the selected names to the right authority (Central Bank or alike) for the final approval to create an independent Shari’ah Authority for advising and facilitating the company’s activities in accordance with the Shari’ah Principles and the Divine standard.

ISSUE 11:

Is there a need to have a "participants' advocate" independent of the Takaful operator?

SOLUTION:

• It is not a mandatory but recommended to establish a “Participants’ Advocate” for furtherance facilities not only to participants but also to Takaful operator to enjoy over the Takaful scheme by holistic cooperative spirit.

• To have such a “Participants’ Advocate” may contribute to the followings:

(i) To have a sustainable transparence relationship between the Takaful Operator and the Participants;

(ii) Rights and obligations of all parties involved in the Takaful operations will be correctly observed in reality;

(iii) No unfair advantage nor unlawful gain will be expected over one another;

(iv) Underwritings, management, claims and distributions shall take place accurately (by complying the right Shari’ah spirit) without unjust enrichment;

(v) Contribute to a sustainable growth in the Takaful industry with holistic phenomena;

(vi) The true spirit of Takaful with brotherhood, solidarity and mutual cooperation will be honored in action and achievement.

"NO RISK is a RISK"... Takaful provides safeguard.

Greater risk of an individual, family, community, entity, corporate, or government be against one's life, bodily, dignity, future, wealth or businessis is: "not taking the risk" by ignoring it or its poor management.

It is a wise step for any human, socital, corporate, entity, wealth or government culture to act smartly as per plan, and no plan shall be designed by 'no risk taking'.

Thus, behind every successful life, family, community, nation, entrepreneur or entity is evidentially contributed by smart action with wise plan by incorporating appropriate risk taking against unpredicted catastrophe.

Takaful (Islamic insurance), is a scheme designed in the holistic spirit of Shari'ah principles of mutual cooperation, soliderity, brotherhood, shared-responsibility, utmost care & concern among the Ummatic (humanity) environment across the univers by diminishing the issue of one's race, religion, colour, nationality, gender or status by promoting a theme of "Ummatic globalization".

Thus, Takaful scheme provides a meaningful safeguard against risk (loss, damage, catastrophe or disaster) be on one's life, dignity, future, wealth, business or entity. All Takaful schemes are further cooperated by Re-takaful arrangement. Hence, Takaful stands in its capacity as an "Eco-Peace" for the Ummah (humanity).

The Battle of Shari'ah Scholars & the direction ahead.....

It had been an on going phenomena that, Shari'ah scholars are in most issues dispute (Ikhtilaf) not only in corporate, but also other environments. Such disputes are resulted due to:

(i) different schools of Islamic jurisprudence (Mazhab).
(ii) different understanding on the concerned issue.
(iii) different thoughts on the Shari'ah principles.
(iv) cultural dichotomy.
(v) contra understanding (classical vs. modern vs. rigid vs. rational).
(vi) lack of subject, practical and or technical knowledge (in some cases).
(vii) prioritying self view while having poor tolerance in accepting other's views.
(viii) lack of research & development culture on the primary sources.
(ix) lack of mutual respect.
(x) racial, nationality, background & gender differences.

All these factors cause the unresolved battle among the Shari'ah scholars. Hence, for a peach making pack among the Shari'ah scholars by resolving such crisis, the direction ahead through:

(i) mutual respect on the issue of differences as to mazhab, nationality, race, background, gender or even culture.
(ii) every Shari'ah scholar must hold a basic norm that, every one is with the single Islamic faith guided by the holy Qur'an & the Sunnah of the Prophet Muhammad (saw), accountable to only Almighty Allah (swt) and thus, any view, opinion or decision made over any issue shall be in the spirit of the Qur'an & the Sunnah.
(iii) once a decision is made by a Shari'ah council, shall be respected, unless any doubt is discovered on the credibility of the decision, the concerned issue shall be addressed with proper professional ethicate justifying by the Qur'an & the Sunnah, by adapting no attitude of humiliating others.
(iv) Shari'ah decision or opinion or thought may be different from each other so long one is justified by the Shari'ah principles, such decision is acceptable and thus, shall be respected by each other.
(v) if a decision is made or a thought is expressed by a Shari'ah scholar or a council by justifying their respective decision or view basing the Qur'an & the Sunnah, such decision or view shall be respected by each other as to honour the holistic principle of " freedom of justified thought".
(vi) hence, the issue of any Shari'ah opinion or decision made by the Middle east scholars or Malaysian scholars or African scholars or Asia pacific scholars or Europian scholars or Indian scholars may no longer be a ground for an unwanted battle among the Shari'ah scholars so long the decision concern is justified by the Divine principles of Shari'ah.
(vii) by appreciating such a peach making process against the unjustifiable on going battle among the Shari'ah scholars, may contribute to a dynamic progess and prosperity in the Global Islamic Financial, Corporate industries & other human sectors in reality.

a 'FRIDAY CALL' on Economic Da'wah

"let we all be prepared to offer our utmost cooperation, resources & contributions through our reasonable intellectual capacities for the common prosperity of the global ummah (humanity) under the great holistic mission of Economic Da'wah (Divine financial strategies)", which will ultimately pave the way to global Ummatic peach & harmony through world economic cooperation, soliderity, mutual respect, care, share, concern & brotherhood leading to sustainable enterprising community with self-reliant existence, Ensha Allah (swt).

WORLD ISLAMIC INVESTMENT CORRIDOR (WIIC) - the right time for its establishment

WORLD ISLAMIC INVESTMENT CORRIDOR (WIIC): the brain child idea with conceptual architecture of WIIC had been began since 2006 through my humble initiative & efforts with gradual effect by referring to the phenomena of wealth & investment management in different parts of the muslim and some parts of non-muslim world, desired by the respective owners to be structured under the principles of Shari'ah, which ought to be further standardised as to its system, operation & end results for the added benefit of the Ummah in reality.

The existence of fund alone may not be able to ensure the right achievement unless being integrated with the right system of offerings, genuine parties & relevant projects or avenues, all of which shall be pillared on mutual cooperation of the universal spirit of brotherhood among all fund owners, investors, manufacturers, industrialists, project owners, fund managers, technical group & other related groups.

As the today's world is experiencing the greater appreciation from the global community towards the attributes of Shari'ah structure of finance & investment portfolios with promising outcomes, which requires an urgent thought of a centralised global entity to offer required facilities to achieve the desired goal.

To date, no global entity (by uniting all Islamic investors, manufacturers, project owners & managers) yet to offer the centralised facilities for the global Islamic investment management hence, it is the right time to establish "World Islamic Investment Corridor (WIIC)" for the global ummatic (humanity) benefits by enjoying the discovered goal in the holistic spirit of brotherhood.

WIIC is designed with 18 expected components (by gradual implementation) namely:

1. world islamic investment hub.
2. world islamic manufacturers' hub.
3. world islamic barter trading hub.
4. world islamic venture capital development & management hub.
5. world islamic cooperative micro-finance hub.
6. world islamic micro-credit (al-rahnu) hub.
7. world islamic hedge fund structure hub.
8. offshore islamic bullion bank.
9. world islamic investors' club.
10. world halal shopping mall development hub.
11. world islamic commodity trade development hub.
12. world islamic mini-hospital development hub.
13. world islamic construction development hub.
14. world halal tourism development hub.
15. world islamic power plant development hub.
16. world islamic mono-rail development hub.
17. world islamic effective poverty eradication by enterprising plan through Zakat.
18. world islamic corporate human capital development hub.

Ummatic Peace by Socio-Political & Eco-Cultural Unity

"1 MALAYSIA" to "1 WORLD" with socio-political & eco-cultural peace and harmony among ALL by diminishing the differences in humanity, paving the way forward to common prosperity and pulling ALL to share, care & concern with mutual respect under a natural universal spirit of brotherhood, soliderity & utmost cooperation.

Such a holistic menufesto may contribute to the true achievement of Globalization for all humanity by waiving the question of one's race, religion, colour, gender, status or even nationality.

'MLM' ? it's true holistic objective with humanity

The conceptual objective of MLM is: "to create job opportunities for the retrenchment or jobless communities, fresh grandaunts, single parents, low or under incomers & other potentials on socio-eco- humanitarian grounds, besides having an auto-opportunity of building friendly networks, brotherly cooperation & cultural solidarity among the human environment. This ultimately contributes to ease the socio-eco &cultural crisis faced by the families, communities or even by the nation".

The true objective of MLM may be achieved through: "a binary concept with fullest transparencies of every aspect of the transaction and of course its underlying subject matter shall be physically exist in its right legal capacity as to be transferred on a contract of sale".

In contrast, an MLM by selling of membership (by competition but not compliment) on a subject matter by imagination in paper only, may diminish the holistic objective of MLM, which may lead to misappropriation, destruction, threatening to peace & harmony besides giving unacceptable opportunities to some to gain at the expense of others.

Hence, an MLM with holistic approach of mutual cooperation, solidarity & brotherhood for the noble cause of socio-eco-cultural prosperity among mankind, is strongly encouraged by the Divine principles of al-Qur'an: ".......cooperate each other in righteousness & piety, but do not cooperate each other in sin & rancour....." (al-Maidah:02).

First Offshore "ISLAMIC BULLION BANK" in mind.

Offshore Islamic Bullion Bank (IBB) is designed (at brain child idea) to offer money market by Gold Diner, global Asset (gold, silver & diamond) management, global Sukuk issuance, global capital market, Cooperative micro-finance, islamic micro-credit @ al-Rahnu & global equity (gold, silver & diamond) management in accordance with the standard Shari'ah principles. The Risk management of all these services shall be by Takaful providers.

The prime objective of IBB is to provide an effective Gold, Silver & Diamond management for the global Ummatic benefits in the spirit of Shari'ah by having not only commercial gains, but also added opportunities with socio-cultural, political-global and spiritual significance.

Furthermore, through the successful establishment and operation of IBB, the depositor / owner of asset (gold, silver or diamond) may not only hold the certificate of safe keeping, but also grand opportunities in legitimate profit making besides cooperating others towards required financial supports for the project developments, establishment of businesses & needed facilities.

For example: IBB may offer any guarantee with standard financial instrument backed by the ready asset in custody (gold, silver or diamond) to the party who requires financial support for the project, business or facility. A financing bank will offer the facility based on the IBB's issued instrument to effectively support the party towards one's end result. Through such a holistic cooperation, all four parties (including the owner of asset) will have the chance to share income in the project as per mutual understanding. Moreover, IBB may also be able to issue Sukuk guaranteed by the ready asset, participation in the equity market and other global opportunities, to generate income over the deposited asset, which will ultimately befifit not only IBB, but also the owner of the asset coplying the Shari'ah principles of profit sharing technique. In all circumstances the risk shall be minimized by the relevant Takaful coverage.


Though the brain child architecture of IBB of my humble effort had began its structure since 2002 and now may be the right time to be established as the first of kind in today's world of reality.


The establishment of IBB may open up long waited opportunities for all through the centralized management of gold, silver & diamond aiming a discovered effective benefit for the global Ummah, EnSha ALLAH (swt).


It is further clarified here that, though IBB has not been established yet in its capacity as an Islamic bullion bank with operation, but ready with its architecture by conceptual frame works, management structure, Shari'ah regulatory structure, products structure, strategies, Shari'ah instruments, business prospects, lead partners including investors, market zone & operational mechanisms, which may lead to formalization & operation effectively (all are depending on the fulfillment of legal requirements, approval by the relevant authorities & endorsement by the government concern) EnSha Allah (swt).

Islamic finance is with its universal characters for All

islamic finance is not for muslim alone, but it with its universal characters offers benefits for ALL regardless of one's religion, race, nationality, gender or even status.

thus, the ownership, development, decision making, management, operation, marketing & distribution may not necessarily be confined among muslim only, but be enjoyed by non-muslim too, so long every components of islamic finance are assured in total compliance with the principles of Shari'ah.

hence, an unjustifiable discrimination may slower the spirit of the growth of islamic finance, despite being designed for the benefits of the humanity (Ummah) across the globe.

Resurgence of Islamic Financial Laws & Governance: a world view.

It has been undeniably witnessed by the applied world of socio-economy that, ever since 1963 when the first Islamic banking operation began in Egypt, the rapid growth of it had been being counted till today by securing a sustainable place with an achievement of almost 27 % of the total banking sectors across the applied world. Today, at the commencement of the 21st century we shall satisfactorily be able to observe the well-establishment of Islamic financial industries with almost desirable product offerings, discovery of instruments and adapting innovative/strategic plan to meet the Ummatic need for today and the time ahead. With the greater world’s appreciation to Islamic banking and financial offerings, it is proudly noted that, about 800 Islamic banking and financial institutions with a growth rate of about 18% p.a. by a total size in its value exceeds USD 1.3 trillions may easily be able to mark the world as a potential Islamic financial component alternative to the existing conventional ones. Such a growth in Islamic finance is systematically regulated and well governed by Shari’ah justified Legislations, Codes, Decrees, Fatwas (Juristic Opinions) and the collective decisions of ‘Ulema (Islamic Scholars better known as Shari’ah councils).
Today, the market segment of Islamic banking and financial products and regulations are no longer confined within the limited territory, but are in the web of borderless world by having an appreciation from almost all groups of human beings with an utmost dreamed result. The market mechanisms adapted by the potential marketers are with dynamic strategies and mechanisms of governance to match the applied global phenomena where both Muslim and Non-Muslim are equally participating to market the Islamic financial products with a maximum gear of micro-macro levels. Nevertheless, numerous market risks always await to hinder the smooth progress of the industrial movements, perhaps caused by lack of reasonable Shari’ah justified professional enrichment ought to be exist among the marketers. These sorts of short comings could easily be overcome with due care and diligence, wisdom and mutual corporate respect and of course with right professionalism by performance supported by Shari’ah standards, Ethical paradigm, regulations and governance.
The promising arena of Islamic corporate application and governance caught the attention from both Muslim and Non-Muslims with equal participation in establishing and offering competitive and sound Islamic financial products. Resulting such a phenomena, besides having almost 300 entities of full fledged Islamic financial providers in to day’s world, almost all conventional potential players are also offering the desirable Islamic financial products through the establishment of segregated windows and divisions respectively by adapting suitable mechanisms of Shari’ah Compliance.
Numerous options as to the Shari’ah justified instruments are in fact applied by the relevant product specialists and technical experts in Islamic financial industries to develop competitive Islamic financial products with innovative culture and dynamic corporate outcomes. As a result, expected almost products considering investors, customers and bankers are designed to pave the right way of Islamic financial industries with utmost competitive achievement. The products are not only to satisfy the retail groups but also corporate levels. If such dynamism as to products innovation continues, the growth rate of Islamic financial business, upon considering the historical fact, may reach to 40% to 50 % by the year 2020. But for such an achievement certainly and rationally require rediscovery of mechanisms for the products innovations, culture of products review, review on professionalisms and improving the relevant policies, regulations and governing standard with ethical guidelines as these shall not be denied in any sector in the promising Islamic industrial movement.
Strategic planning for every move of Islamic financial industry is an utmost important to ensure a smooth growth of the industry with successful outcome. Strategic planning shall be consolidated with dynamic actions. For this exercise, it is essential to ensure the existence of right experts be in; Shari’ah, decision making, technical, operational or /and marketing avenues with proper professionalisms and rightful performance justified by Shari’ah Standard.
The modern growth of Islamic financial industry began in Egypt and the Arab world, while Malaysia caught the wave in early 80s and subsequently till today with a rapid gradual development by appreciation with achievement channel through both Muslim and Non-Muslim world, Islamic and Conventional players with utmost recognition by establishing an undeniable fact of growth. Due to present phenomena of development and dynamic offerings of applied Islamic financial products in Malaysia, Bahrain and UAE play among the top ranking role in the global Islamic financial market. A part from the existing world players the next wave of industrial growth can consciously be predicted from the non-Muslim world with a reasonable participation. Among those countries may be listed like, Singapore, England, Hong Kong, Germany, Canada, Russia, Australia, China, Japan, South Africa and to name others. It may be anticipated that, in the next 7 to 10 years time the innovative designed Islamic financial products with required Shari’ah regulatory frameworks may be able to attract almost 60-65% of the total financial industries globally to offer Islamic financial products to both Muslims and non-Muslims with beneficial results.
Trade and finance arranged according to Islamic principles have gained increasing importance. Commercial transactions conducted under Shari’ah principles form a significant portion of international commercial activities today. The Shari’ah standard trade and finance has now developed into an important system operating parallel to the conventional system globally.
Despite this development, quality reference materials on Islamic law of trade and finance are not in abundance. My book “Applied Islamic Law of Trade and Finance” provides a clear and practical exposition of the current Islamic law of trade and finance. Comparison with civil law highlights the differences between the systems and greatly assists in the understanding of both systems. Regular quotation of Qur’anic verses and prophetic tradition with English translation, sets out the religious foundation underlying the applicable Islamic law of trade and finance in practical reality.
This book in fact, covers topics such as commercial contracts, sale of goods, partnership, stock market, Islamic currency, Takaful and the institution of Zakat. Islamic finance practitioners, bankers, lawyers, business owners and their financial and legal advisers may gain valuable information on the Islamic law of trade and finance with practical solutions.
Islamic finance has grown exponentially in the last few decades and has reached over 70 countries around the world. The Islamic financial system today comprises a sizeable asset base and there is evidence of sustained demand for Islamic financial products and services in the global market, with demand outstripping supply.
My forthcoming title “Applied Islamic Finance” provides a new source of reference to aid the understanding of the laws and practices of Islamic finance from a global perspective. Besides providing an overview of the regulatory structure overseeing the Islamic financial system, the book discusses the sources of law and the applied principles of Shari’ah governing Islamic financial instruments, products and policies. An entire chapter is also devoted to surveying the laws of several countries in the Muslim world that govern Islamic financial institutions.
As Islamic finance involves a wide array of global players including borrowers, lenders and their bankers, policy makers as well as legal and financial advisers, harmonization and rationalization are important to foster an efficient and dynamic system. To that end, the book discusses the Shari’ah standard of contemporary financial business, the roles and functions of a Shari’ah advisory body and the impact of fatwa in Islamic financial practices.
This book may be regularly consulted by banking and finance practitioners, in-house legal counsel, business owners, policy makers, participants, players, researchers and persons responsible for the further development of the Islamic financial system globally.
The understanding of Takaful (Islamic insurance) and modern insurance will be greatly enhanced by reading my book “Applied Takaful and Modern Insurance" with regulatory and practical consideration. This book makes available in clear and succinct language the principles and practices of Takaful and modern insurance with comparative treatment. The comparison of these two systems brings up the differences between and coincidence of both systems to facilitate the better appreciation of the systems, which run in parallel to cover the various risks faced in life and reality today.
The topics covered in this book include subject matter at risk, insurable interest, good faith, insurance contracts, risk management, insurance intermediaries, nomination, beneficiaries, claims, distribution and legal formalities. The contemporary experience in Takaful operation is also discussed and recommendations are given for the future development of the industry in the contemporary world of advance economy.
The book has been useful for the Takaful, Re-takaful and insurance practitioners, business owners, in-house Shari’ah and legal counsel, takaful or insurance advisors and persons responsible for the risk management.
The increasing volume of Shari’ah-compliant business transactions backed by Islamic financial arrangements and the widespread use of the internet and information technology (IT) make a good understanding of Islamic e-commerce law and practices very important. Being a developing area, good literature is not in abundance and it is the aim of my latest book “ Applied Islamic e-Commerce” may meet the need.
This book gives a practical and enlightening account of Islamic law comparing with modern principles as it applies to the field of e-commerce with comparative treatment. Part I of the book sets out the general principles of e-commerce law, which include ethics in e-commerce and the sources of e-commerce law. Part II discusses from the Shari’ah perspective comparing with modern practical matters such as Internet marketing and advertising, virtual stores and payment systems as well as personal rights and the protection of privacy.
The practices of e-commerce law under Shari’ah comparing with modern principles are explored in Part III. These include the components of an e-contract, the principles governing data protection and the concept and practical application of digital signatures. Part IV surveys offences and liabilities in e-commerce, particularly the problem with hackers and torts in e-commerce dealings under Shari’ah comparing with modern principles.
Applied Islamic e-Commerce: Laws and Practices is illuminating and provides valuable guidance from the Islamic law standpoint comparing with modern principles on practical issues, which arise in the conduct of e-commerce. This is certainly a first book produced by considering Shari’ah standard comparing with modern principles that should not be missed by corporate lawyers, finance and business advisors, business owners, in-house legal counsel, marketers, IT professionals and those involve in e-commerce activities in the contemporary business reality across the world.
Indeed, the past of Islamic financial industry had been grown with hardship strategies while the present movement is with rapid achievement through dynamic strategic and smart applications with a potential alternative component to the global conventional players. If such a phenomenon continues, the Islamic banking and financial platform may undoubtedly secure a sustainable place in the world financial growing picture. Provided that, due professionalism, public awareness, review exercise and product innovations are strictly recommended to be observed with sustainable routine. Furthermore, the dynamic mechanisms shall be discovered with continuous research habit to provide tools for the risk management in all levels of Islamic financial industry along with adequate applications of relevant tools of Information technology (IT) to facilitate in the smooth running of the hi-tech Islamic financial activities with an objective of best and competitive offerings for the present and the Ummah ahead.

Islamic Cards: issues & possible directions

ISSUE 1: Where is the growing demand for Islamic cards coming from? Obviously the growth of Middle Eastern economies through petrodollars plays a part, but what about countries such as Malaysia and Indonesia ? Is it also because cards are a cheaper financial product proposition to offer?
SOLUTION:

• Shari’ah (Islamic) Cards include Credit card, Debit Card, Mult-purpose card and Loyalty Card.


• The growing demand of Shari’ah compliant Cards come from Dubai, Malaysia and Bahrain with almost equal efforts and spirit followed by other countries like Indonesia, Qatar, Saudi Arabia, Kuwait, Brunei and UK.


• Such a growing phenomena is basically contributed by petrodollars but also the adaptation of Multi-currency basket especially in Malaysian Islamic Banking Practices.


• Growing phenomena is also contributed not only be Shari’ah card is one of the cheaper financial product but also it ensures a sort of security and convenient for the customer concerned.

ISSUE 2: The development of the differing models of Islamic finance – will this create problems for an increasingly globalised financial network?

SOLUTION:

• Different models of Islamic finance adapted and applied in different parts of the world are because of: (i) different Mazhab (Schools of Islamic Jurisprudence); and or (ii) advancement of research and action by respective players in the Islamic Financial Industries; or (iii) the differences of views of the Shari’ah Scholars.


• It shall neither be an issue nor confusion as this may be a healthy culture in the growth of Islamic finance globally.


• Because, different experiences and practices may discover an opportunity to share knowledge and upgrade own products, policies and mechanisms to pave the utmost satisfaction of customers with gradual effect.

ISSUE 3: Processing and operations for Islamic cards must all be Shariah compliant – how does this work? Is it a challenge, given that processing in particular is now more a game of scale than anything else? SOLUTION:

• Processing and operation for Islamic Cards shall be with Shari’ah compliant is neither a challenge nor a game but a system with different mechanisms offered within the spirit of Shari’ah principles applicable to all regardless of one’s religion, race or status.


• For example, Conventional Card adapts fixed interest, which is opposed by Islamic Financial Principles.


• Alternatively, Islamic Card is processed and operated based on the principles of Service Charge (Ju’alah), Buy Back Sale with SPV (Tawarruk), Sale with mark up by Deferred Payment (Murabahah) etc which offer the products in view of Risk sharing (opposed to Risk transferring), Mutual benefits (opposed to gaining on liability account).

ISSUE 4: Fees vs. Interest: Islamic credit cards seek to mimic rather than differentiate themselves from alternatives (unlike other Shariah compliant products) – is this a problem? Will potential customers fail to see the benefits? SOLUTION: Please refer the Solutions to ISSUE 3.

ISSUE 5: Conversely, these products are invariably cheaper for cardholders – could Islamic cards open up and become somewhat akin to an ‘ethical’ option for consumers? I understand that some banks offer the cards to non-Muslims. SOLUTION: please refer the Solutions to ISSUE 3.

ISSUE 6: Are Shariah scholars more averse to credit cards than other financial products such as loans and mortgages i.e. they promote consumerism and spending beyond one’s means. Will this mindset prove to be an obstacle for the industry? SOLUTION:

• Shari’ah Scholars concern on a just financial planning and application within the standard of Shari’ah ethics and spirit, which shall be beneficial for all Muslim and non-Muslim with no discrimination per se.


• Therefore, Islamic card is not an exceptional Islamic financial products as far as the treatment by the Shari’ah scholars are concerned.


• It is Shari’ah ethical spirit (as a principle of Islamic Financial Planning) to economize spending and mange own wealth rationally, which is oppose to spending excessively and or beyond the capacity.


• But, the responsibility with rationalism in spending culture / habit is personal rather than state or community responsibility


• Therefore, Shari’ah principles on spending unnecessarily do not really indicate an obstacle to the growth of Islamic Card.


• Because, using the Islamic Card does not really give a chance the user to spend unnecessarily but it depends on one’s personality and personal habit.


• Hence, management of own wealth is a personal responsibility, and no connection with the fact of having Islamic Card can influence one to spend excessively.

Islamic Finance - an update in the context of Europe

Sukuk (Islamic Bond):
Bond Issuer Companies issue Sukuk in order to raise capital in a form of Islamic investment on a definite project or venture says Prof. Dr. Mohd. Ma'sum Billah, a global renowned Islamic finance expert from the Middle Eastern Business World Group. In doing that, the company sells an asset to investors who lease it back to the company for a rental called Sukuk al-Ijarah. This rental is an alternative to the coupon of a traditional corporate bond. Leasing (Ijarah) leads to facilitate several categories of Islamic investment products in the contemporary reality says Prof. Dr. Mohd Ma'sum Billah, a global renowned Islamic finance expert from the Middle Eastern Business World Group. Sukuk in to day’s economic reality is adapted as security as in debt capital market of Islamic investment, and has reached the West. In March 2007, two of Kuwaiti investors have bought the British car company Aston Martin. They wanted to finance the deal according to Islamic principles, and hired the German West LB to finance the deal using the Sukuk (structure).

Islamic Debt Financing:
If a person plans to buy a house or Vehicle or any property or Asset and needs financing facilities under Shari’ah principles, and approach the bank. The bank will buy the subject matter first and resell it to the client at a markup. The client pays back the price in fixed installments. This type of structure is facilitated by Bai’ Bithaman al-Ajeel (differed Payment on long term basis by installments), al-Murabahah (differed Payment on short term basis by installments), Bai’ al- ‘Inaa’ (Buy back sale) and Tawarruk (Buy back Sale by Special Purpose vehicle @ SPV) says Ma'sum.

Corporate Banking with Diminishing Partnership (Musharakah Mutanaqisah):

If somebody wants to start a company and needs money, he doesn't receive a loan, but the Islamic bank offers capital and in return obtains ownership of shares under the structure of Musharakah Mutanaqisah (Diminishing Partnership) says Ma'sum. In this way, the bank acts a bit like a benevolent venture capitalist. But it doesn't have to search for an exit strategy as its share diminishes over time as the entrepreneur pays back the capital. As long as the bank is holding shares, it shares risk and revenue of the company. The details of this arrangements have to be worked out in great detail in the contract as Islamic banking does not allow uncertainty called Gharar.

Takaful:
Islamic insurance, called Takaful, which pools the premium (contributions) paid by the Participants. There are two types of Takaful schemes namely, Family @ Life Takaful (long term policy) and General Takaful (short term policy). In a Family Takaful scheme the money is distributed in to two different accounts, one account is for risk management (treated on the basis of Tabarru’ @ donation or Waqf @ charity or Hibah @ gift) while the other is Shari’ah-compliant investment account (treated on the basis of al-Mudharabah @ co partnership). The claims against the risks are settled out of both accounts. "If one does not make any claim within the policy period, shall receive money from the investment account only". In General Takaful the premium (contributions) paid shall initially be credited in to risk management account(treated on the basis of Tabarru’ @ donation or Waqf @ charity or Hibah @ gift). The claim shall be settled out of this account but if one does not make any claim with the policy period he or she may be satisfied out of surplus sharing. This general Takaful provides coverage against the risks of the sectors like, health, motor, accident ,property etc, explains Prof. Ma'sum. Moreover, Takaful is further backed up by Re-Takaful arrangement.
(view expressed in German Finance Time)

World Economic Crisis & the way ahead

Risk sharing techniques adapted in the modern Islamic financial paradigm has been empirically proven to stand with sustainable existence against any unexpected eco-financial catastrophe. To day’s unpredicted economic tsunami does not remain in the USA but shakes the world financial corridors. Through the close post-mortem on the existing world economic models it may be concluded that, the one with risk sharing techniques may contribute to fight the present critical scenario of financial chapter and that is Islamic financial model applicable globally with the true spirit of brotherhood, solidarity, cooperation, care and concern to every one regardless of one’s religion, race, color, nation and the status. It does not mean to deny the fact that, a deepest revision of all the existing eco-financial models with the holistic spirit of harmonization by considering the current socio-economic phenomena of the world may play a rescue role to the contemporary world-eco crisis.

Hence, US deputy secretary of the Treasury Mr. Robert M. Kimmitt’s recent concern is timely, which has been published in Arab News in Riyadh on October 26, 2008 on the possibility of Islamic finance, which may contribute to overcome the present world economic crisis and thus, has been studied carefully by the experts of US treasury department to re-discover the important features of Islamic Finance in reality.

Open investment policies, risk analysis with foreseeable test, research & re-discovery with product innovation culture and human capital enrichment with reviewed professional integrity, applied wisdom, mutual respect and natural harmonization structured under Shari’ah principles may be among the salient steps to design the way forward against the present financial upset.

Thus, for the eco-rescue, benefits and the way ahead for the contemporary Ummah (Global Community), the recent dynamic concern of the US leaders on the Islamic financial role is relevant, which shall be congratulated and be cooperated by all regardless of one’s nation, religion, race, color, philosophy or ideology to re-discover a right common avenue with the spirit of harmonization by way of mutual respect and common efforts towards noble achievement for all and that is already guided in the Holy Qur’an : “ ….. cooperate each other in righteousness and piety…” (al-Maidah 5: 2).

Hence, the forthcoming G-20 summit to be held in Washington on Nov. 15, 2008 may be the right platform to address the practical implication of Islamic finance to be the potential joint-force with the world eco-rescue consortium through effective cooperation among all in to day’s financial reality.
(view expressed on November 03, 2008)

Islamic Cooperative Micro-Financing (i-CMF) - a rescue pltform to world under-class humanity

The World is suffering due to the influence of Micro-Credit System, a Debt based economy with Risk Transferring Financial Techniques, Which gives an opportunity for one to gain at the expense of others. This is Again Contrary to the Holistic Approach of Economic Justice for All humanity.
Thus, alternatively an Islamic Cooperative Micro-Financing (i-CMF) Model is an asset based system with risk sharing technique with utmost sharing, caring and concern, which is timely to fight to day’s World Economic Crisis and at the Same Time May Rescue the Under, Lower or Middle Privileged Ones to live with a Reasonable Comfort without the Debt Curse. Such Model May Fight the Debt Based Economy With Risk Transferring technique While Promoting an asset Based Economy with maximum Risk Sharing Paradigm by Establishing an Environment with Shared Responsibility, Mutual Caring and Cooperation on the basis of the Holistic Principles of Brotherhood, Solidarity, Care & Concern. Such a model is justified by the Principles of Shari’ah coupled with the true spirit of socio-economic justice for all regardless of one’s religion, color, status or gender per se.
The Above Model has been discovered and duly designed through almost last 10 years of my humble efforts, but has not been implemented yet as till the time arrives today to re-discover a socio-economic way forward with cooperative undertaking among to day’s world of mankind.
ONE MALAYSIA to create an enterprising and entrepreneur based community with the holistic concept of harmonious, solidarity and brotherhood among all, the dynamic thought of Dato’ Seri Mohd Najib Tun Razak, the Prime Minister of Malaysia is the spirit of mind opener with cooperative dynamism to create a debt fighting self reliant based enterprising community with mutual cooperation and creative discovered culture among all by enjoying with a sustainable socio-economy and cultural victory. Thus, i-CMF arrives timely at the right platform leading to create a global enterprising community with a just economic liberty.

LIBOR & The Reaction of Islamic Finance

Issue 1: Can we delink sukuk & Islamic banking transactions from Libor?*

Comment: Definitely because, LIBOR involves RIBA (Usury), which is prohibited under Shari’ah Principles (al-Qur’an, 2:275). Sukuk as well as Islamic banking deals expressly oppose the element of Usury in any component of their operations. Thus, no justification for Sukuk or Islamic banking operation to link with LIBOR per se.

Issue 2: Would it be possible to have Islamic banks' fees higher, even in rare occasion, than the LIBOR Rates?
Comment: It is justifiable for Islamic bank to impose the fees higher than the LIBOR rates. Because, Islamic banking is (in current practice) liable to pay both income tax as well as Zakat, in contrast, the Conventional financial institution under LIBOR rate is liable to pay only income tax. Yet, Islamic bank offers better benefits to its customers than the conventional ones because, its operation is asset based with risk sharing leading profit sharing techniques, which is proven to have been more attractive to all than the one offered under LIBOR rates.

Issue 3: Could you elaborate on why many shari’ah scholars have been uneasy when it comes to returns on the ijara sukuk as they are typically benchmarked to LIBOR, an interest rate indicator?
Comment: There are several mechanisms of rating namely: FIXED rate, INDICATIVE rate, FIXED charge, INDICATIVE charge, FIXED income, INDICATIVE income. Some scholars perhaps fail to differentiate among all these categorization in the eyes of Shari’ah. Therefore, any rate FIXED by amount except the FIXED charge are within the ambit of the standard practice of LIBOR, which is opposed by the Spirit of Shari’ah. Thus, an INDICATIVE rate is totally different from a FIXED rate. A Fixed rate is approved by LIBOR but opposed by Shari’ah, which proposes alternatively the INDICATIVE rate. Hence, no confusion shall arise as far as the practices of INDICATIVE rate adapted in SUKUK al-IJARAH.

Issue 4: "Taqi Usmani has suggested a benchmark based on a common pool, which invests in Islamic instruments. If most of the assets are tangible, its units can be bought and sold based on their net asset value which is determined on a periodic basis", please justify your view if you are against Usmani suggestion?
Comment: I fully agree with Mufti Usmani. Because his idea provides INDICATIVE thought by deriving the outcome from the common pool, which is again sharing the above highlighted ‘INDICATIVE rate’ view.