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BLOG OF KNOWLEDGE (Shari'ah, Law, Islamic Finance and Muslim News)
Shari'ah, Law, Islamic Finance and Muslim News
Daily Archives: June 24, 2014
June 24, 2014
DR. ZULKIFLI HASAN
Is Tawarruq Really Islamic Finance?
Is Tawarruq Really Islamic Finance?
Available at:
http://finance.yahoo.com/news/tawarruq-really-islamic-finance-080324265.html;_ylt=AwrTWfyxoalTW0UAQZ_oPwx
.
A legal opinion from Ethica Institute Of Islamic Finance, one of the Islamic finance industry’s leading training and certification institutes sheds light on the problem of the Tawarruq retail product and how it is likely hurting the industry’s profitability
You walk into the Islamic bank, sign some papers, “trade” in metal in some corner of the globe, and walk out with cash. Papers are pushed, money changes hands, and the metal just sits there, ready for the next customer to “trade” a few minutes later. Or can the same metal be bought and sold by different customers in the same minute? Who’s counting anyway?
Welcome to the world of Tawarruq.
Last week Ethica Institute, one of the industry’s leading Islamic finance training and certification institutes, distributed a fatwa (expert legal opinion) to its community from one of its scholars, Mufti Ismail Desai, explaining the impermissibility of a particular Tawarruq product. The product in question came to light when one of the UK’s major banks approached the institute for its training and certification services. Ethica declined to offer its services citing Shariah non-compliance of the Tawarruq product.
What some Islamic finance scholars begrudgingly allow for in extreme, case-by-case situations, banks often turn into a retail product for ordinary customers to use. Tawarruq, according to Ethica, is one of the main reasons customers question the credibility of Islamic finance. A product that began as the industry’s somewhat embarrassing black sheep over a decade ago has now grown into the eight hundred pound darling of many Islamic banks.
Ethica’s fatwa raises two important issues for an industry fast on growth but slow on establishing credibility among banking customers: first, what really is Tawarruq? And, second, importantly, if it becomes a regular product, is it still Islamic finance?
“Banks think they attract customers in the short term, but the reality is that they lose them in the long term. Ethica works with bankers and customers across multiple regions and we are seeing the same pattern: when Islamic finance’s credibility is compromised, customers leave. And they usually don’t come back. Retail Tawarruq is not only Shariah non-compliant most times, it is also quite possibly the worst first impression we can make as an industry,” said Ethica’s spokesperson.
Ethica explains that the first step to understanding Tawarruq is understanding its definition according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the world’s leading Islamic finance standard. Tawarruq (Monetization), “refers to the process of purchasing a commodity for a deferred price determined through Musawama (Bargaining) or Murabaha (Mark-up Sale), and selling it to a third party for a spot price so as to obtain cash. Whereas Inah refers to the process of purchasing the commodity for a deferred price, and selling it for a lower spot price to the same party from whom the commodity was purchased.”
To expand on this definition,
1. Bay al-Inah is composed of two sale transactions. In the first transaction, a seller sells an item for a particular price to be paid in deferred installments. In the second transaction, after taking possession of the item, the buyer sells the item back to the seller for immediate payment of a lower price, to be paid before the installments of the first sale are due. The overwhelming majority of scholars are of the opinion that Bay al-Inah is impermissible when the price of the second sale is lower than the first sale. However, some jurists have ruled that Bay al-Inah is permissible in the instance when the price of the second sale is equal or higher than the price of the first sale.
2. Bay al-Tawarruq in the strict definition of the jurists is defined as a Monetizer (mustawriq) who buys a merchandise at a deferred price in order to sell it in cash at a lower price. Usually he sells the merchandise to a third party with the aim to obtain liquidity. Jurists have ruled that this form of Tawarruq is permissible since the laws and rules of a valid legal Shariah sale have been fulfilled.
The contemporary definition of organized Tawarruq is when a Monetizer (mustawriq) purchases merchandise/commodities on the international commodity market on a deferred price basis either through Musawamah or Murabaha. The financier arranges the sale agreement either himself or through his agent. Simultaneously, the mustawriq and the financier executes the financial transactions, usually at a lower spot price.
According to scholars, Tawarruq should be limited to individual need and necessity and not retailed to the public. The Islamic economy, they say, should be based on profit-sharing instruments like Mudarabah and Musharakah. Interest free loans (Qardh Hasan) are the ideal alternative to Tawarruq. Among the problems with Tawarruq:
1. Tawarruq in currencies are not permissible.
2. The bank cannot sell goods on behalf of the client without the client taking physical or constructive possession of the goods. This does not usually take place. Islamic banks generally sell the warrants representing the metals and not the actual metals. Therefore, the bank does not take possession when purchasing the metals from the broker initially. The Mustawriq (monetizing client) does not take possession in any form of the metals. The bank is merely appointed as an agent to sell the metals on the metal exchange without any actual Shariah realization of the contractual positions required.
3. All the transactions in a Tawarruq transaction should be separated and individualized. The various legs in most transactions are not individualized and separated.
4. Contemporary forms of organized Tawarruq are very similar to Bay al-Inah and have been largely detested by the majority of scholars including the International Council of Fiqh Academy. (Resolution 179 (19/5) in relation to Tawarruq: its meaning and types (classical applications and organized Tawarruq))
While it remains to be seen whether Tawarruq reform is likely in the industry much like a few years ago when banks began cleaning up their Sukuks after AAOIFI’s chairman, Mufti Taqi Usmani, publicly criticized them there is no doubt that the industry continues to suffer the long-term consequences of an expedient reading of an already borderline product.
Regards

Zulkifli Hasan
Tokyo, Japan
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BLOG OF KNOWLEDGE (Shari'ah, Law, Islamic Finance and Muslim News)
Shari'ah, Law, Islamic Finance and Muslim News
Monthly Archives: July 2009
July 31, 2009
DR. ZULKIFLI HASAN
More Saudi family firms in trouble
By Nadim Kawach Available at:
http://www.zawya.com/story.cfm/sidZAWYA20090730050852/More%20Saudi%20Firms%20In%20Trouble%20-%20Jadwa
A severe debt problem involving two major Saudi family businesses has been caused by massive short-term borrowing and other similar groups could be suffering from such problems, said a Saudi investment centre yesterday. The defaults by Saad and Algosaibi has allied with the global credit tightness to dissuade banks from lending to the private sector and this has put further pressure on the domestic economy that is already reeling under lower oil prices, said the Riyadh-based Jadwa Investments Company.
The company said slackening bank credit has prompted it to cut down its forecast for the kingdom’s economic performance this year, expecting the real GDP to shrink by one per cent compared with earlier projection of 0.5 per cent. “The recovery of the kingdom’s economy has been hit by problems at one prominent local family business and an associated businessman. In addition to these two groups it seems that several other family groups are stressed financially,” said Jadwa in its monthly economic bulletin.
“The causes of these problems appear to be short-term borrowing for long-term assets, investment losses and the accumulation of large inventories of raw materials whose prices subsequently collapsed. Owing to concerns about the health of family business and their own exposures, banks have become more cautious in extending credit to the whole of the private sector.” It said there are links between the two families through marriage, but the extent of the business links is unclear with each side issuing conflicting statements. “The immediate causes of the recent problems are not unique to family groups. Companies worldwide that are heavily reliant on short-term borrowing have suffered from a drying up of credit from the banking sector.”
According to Jadwa, in Saudi Arabia only 22 per cent of total credit has a maturity of more than three years, while losses on investments have been widespread as the value of assets has plunged because of the global crisis. It noted that the Saad group has substantial holdings in the property and financial services sectors, which have been particularly hit. “Shortages in the first half of last year and expectations of a continuation of the economic boom encouraged some companies to stock pile, while prices were rising only for the value of these stocks to collapse as commodity prices plunged as the global financial crisis intensified,” said the report.
“Nonetheless, it seems probable that the dynamics within the two groups aggravated the problems. Both groups started based on a single business line; for Saad this was contracting and for Algosaibi it was trading. “Jadwa said over the years, the interests of those two group mushroomed and they became large conglomerates with diversified interests. It said many family businesses have followed a similar path in the kingdom, but it appears that the Saad and Algosaibi groups did not have sufficient internal controls to operate a diversified group of companies. “Due to the Algosaibi and Saad group defaults, banks have become increasingly wary about lending to all family businesses (family business account for a large part of the private sector). Other companies within the private sector are also finding it tougher to raise finance as a result,” said the study. “Availability of credit was already constrained for the private sector. Total commercial bank lending to the private sector has declined in five of the seven months to end-June and the total outstanding is over SR14 billion below its November peak. Credit to the private sector rose by 0.5 per cent in June, though the breakdown indicates that this was targeted to a few specific sectors.” Jadwa said none of the local banks have publically admitted to exposure to the Saad or Algosaibi groups, but it “seems that this runs into billions of dollars.”
“The Algosaibi group has acknowledged that it owes $9.2 billion to 120 banks across the world. Local banks have very large exposures to family businesses.” The report said second quarter results have shown that National Commercial Bank, Al Rajhi Bank, SABBS, Samba, Banque Saudi Fransiand Saudi Hollandi have increased their provisions for bad debts. “It is highly likely that other banks will do likewise in the third quarter and that provisions made during the second quarter will be raised. Nonetheless, we do not think problems at family businesses will pose a systemic threat to the banking sector owing to its strong fundamentals. Non-performing loans were just 1.3 per cent of total loans at the end of 2008 and provisions were sufficient to cover over 153 per cent of these loans,” said the study.”However, there is likely to be a reform of lending practices at commercial banks. In cases where there are long-term relationships between banks and large customers, lending standards have sometimes been less stringent than would otherwise be the case as a result of the level of trust between the parties.”
Best Regards

ZULKIFLI HASAN

DURHAM, UNITED KINGDOM
From left, Dr. Mehmet Asutay, Profesor Kosugi Yosushi, Zulkifli Hasan, Hylmun Izhar and Professor Dr. Abdul Ghafar Ismail.  Kyoto, Japan.
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July 29, 2009
DR. ZULKIFLI HASAN
Islamic finance principles to restore policy effectiveness, By Professor Willam Buiter
Financial Times Available at:
http://blogs.ft.com/maverecon/2009/07/islamic-finance-principles-to-restore-policy-effectiveness/
Further expansionary monetary policy has become rather ineffective in the overdeveloped world because banks are capital-constrained rather than liquidity-constrained and because liquidity spreads in financial markets that bypass the banks have shrunk remarkably.  Remaining spreads between sovereign debt instruments and assorted private securities of similar maturities can now be rationalised quite easily as reflecting just differential default risk.  Until the banks get significantly more capital on their balance sheets, quantitative easing, credit easing and enhanced credit support are examples of pushing on a string.
The banks will take the liquidity offered and redeposit the bulk of it with the central bank again rather than lending it to the private sector or purchasing more risk financial instruments.  Low official policy rates (and the expectation of the official policy rate being kept at a low level for a further significant period of time) will help recapitalise the banks.  So will the quasi-fiscal subsidies most central banks have been channelling into the banking system through the favourable terms offered by the central banks to the private banks in their transactions, facilities etc., but such gradual recapitalisation through wide margins on low volumes of lending is slow and could lead to a re-run of Japan’s lost decade for much of the G7.
Further expansionary fiscal policy is likely to be ineffective in most of the G7 countries (possibly excepting Germany and Canada).  This is, first,  because households are short of capital and overly indebted and, second, because any further increase in short-term fiscal deficits is likely to undermine confidence in the sustainability of the fiscal-financial-monetary programme of the state. Excessive indebtedness of households can, especially when consumer psychology swings from optimism and recklessness to pessimism, caution and prudence, give rise to a strong precautionary saving motive.  Household income or wealth windfalls will tend to be saved rather than spent on consumption.  Consumption or saving behaviour under such conditions is well-characterised by a simple target wealth model, with households making up the gap between target and actual financial wealth as quickly as possible, subject to a psychologically/socially determined ’subsistence’ level of consumption spending. Under such conditions, tax cuts will be mostly saved and the public spending multiplier will be disappointingly low.
When markets begin to fear that the politics of medium-term and longer-term fiscal tightening – tax increases and public spending cuts – do not look credible, the realisation will dawn, even in the most myopic of our short-sighted financial markets, that unsustainable public debt expansions will either lead to sovereign default or will be monetised and lead to inflation in the medium to long term (starting, say, 4 or 5 years from now).   The state is short of capital and overly indebted.  An expected inflation premium will boost long-term nominal interest rates.  An inflation risk premium may raise long-term nominal and real rates.  If sovereign default cannot be ruled out (and where can it truly be ruled out with complete certainty), credit risk premia will boost long-term nominal and real interest rates as well.  Financial crowding out of interest-sensitive private spending will result.
I have left the non-financial corporate sector out of this litany of capital-deficient overly indebted sectors.  I still believe that the non-financial corporate sector in North America and Europe by and large started the crisis-cum-recession season in reasonably good shape.  If, however, Andrew Smithers is right, and even in August 2007 the balance sheets of many non-financial corporates in the north-Atlantic region were wonky, my argument of a general capital shortage and excessive indebtedness (and therefore of excessive leverage) would apply to every sector in the domestic economy of the north-Atlantic region.
A possible solution: the application of Islamic finance principles through the equitization of private and public debt. If too much debt and too little capital are (part of) the problem, then the conversion of debt into equity is (part of) the solution. Capital structure or financial structure is irrelevant in a complete markets model.  Indeed, the standard interpretation of the complete markets model has no financial instruments at all.  There is a single grand market at the beginning of time in which contingent spot and forward contracts are traded for all real goods and services.  The rest of history is simply the monitoring of the states of the world that materialise and the delivery in each period, location and state of the world, of the real goods and services contracted for at the beginning of time.
This, of course, is crazy stuff, but a lot of economics, and even a lot of macroeconomics got stuck in that time-warp.  Even without complete markets, there are other, slightly less restrictive economic models (although still quite dangerous as stylised representations of the real world) in which capital structure/ financial structure (debt, equity, retentions, dividend policy etc) don’t matter for the performance of the economy.  In such Modigliani-Miller worlds, individuals or households can always undo, by changing the composition of the household financial portfolio, anything a corporation may try to do.
For instance, if a company decided to decrease its leverage by issuing more equity and using it to buy back debt, its shareholders can neutralise this action by increasing home-made leverage, that is, by borrowing more (to buy the company’s equity).  In an extreme version of the Modigliani-Miller world government financial policy (or at least the choice of debt vs. lump-sum taxes) is irrelevant as well as corporate financial policy.  If the government cuts my (lump-sum) taxes and borrows instead, thus redistributing resources from my heirs (who will pay higher taxes to pay for the increased public debt) to me, I simply turn around, save my tax cut and leave the tax cut in its entirety as a larger bequest to my heirs. They use the increased bequest to pay their higher taxes.
Again, we don’t live in a Modigliani-Miller world.  Limited liability applies to firms, but not to households.  Default and bankruptcy are costly processes that consume real resources.  Indeed, all external or third-party contract enforcement is costly.  Most intertemporal trade (and all of finance) involves time-inconsistent actions by at least one of the parties and relies on external or third-party enforcement.  Self-enforcing contracts, relying on repeated interactions, reputation and private punishments or rewards are few and far between.  Taxes are distortionary and don’t affect households and firms in the same way.  Most household wealth (the present value of current and future labour income) is illiquid, non-tradable and cannot be collateralised – courtesy of the abolition of slavery and indentured labour.  Private information and complex principal-agent problems (between shareholders, managers and workers) further undermine the Modigliani-Miller view of the world.  Financial structure matters.
Debt is a fixed commitment on the part of the borrower.  Default on debt is a costly process which can be traumatic for those involved.  Debt has its uses.  In a world of incomplete markets and incomplete contracts and with hard budget constraints (including credible enforcement of debt contracts), debt can have a disciplining influence on managers (as agents for the shareholders in one of the corporate principal-agent relationships). When there are hard budget constraints, debt can act as a bonding mechanism because the debtor exerts additional effort to avoid the personal costs of financial distress.  Of course, this only works if the budget constraint is hard.  With soft budget constraints – the situation of banks that are bailed out by the tax payer when their debt threatens to go into default – debt has no incentive-improving and effort-enhancing impact on the agent.
When the economy is in sufficiently deep dodo, debt can become paralysing: its stops socially useful expenditures and risk taking.  We are likely to be in such a situation now, with much capital destroyed and with public debt about to be boosted to sustainability-threatening levels by the deficits caused by collapsing economic activity, normal countercyclical spending increases and extraordinary public sector financial rescue efforts. It is therefore time to turn water into wine or, failing that, to turn debt into equity; in some cases both the existing stocks and new flows should be equitized, in other cases only new flows.
The equitization of bank debt
I have on many occasions advocated the recapitalisation of banks through mandatory debt-to-equity conversions.  Ideally this would occur through an expedited process of ‘insolvency lite’, through the special resolution mechanisms (SRR) that exist (or where they don’t exist ought to be created in a hurry) for banks and other systemically important institutions.   Simply, the unsecured creditors of banks and similar institutions, starting with those holding subordinated debt and working up the seniority ladder until enough capital has been created, receive a letter in the mail saying: “Congratulations, you are now a shareholder.  There will be no dividends or share repurchases for a while.” This is fair (certainly much fairer than making the tax payer cough up) and it is efficient, properly aligning incentives for future risk taking.  The unsecured creditors have had the benefit for many years of gratis default insurance.  It is time they engaged in some true risk and profit sharing.
The equitization of mortage debt.
Household mortgage debt could be turned into an equity claim.  Many proposals of this kind have been floated in the US for quite a while now.  For a new equity mortgage, the bank would start off as the owner of the property that secures the mortgage.  The contract could take the following form.  With a 20-year mortgage, say, the ‘borrower/tenant’ would pay the bank a rental to live in the property, plus a periodic payment transferring part of the equity in the property to the tenant, say 5 percent of the purchase price each year.
The intial value of the equity (the purchase price) is the present discounted value value of the rentals expected not just over the 20 years of the mortgage contract, but over the entire economic life of the property.  The actual rental payments would be determined by some index of local market conditions.  Each period the bank would only receive a share of the total rental income from the property equal to its remaining equity share. As long as the tenant meets the terms of the contract, she cannot be forced to vacate the property.  The bank could sell its share of the property (and the right to collect the rents for the remainder of the mortgage). It would have a stake in the upside (and the downside) of the property market.
A mortgage contract of this nature (suitably modified to allow for past interest and amortisation) could be offered to existing mortgage holders who are in default on their mortgages as an alternative to repossession.  It could significantly reduce the socially wasteful repossession costs, which have been estimated for the US at between $50,000 and $80,000 per property repossessed.  It could also be offered as an  alternative to regular mortgages for new home borrowers.
The equitization of public debt
How can we turn public debt into something more akin to equity?  One way would be to replace regular fixed or variable interest rate bonds by a security that would have the growth rate of nominal GDP (plus or minus some fixed number) as its interest rate.  With $1 million worth of 10-year debt, for instance, there would be an amortisation of  $100,000 each year, unless the growth rate of GDP that year were negative. With 5 percent nominal GDP growth in the first year, interest that year would be $50,000.  With minus 2 percent GDP growth in year 1, interest payments would be minus 10,000, which could be paid as a reduction in principal repayments that year to $90,000.
This way, with government revenues and deficits so closely coupled to GDP (as a measure of the effective tax base), weak growth would reduce the expansion of the public debt through the intrinsic debt dynamics that comes out of the product of the interest rate and the outstanding stock of debt.
Argentina issued GDP growth warrants of this kind following its latest debt default in 2002.  Of course, this could only work if the statistical office in the country were independent of the government and did not fiddle the GDP growth data to minimize the government’s interest burden. A way to handle the long-lasting stream of GDP revisions would also have to be found, but such technical problems can surely be overcome. Even without fiddling the data, the fact that the growth rate of nominal GDP is, within limits, controllable by the government, could create worries about adverse incentive effects on the borrowing government.  It is, however, hard to imagine a government that would slow down the growth rate of its economy just to reduce the interest rate on its debt.
This form of risk-sharing between the borrowing government and the investor would seem to be of interest not just in crisis situations but more generally.  New government borrowing could take this form even for governments of undoubted fiscal rectitude.  Governments threatened with the prospect of having to default on their debt because of  unexpected weakness of GDP could try to restructure existing debt by offering to swap it, at a discount, for GDP growth warrants of the kind described earlier.
Conclusion
Debt, characterised by fixed financial commitments, can be a poor financing choice in a risky, uncertain world where the private and social costs of default are high.  Many distortions, often created by policy makers, have contributed to the excessive use of debt in the private sector.  There is the nonsense that (nominal!) interest is a deductible cost in the calculation of taxable corporate profits in many countries, but that dividends or retained earnings are not deductible.  The deductibility of residential mortgage interest in the personal income tax system of many countries (although not in the UK) is another obvious distortion.  While it is true that, in the presence of asymmetric information, certain agency problems can be mitigated if companies issue debt (as long as there are hard budget constraints), the highly leveraged state of many households, financial institutions and governments today would appear to be undesirable, preventable and remediable.
What we need is the application of Islamic finance principles, in particular a strong preference for profit-, loss- and risk-sharing arrangements and a rejection of ‘riba’ or interest-bearing debt instruments.
Mandatory debt-to-equity swaps for the banking sector, conversion of defaulted residential mortgages into equity-sharing instruments for banks and households (possibly for the old stock as well as for the new flow), and the replacement of traditional government debt by GDP growth warrants and similar social risk-sharing instruments could enhance both the ex-ante incentives for risk taking and the ex-post capacity of our economic system to respond to shocks.
Author: Professor Willem Buiter is a Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC; adviser to international organisations, governments, central banks and private financial institutions.
Best Regards

ZULKIFLI HASAN

DURHAM, UNITED KINGDOM
Nijo Castle (Built by Shogun Tokugawa Ieyasu, founder of the Edo Shogunate in 1603), Kyoto, Japan
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July 26, 2009
DR. ZULKIFLI HASAN
Dubai Islamic Bank Q2 falls 40% and Commercial Bank of Kuwait Q2 net loss at $8.2 mln
Available at
http://www.reuters.com/article/rbssBanks/idUSLP47943620090725
,
Dubai, (Reuters) – Dubai Islamic Bank posted a net profit of 450 million dirhams ($122.5 million) in the second quarter, down 40 percent from a year earlier but better than analysts’ forecasts. The bank, one of the largest Islamic lenders in the Gulf Arab region, said in a statement on Saturday half-year profit stood at 820 million dirhams. Analysts surveyed by Reuters had forecast earlier this month that the bank’s second-quarter profit would fall between 53 and nearly 67 percent. [ID:nL697302]
The bank said it took a provision of 135 million dirhams in the second-quarter, which is less than amounts announced by several regional banks hit by losses on loans. “The bank’s total impairment provision for first half of 2009 now stands at 239 million dirhams. This reflects a prudent and conservative approach during a period of marked global financial instability,” the statement said. DIB said last month it had no exposure to troubled Saudi conglomerates Saad Group [SAADG.UL] and Ahmad Hamad Al Gosaibi Group & Brothers.
The bank’s investment and financing assets fell to 50.7 billion dirhams from 52.6 billion dirhams at the end of 2008, the statement said without elaborating. Total assets rose 3 percent to 87.8 billion dirhams in the same period. “As we begin to see gradual stabilisation of the markets in the past quarter, DIB is optimistic of the recovery of regional markets,” Chairman Mohammed al-Shaibany said in the statement. “The bank’s financing-to-deposit ratio stood at 71 percent as of 30 June 2009,” it said, adding this “reflects the bank’s conservative credit policy as well as a strong liquidity position.”
On July 7, Standard & Poor’s Ratings Services lowered its long-term counterparty credit rating on DIB to ‘BBB+’ from ‘A-‘ with a negative outlook but affirmed the ‘A-2′ short-term counterparty credit rating on the bank. S&P said it expected a decline in the real estate sector in Dubai to put pressure on DIB’s asset quality and profitability, adding the negative outlook reflected it expectation of a weakening of DIB’s financial profile. Established in 1975, Dubai Islamic Bank is one of the oldest players in the fast-growing Islamic banking sector. (Reporting by Firouz Sedarat).
Available at:
http://www.reuters.com/article/rbssInvestmentServices/idUSLP55154620090725
KUWAIT, (Reuters) – Commercial Bank of Kuwait (CBKK.KW) (CBK), the country’s third biggest lender by market value, made a 2.34 million dinar ($8.15 million) loss in the second quarter on provisions, according to Reuters calculations. Net profit for the first half came in at 800,000 dinars, the bank said in a statement on Saturday without giving quarterly figures. Reuters calculated the second-quarter loss based on financial data which showed the bank made 3.14 million dinars net profit in the first quarter of this year and 36.4 million dinars profit in the second quarter of 2008.
“Commercial Bank of Kuwait has reported a profit before provisions of 66.9 million dinars and, after the bank’s board of directors has allocated provisions against the loan and investment portfolios, the net profit is 0.8 million dinars,” the bank’s chairman Abdulmajeed al-Shatti said in a statement. CBK had a total of 256.2 million dinars of loan provisions in the first half of the year, the statement said. On Friday, Fitch Ratings said Kuwaiti banks, including CBK, were coming under increased stress due to contraction in the local economy and exposure to risky asset classes which would affect their profitability.
“Kuwaiti banks’ exposure to risky asset classes is significant, with over half of the banking system loan book exposed to potentially risky sectors of the economy, including investment companies, real estate and construction, and lending for the purchase of securities,” Fitch said. Shatti said in the statement that despite government steps to support the local economy, the “outlook remains uncertain.” In March, Shatti said 2009 would be a difficult year and that CBK may take provisions to weather the global downturn. Earlier this month, National Bank of Kuwait (NBKK.KW), the country’s largest, posted a 32.7 percent fall in second-quarter net profit on provisions and a fall in the value of investments. Kuwait Finance House (KFIN.KW), the Gulf’s second largest Islamic lender, has posted a 61 percent fall in second-quarter net profit on provisions as the global crisis hit Kuwaiti banks.
OPEC member Kuwait has been hit hard by the financial crisis. The government had to step in to save Gulf Bank (GBKK.KW) last year, the only major bank in the Gulf Arab region requiring a government bailout, while several major Kuwaiti investment firms are struggling to meet debt requirements. CBK’s total assets amounted to 3.7 billion dinars at the end of June, while shareholders equity stood at 451.5 million dinars, the bank said. (By Rania El Gamal and editing by Firouz Sedarat)
Best Regards

ZULKIFLI HASAN

KYOTO, JAPAN
INTERNATIONAL WORKSHOP IN ISLAMIC ECONOMIC, BANKING AND FINANCE, 8th-9th JULY 2008, Jointly organised by Durham Islamic Finance Programme, Durham University and Center for Islamic Area Studies at Kyoto University, KIAS, Japan; and Global COE Program: In Search of Sustainable Humanosphere in Asia and Africa, Japan.
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July 16, 2009
DR. ZULKIFLI HASAN
Commentaries on the IFSB Exposure Draft Guiding Principles on Shari’ah Governance System
Assalamualaikum,
Dear Readers,
It has been quite sometimes I do not share any of my writings or thoughts. I take this opportunity to share with you my commentaries on the IFSB Exposure Draft Guiding Principles on Shari’ah Governance System issued early this year. This exposure draft has already been tabled to the Shari’ah Board of the Islamic Development Bank and now in the process of revision.  The revised draft shall be referred to the Shari’ah board for endorsement of its Shari’ah compliance and then be referred to the technical committee for discussion and amendment. It is expected that this Guiding Principle will be ready by end of this year. Enjoy reading!
Commentaries on the IFSB Exposure Draft Guiding Principles on Shari’ah Governance System
Best Regards

ZULKIFLI HASAN

DURHAM UNIVERSITY
International Conference on Endowment and Minor Affairs, Dubai, United Arab Emirates
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July 14, 2009
DR. ZULKIFLI HASAN
Five former senior officials from the Islamic Finance Company have been sent to prison.
By Andy Sambidge (
http://www.arabianbusiness.com/560297-former-islamic-finance-company-chief-jailed
)
Five former senior officials of an islamic finance firm have been jailed after being found guilty of charges including breach of trust and the violation of the commercial law of the UAE and embezzling AED423m. The Abu Dhabi Court of First Instance sentenced Ali Hamel Khadem Ghaith Al Ghaith Al Kubeissy, the ex-chairman of Islamic Finance Company to three years in jail, news agency WAM reported on Sunday.
Abdullah Saeed Abdullah Al Kubeissy was jailed for two years and board members Al Al Walid Bin Hamad Al Mubarak, Eissa Shamlan Eissa Al Shamlan and Ghaith Hamel bin Khadem Al Ghaith Al Kubeissy were sentenced to one year in jail each. The court indicted them for “breach of trust, mis-assessment of shares with bad faith and violation of the commercial law of the UAE”, it was reported.
Established in October 2006 with a paid up capital of AED1 Billion, the Islamic Finance Company’s objective was to provide a comprehensive range of Islamic financial solutions as well as asset management services. The court found Ali Hamel Khadem Ghaith Al Ghaith Al Kubeissy guilty of “wasting” AED423m in addition to other amounts. He also misused the power of attorney granted to him illegally while the court also established that the accused did not record minutes of the board meetings in violation of the law, WAM reported. The UAE ministry of economy had filed an official complaint against the five defendants, requesting that Dubai Public Prosecution conduct urgent investigations.
Best Regards

ZULKIFLI HASAN

DURHAM UNIVERSITY
With Dr. Humayon Dar, CEO of BMB Islamic.
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BLOG OF KNOWLEDGE (Shari'ah, Law, Islamic Finance and Muslim News)
Shari'ah, Law, Islamic Finance and Muslim News
Monthly Archives: September 2016
September 11, 2016
DR. ZULKIFLI HASAN
Significant development: Delinking Islamic banking from interest
Significant development: Delinking Islamic banking from interest
By Humayon DarPublished: September 11, 2016 Available at: http://tribune.com.pk/story/1180701/significant-development-delinking-islamic-banking-interest/
SBP has taken a number of steps to improve authenticity of Islamic financial products.
SBP has taken a number of steps to improve authenticity of Islamic financial products.

LONDON: Islamic banking and financial products are priced with reference to an interest-based benchmark, which makes them look and behave like interest-based financial products.
This attracts criticism from those who otherwise have serious doubts over viability of Islamic banking and finance as an alternative to interest-based conventional banking and finance. The users of Islamic financial services also show dissatisfaction with the use of interest as a benchmark.
The State Bank of Pakistan (SBP) has taken a number of steps to improve authenticity of Islamic financial products. In 2014, it sponsored a detailed study on Knowledge, Attitude and Practices of Islamic Banking and Finance in Pakistan, known as KAP Study.
It was conducted by a research team headed by Dr Farooq Haq. The study also identified dissatisfaction over the use of Karachi Inter-bank Offered Rate (Kibor) as a benchmark. On September 7, 2016, the SBP issued a directive allowing Islamic banks to benchmark their products based on participatory modes – known as Musharaka and Modaraba – and Wakala-based agency, with respect to an index other than Kibor.
This is a historic development that will allow Islamic banks to delink themselves from the interest rate mechanism. It will also allow Islamic banking to be more Shariah authentic for which Pakistan is already respected in the international markets.
SBP Deputy Governor Saeed Ahmed is expected to receive a special award at the Global Islamic Finance Awards to be held at Jakarta on September 29. This award acknowledges his personal initiative and advocacy role to promote Islamic banking and finance in the country.
While the likes of Finance Minister Ishaq Dar have received accolade for their efforts to promote Islamic banking, there is a need to acknowledge roles of bodies like the Department for International Development (UK) that sponsored the KAP Study and individuals like Dr Farooq Haq who conducted the study.
KAP Study has played an instrumental role in many recent developments in Islamic banking and finance in Pakistan. The establishment of three centres of excellence at the Institute of Business Administration (IBA) Karachi, Lahore University of Management Sciences (Lums) and Institute of Management Sciences (IMSciences) Peshawar is a direct outcome of the KAP Study.
In the recently concluded World Islamic Finance Forum at the IBA, a number of leading personalities and individuals from around the world were invited. However, many organisations and individuals who have been instrumental in the development of Islamic banking in the country were not represented.
Increasing influence of one religious school of thought (particularly one seminary in Karachi) in Islamic banking and finance is also frowned upon by many industry observers. This trend is certainly not healthy, despite huge achievements the SBP as a regulator has made.
If the trend continues, it will polarise Islamic banking and finance in the country on a sectarian basis, something the global Islamic financial services industry has so far successfully avoided.
While it is absolutely imperative that the SBP remains friendly with Islamic banking institutions, it is equally important that it provides a level-playing field to all banks – whether Islamic and conventional – which are involved in Islamic banking and finance.
With comprehensive engagement with all stakeholders in Islamic banking, the government and SBP can bring this latest initiative – delinking of Islamic financial products from Kibor – to the attention of the international Islamic financial community.
The London-based Global Islamic Finance Awards have identified achievements of a number of Pakistani banks involved in Islamic banking. In this year’s awards ceremony to be held at Jakarta, at least two banks from Pakistan will receive awards for their contribution to the development of Islamic banking in the country.
The writer is an economist and PhD from Cambridge University
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September 4, 2016
DR. ZULKIFLI HASAN
Hindu Groups Oppose Entry of Islamic Finance in India
Hindu Groups Oppose Entry of Islamic Finance in India
Available at:
http://www.voanews.com/a/hindu-groups-oppose-islamic-finance-india/3450351.html
A Sharia-compliant international bank’s plan to launch its business in India is facing opposition from Hindu groups that say an Islamic bank should not be allowed to operate in a secular country.
The Islamic Corporation for Development (ICD), a subsidiary of the Saudi Arabia-based Islamic Development Bank (IDB), is expected to set up its first Indian branch in Gujarat city of Ahmedabad.
The ICD branch would operate as a non-banking financial company (NBFC), providing loans to small and medium businesses and sharing their profits and losses, instead of charging interest — which is the basis of the Sharia-compliant banking.
The exact date of the branch’s launch in Ahmedabad has not been announced.
Encourage religious conversion?
Although some Muslim experts believe the financial service offered by the ICD can benefit people belonging to certain underprivileged sections in India, leaders of Vishva Hindu Parishad (VHP), India’s largest Hindu religious organization, said the Sharia-based financial institution should not be allowed entry into India because it operates against the country’s principles of secularism.
Islamic Development Bank
“They are planning to launch ICD to introduce a Sharia-based financial system in India. By establishing it, they are aiming to implement Sharia law and promote Islam in the country,” Surendra Jain, joint general secretary of VHP, told VOA. “Banking activity in India is a totally secular activity. It cannot be controlled by any religious way or any religious system.”
He added, “If as a Hindu I seek a loan from this company, my application will be rejected. They will say, if you convert to Islam, I shall give you an interest-free loan.’ The establishment of this financial company in India will encourage religious conversions in the country,” he said.
But Zafar Sareshwala, who heads the ICD’s India operations, said those who are opposing the entry of the NBFC in India have no idea how it is set to operate in India.
“Those who are opposing don’t know what it is. This is not going to be the distribution of zakat [where only Muslims are the beneficiaries]. It will be a profit-making enterprise. Whoever stands the scrutiny of the lending norms will get the loans,” Sareshwala told VOA. “Across the world, most of the recipients of Islamic finance are non-Muslim.”
IDB, which is an
INTERNATIONAL INVESTMENT
organization, was established to provide funds for infrastructure projects in the Islamic world, as well as economic and social development programs. Following Sharia law, the IDB supports developments in 56 Islamic member countries.
Indian opponents of the ICD appear to be fighting an uphill battle in their campaign against the financial institution.
More branches planned
When Indian Prime Minister Narendra Modi visited Saudi Arabia in April, an extensive agreement was signed between his delegation and IDB to facilitate the bank’s launch in India.
Since the agreement, ICD, an affiliate of the IDB, has been in the process of setting up its first Indian branch in Ahmedabad, with plans to open more branches across the country.
Under the agreement, India’s state-run Exim Bank would provide a $100 million line of credit to help Indian exporters do business with IDB’s member countries. IDB has promised to donate $55 million to India to set up some 350 mobile medical units for rural regions.
H. Abdur Raqeeb, general secretary of the Indian Center for Islamic Finance, a New Delhi-based non-profit group that promotes Sharia-based banking in India, said Sharia-compliant banking will significantly contribute to development in India.
“The IDB and ICD sponsored NBFC in India will be operating on participatory and ethical principles based on profit and loss sharing, without charging interest. The enterprises often operate in risky markets and are sensitive to changes in economic environments. Therefore, there is a need of an alternative system of financing, instead of the conventional one based on interest,” Raqeeb told VOA.
“The NBFC is going to be warmly welcomed by the religious minorities and marginalized segment of India,” he said.
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BLOG OF KNOWLEDGE (Shari'ah, Law, Islamic Finance and Muslim News)
Shari'ah, Law, Islamic Finance and Muslim News
Daily Archives: May 15, 2015
May 15, 2015
DR. ZULKIFLI HASAN
SELAMAT HARI GURU 2015
SELAMAT HARI GURU
Dr. Zulkifli Hasan

Yang Dipertua ABIM Negeri Sembilan
Pendahuluan
Sebuah negara yang disegani di dunia memiliki satu ketamadunan yang mempunyai masyarakat yang berdisiplin, berhemah tinggi berilmu, beriman, bertaqwa serta berakhlak mulia. Ketamadunan pula bertitik tolak daripada ketinggian intelektual dan pembudayaan ilmu. Kesemuanya ini pasti datangnya daripada didikan guru. Pada tahun ini, hari guru bertemakan “MEMBINA ILMU MENYEMPURNAKAN AKHLAK”. Ianya adalah bertepatan dengan hasrat murni pendidikan iaitu pembinaan kualiti akhlak terunggul atau “towering personality” bagi memastikan kejayaan pembentukan warga yang seimbang dari setiap aspek jasmani, emosi, rohani dan intelektual. Kes-kes serius melibatkan pelajar seperti buli, pembunuhan dan jenayah seksual yang dilaporkan akhbar menambahkan lagi kebimbangan terhadap kualiti dan keperibadian manusia yang ingin dihasilkan menerusi sistem pendidikan sedia ada.
Demi mencapai pembentukan akhlak terunggul, ianya memerlukan kegemilangan ilmu dan pendidikan bagi menjadi pemangkin kemakmuran dan kemajuan. Sejarah telah membuktikan bahawa kegemilangan sesebuah negara bergantung kepada kecemerlangan rakyatnya dan orang yang berperanan besar mewujudkan kegemilangan tersebut, ialah guru. Manusia hebat dalam sejarah kesemuanya dipengaruhi oleh guru-guru mereka. Dalam erti kata lain tidak akan adanya seorang pemenang anugerah Nobel, doktor, jurutera, saintis, professor, menteri, ahli korporat dan sebagainya tanpa adanya didikan awal dari guru.
Mutakhir ini kita sering mendengar rungutan ibubapa dan masyarakat terhadap guru. Aduan mengenai guru mendera pelajar, tidak terlatih, tidak ikhlas mendidik, mengejar sambil lewa dan sebagainya sering dipaparkan di dada akhbar mahupun di kaca televisyen. Kajian juga mendapati bilangan kes saman guru di Mahkamah juga meningkat dari masa ke semasa. Sesetengah pihak seringkali menyalahkan guru apabila dikaitkan dengan gejala keruntuhan dan kerasukan moral dan syahsiah generasi muda ketika ini. Faktor-faktor ini serba sedikit telah melemahkan semangat guru untuk menaburkan bakti secara ikhlas di dalam proses pendidikan dan pembelajaran. Kerap kali guru melahirkan rasa tidak puas hati dan kekecewaan mereka apabila pengorbanan mereka tidak dihargai bahkan disalahanggap oleh ibubapa dan masyarakat. Guru yang telah hilang keikhlasannya tidak akan dapat menumbang bakti dengan cemerlang ke arah pembentukan peribadi dan kualiti akademik generasi muda negara.
Peranan pendidik yang paling utama adalah untuk menyampaikan ilmu pengetahuan agar dapat membina rohani, jasmani, emosi, intelektual dan sosial pelajar yang seimbang. Dalam melaksanakan tanggunjawab ini pendidik yang baik mestilah mempunyai ciri-ciri tertentu seperti yang telah ditunjukkan oleh Rasulullah Sallallahualaihiwasallam. Islam amat menitikberatkan ilmu pengetahuan dan meletakkan darjat yang tinggi kepada orang yang menyebarkan ilmu. Ini telah dirakamkan oleh Allah Subhanahuwataala di dalam surah al-Mujadalah ayat 11 yang bermaksud: “Allah meninggikan darjat orang yang beriman dan di antara kamu, dan orang-orang yang diberi ilmu pengetahuan agama beberapa darjat”. Ayat ini menunjukkan bahawa orang yang berilmu mempunyai darjat yang lebih tinggi di kaca mata Islam lebih-lebih lagi orang yang menyebarkan ilmu pengetahuan seperti pendidik sama ada di peringkat rendah mahu pun di institusi pengajian tinggi.
Sebagai seorang pendidik yang diberkati Allah, mereka mestilah menjaga akauntabilitinya selaras dengan kesucian dan keberkatan profesion ini yang melibatkan proses transformasi ilmu pengetahuan. Secara umumnya, para sarjana Islam telah mengemukakan bahawa pendidik perlu memainkan fungsi seorang guru dan mencapai martabat sebagai pendidik (mudaris), penyampai yang benar (mualim), murabbi (pengasuh dan pendidik dengan kasih sayang, muaddib (pembentuk adab dan akhlak) dan mursyid (pembimbing ke arah kebaikan). Kelima-lima ciri unggul pendidik ini menjadi dasar dan asas kepada penjelmaan akhlak dan keperibadian seorang guru.
Akauntabiliti Sebagai Pendidik
Akauntabiliti sebagai pendidik merupakan perkara yang amat penting untuk dipelihara oleh setiap pendidik. Secara umumnya akauntabiliti pendidik merujuk kepada tanggungjawab seorang pendidik kepada setiap perkara mahu pun hasil kerjanya. Sebagai seorang yang profesional, pendidik perlu memelihara dan melaksanakan tanggunggjawabnya dengan penuh ikhlas dan sebaik mungkin. Ini adalah kerana pendidik merupakan pihak yang bertanggungjawab menghasilkan sumber manusia yang baik dalam pelbagai bidang demi keperluan negara bahkan umat seluruhnya. Secara ringkasnya akauntabiliti akademik ini boleh dibahagikan kepada tiga aspek utama iaitu kepimpinan, profesionalisme dan ketelusan serta kerahsiaan sama ada dalam hal ehwal pengajaran dan pembelajaran.
Kepimpinan
Aspek kepimpinan ini adalah sangat signifikan yang perlu ada pada setiap pendidik. Kepimpinan yang dimaksudkan adalah keupayaan mencorak, mengemudi dan memandu dalam proses pencapaian matlamat kecemerlangan individu pelajar dan juga institusi. Pendidik yang mempunyai ciri kepimpinan yang baik akan dapat mengatur strategi  dan berusaha mempertingkatkan kualiti, berusaha penambahbaikan kecekapan dan kejituan ilmu dan proses penyebaran ilmu pengetahuan. Ciri kepimpinan ini akan diturunkan kepada pelajar-pelajar menerusi pembelajaran dan pengajaran serta aktiviti-aktiviti yang dilaksanakan. Kepimpinan melalui teladan merupakan teknik paling berkesan bagi melahirkan kepimpinan yang lebih baik pada masa depan.
Profesionalisme dan Pembudayaan Kualiti
Profesionalisme juga merangkumi semua aspek pengajaran dan pembelajaran. Profesionalisme dalam konteks pendidik merujuk kepada keupayaan dan kecekapan melaksanakan sesuatu tanggungjawab berdasarkan kepada panduan ilmu dan latihan, serta kepakaran. Di dalam melaksanakan sesuatu perkara seorang pendidik yang profesional adalah terikat dengan etika profesion yang merangkumi etika dalam keilmuan, etika sikap dan etika kemahiran. Sebagai contoh seorang pendidik perlu menyerlahkan elemen-elemen penjagaan tingkahlaku seperti, cara berpakaian, berkomunikasi, tidak mengadakan hubungan dengan pelajar, mematuhi masa, menghormati rakan sejawat, mengelak plagiarisme, kerja berpasukan dan menjaga kerahsiaan. Para pendidik juga menjaga amanah ilmu bukan sahaja bertindak untuk memperkayakan ilmu dalam diri sebaliknya sentiasa menyalurkan idea-idea dan ilmu yang ada pada mereka baik kepada pelajar mereka di samping mempunyai integriti yang tinggi. Profesionalisme juga menitikberatkan aspek ketelusan dan kerahsiaan. Pendidik mesti sanggup menerima teguran-teguran dan ini akan dapat meningkatkan lagi proses pengajaran dan pembelajaran. Dari aspek kerahsiaan, pendidik perlu menjaga hal kerahsiaan ini umpamanya soal penyediaan soalan peperiksaan dan juga maruah pelajar yang mempunyai masalah peribadi.Adalah menjadi kewajipan seorang pendidik untuk memastikan setiap hasil kerja mereka sesuatu yang berkualiti. Oleh itu pendidik perlu mempergiatkan aktiviti ilmiah dalam perkongsian ilmu, perluasan ilmu dan rangkaian tokoh-tokoh keilmuan, diinstitusi tempatan dan luar negara.
Ciri-Ciri Pendidik Unggul
Secara umumnya para ilmuan Islam telah menggariskan beberapa ciri pendidik unggul. Adalah menjadi kewajipan kepada semua pendidik untuk berusaha memenuhi kesemua ciri ini dan seterusnya mendapat keberkatan dari Allah Subhanahuwataala pada setiap perkara yang dilakukan. Ciri-ciri ini dapat disimpulkan seperti berikut:-
Mudaris
Mudaris berasal dari perkataan arab yang bermaksud mengajar ataupun pengajaran. Pendidik hendaklah bertanggunjawab menyampaikan ilmu yang ada padanya kepada pelajarnya yang boeh membina pemikiran, rohani, jasmani,emosi dan juga sosial. Apa yang diketahuinya hendaklah disampaikan kerana kerja pengajaran adalah sebahagian daripada amal soleh. Manakala enggan menyampaikannya adalah merupakan satu kesalahan.
Mualim
Pendidik sebagai mualim boleh didefinasikan sebagai mengajar atau menyampaikan limu kepada orang lain dan mengamalkan apa yang disampaikan di samping berusaha menambah ilmu pengetahuan. Mualim mempunyai rasa belas kasihan kepada pelajar dan menganggap mereka seperti anak sendiri. Mualim mengajar kerana Allah Subhanahuwataala dan bukannya kerana ganjaran dan tidak mengharapkan balasan daripada pelajar.
Murabbi
Murabbi bermaksud memperbaiki, memimpin dan mentadbir. Pendidik sentiasa menyayangi pelajar dan menasihati dan membimbing dalam pembentukan syahsiyah mereka. Pendidik juga adalah kaunselor dan penyebar nilai budaya yang elok dan menjadi contoh kepada pelajar.
Muaddib
Muaddib bermaksud mendidik ke arah memperelokkan lagi akhlak pelajar. Pendidik yang muaddib merupakan individu yang bertanggungjawab dan melaksanakan pendidikan peradaban dalam pengertian yang luas dan mendalam terhadap peribadi dan kehidupan pelajar. Muaddib seorang yang memberi ilmu dan mendidik mereka dalam akhlak dan adab yang baik. Pendidik juga mendidik pelajar agar tidak merendahkan ilmu pelajaran lain selain dari yang diajar olehnya. Pendidik mendidik pelajar melalui akhlak yang baik daripada hanya penyampaian secara teori sahaja.
Mursyid
Pendidik yang mursyid bermaksud sebagai penuntun jalan hidup yang benar dan betul dengan nilai dan sikap yang benar dan berperanan sebagai hamba Allah Subhanahuwataala dan khalifahNya dimuka bumi. Mursyid menunjukkan kepada jalan yang benar dari sudut ilmu kesufian dan memberikan petunjuk kepada jalan yang lurus. Pendidik mempunyai tingkah laku baik dan terpuji, bersih dari akhlah tercela, tidak taasub atau fanatik, zuhud pada amalan dan perbuatan dan mempunyai tokoh kepimpinan. Syarat untuk menajdi pendidik yang mursyid ialah beliau mestilah alim dari segenap perkara atau disiplin ilmu, menyimpan atau menutup keaiban pelajar-pelajarnya dan pengajaran terkesan di dalam hati pelajar.
Kesemua ciri-ciri seorang pendidik unggul seperti di atas perlulah diamalkan secara berterusan dan dengan penuh iltizam. Pendidik perlu ada sifat mendidik pelajar kerana Allah Subhanahuwataala, berperibadi mulia, menjaga kehebatan dan kehormatan diri, memiliki ilmu dan kaedah pengajaran dan bersifat kasih sayang. Bukan itu sahaja ciri-ciri ini perlu diamalkan dan diserlahkan dari semua aspek termasuk kepimpinan, profesionalisme, tingkahlaku, pembudayaan kualiti dan khidmat masyarakat.
Langkah Memelihara Akauntabiliti Pendidik
Mendidik Kerana Mencari Keredhaan Allah Subhanahuwataala
Seorang pendidik perlu memastikan niatnya untuk bersifat ikhlas terhadap Allah Subhanahuwataala dalam segala amal pendidik yang dilakukannya. Allah telah merakamkan dalam al-Quran surah al-Bayyinah ayat 5 yang bermaksud ”Dan tiadalah mereka itu diperintahkan, melainkan supaya mereka menyembah Allah dalam keadaan mengikhlaskan agama kepadanya”. Ini dikuatkan lagi dengan sabda Rasulullah Sallallahualaihiwasallam yang bermaksud: ” Sesungguhnya Allah tidak akan menerima suatu amalan melainkan apa yang ikhlas kepadaNya dan yang ditujukan hanya untukNya. (Riwayat Abdu Daud dan an-Nasai). Pendidik hendaklah menunjukkan setiap pekerjaan yang dilaksanakan itu hanya semata-mata kerana Allah kerana hanya dengan keikhlasan beliau akan mendapat keredhaan dan keberkatan bahkan akan dikasihi dan dihormati oleh pelajar mahupun masyarakat.
Peribadi Mulia
Pendidik bukan sahaja menjadi ”role model” atau pun ikutan kepada pelajar menerusi sifat spiritual seperti ikhlas, jujur, sabar, kasih sayang, warak dan takwa, bahkan menerusi sifat-sifat fizikal atau lahiriah seperti tutur kata, tingkah laku, kebersihan diri, pakaian, tempat tinggal dan lain-lain. Justeru itu, bagi mencapai keberkesanan proses pembelajaran dan pengajaran serta pembentukan peribadi mulia, Islam mengutamakan tutur kata, tingkah laku yang baik dan nasihat berguna serta menarik. Hal ini dapat dilihat jika kita merujuk dakwah yang dijalankan oleh Nabi Musa dan Nabi Harun, ketika mereka menyampaikan seruan agama kepada Firaun yang amat zalim seperti yang difirmankan oleh Allah Subhanahuwataala dalam al-Quran surah thaha ayat 43 yang bermaksud:-” Pergilah engkau berdua kepada Firaun, sesungguhnya dia derhaka. Katakanlah kepadanya perkataan yang lemah lembut, mudah-mudahan ia akan dapat pengajaran atau takut kepada tuhan”.
Menjaga Kehebatan dan Kehormatan diri
Sudah menjadi tanggapan masyarakat mahupun pelajar bahawa seorang pendidik adalah seorang yang mempunyai kehormatan diri dan kehebatan ilmu pengetahuan. Oleh itu, sudah semestinya pendidik untuk beramal dan berpegang teguh dengan ilmu yang dimilikinya. Setiap amalan mestilah dilakukan dengan istiqamah dan seterusnya menjadikan diri untuk lebih bertakwa kepada Allah Subhanahuwataala. Pendidik tidak sepatutnya melakukan perkara yang berlawanan dengan ilmu yang dimiliki kerana ini akan menjatuhkan kehormatan diri dan mengurangkan rasa hormat pelajar kepadanya. Hal ini telah dirakamkan oleh Allah Subhahanahu Wataala di dalam surah al-Maidah ayat 44 yang bermaksud:-” Adakah patut kamu menyuruh manusia membuat kebajikan dan kamu lupakan diri kamu sendiri sedangkan kamu membaca kitab Allah, tidakkah kamu berakal”.
Memiliki ilmu dan kaedah pengajaran
Pendidik sememangnya perlu memiliki ilmu yang mantap dan mendalam dalam bidang yang diceburi. Pelajar akan lebih yakin dan mudah menerima ilmu yang disampaikan sekiranya pendidik benar-benar menguasai ilmu tersebut. Selain itu, pendidik juga perlu kreatif dan inovatif dalam menggunakan kaedah atau teknik pengajaran berkesan. Dalam dunia moden masa kini, pendidik perlu arif dalam penggunaan teknologi dan dalam masa yang sama sentiasa mempelbagaikan teknik pengajaran agar lebih berkesan dan menarik minat pelajar.
Bersifat kasih sayang
Pelajar merupakan golongan yang masih muda dan perlukan perhatian oleh pendidik mereka. Oleh itu pendidik mesti mempunyai sifat kasih kepada pelajar dan menganggap mereka seperti anak sendiri. Dengan sifat ini, pelajar akan lebih mudah mendekati pendidik dan dapat meluahkan masalah mereka. Sifat ini juga akan dapat menerbitkan suasana mesra di antara pelajar dan pendidik dan seterusnya akan memudahkan lagi proses pentarbiyahan dan pembentukan peribadi mulia.
Penutup
Secara umumnya, seorang pendidik harus mencapai martabat seorang pendidik iaitu murabbi, mudaris, mualim, muaddib dan mursyid. Kedudukan seorang pendidik yang mursyid menjadikan setiap ilmu pengetahuan yang disampaikan akan menjadi lebih berkesan dan mudah diterima oleh para pelajar. Terdapat beberapa ciri utama seorang pendidik yang membolehkan mereka dapat membimbing pelajar dengan baik dan berkesan. Ini termasuk mendidik kerana Allah, berperibadi mulia, menjaga kehebatan dan kehormatan diri, memiliki ilmu dan kaedah pengajaran dan bersifat kasih sayang.
Akauntabiliti sebagai seorang pendidik merupakan perkara yang amat penting untuk dipelihara oleh setiap pendidik dan ini meliputi dari aspek kepimpinan, profesionalisme dan ketelusan serta kerahsiaan dalam pengajaran dan pembelajaran. Sesungguhnya sebagai seorang pendidik, beliau mestilah berusaha untuk memenuhi ciri-ciri seorang pendidik yang mursyid di mana mampu untuk membimbing pelajar bukan sahaja untuk mendalami ilmu pengetahuan yang disampaikan malahan dapat memberi panduan kepada mereka untuk menjadi insan yang berguna dan berjaya. Akauntabiliti sebagai seorang pendidik mesti dipelihara demi menjamin keutuhan institusi keilmuan yang sememangnya dipandang tinggi oleh Islam.
Rujukan
Al-Ghazali. (2006). Ihya Ulumuddin. Kuala Lumpur: Darul Fajar.

Ahmad Mohd Salleh. (2004). Pendidikan Islam. Selangor: Fajar Bakti.

Abdullah Ishak. (1989). Sejarah Perkembangan Pelajaran dan Pendidikan Islam. Selangor: Ar-Rahmaniah.

Ulwan Abdullah Nasih. (1981). Tarbiyatul Awlad Fi Islam. Cairo: Darul Salam.

Yaakub Isa. (1994). Guru dan Pengajaran yang efektif dalam Ahmad Mohd Salleh. (2004). Pendidikan Islam. Selangor: Fajar Bakti.
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SYARIAH CIVIL PROCEDURE

WEEK 3

CONTENTSCONTENTS

�INTRODUCTION

�SUMMONS

�THE APPOINTMENT OF PEGUAM

SYARIE

�SERVICE

�CONCLUSION

INTRODUCTIONINTRODUCTION

� Summons is one of the modes of

commencing an action in the shariah court.

� It refers to proceeding in which a claim is

made by the plaintiff for damages and etc

� Show cause letter prepared by the plaintiff

given to the defendant asking him to appear

before the court to answer any claim against

him.

SUMMONS SUMMONS

PART IVPART IV--SS 23SS 23--2727

� Section 23- Every action shall be commenced
by summons in the form provided.

� The statement of claim shall be endorsed at
the back of the summons and comply with the
requirements of section 52- (i) signed (ii)
concise statement (iii) sufficient particulars
(iv) relief claimed.

� If impracticable to endorse the whole of the
SOC-Separate sheet of paper.

Section 24 Section 24

�Every summons against a single

defendant shall be presented for filing

in triplicate and an additional copy

shall be presented for every additional

defendant.

SECTION 25  SECTION 25

� The registrar shall:_

� (i) examine the summons and if it appears to
be in proper form.

� (ii) paid appropriate fees

� (iii) assign serial no.,seal, sign and issue it
and deliver to the bailiff for service.

� He may reject or direct to amend the
summons.

SECTION 26SECTION 26

�A summons shall not be served

more than 12 months after issue

unless by leave of the court.

�Requirements:-

�Reasonable efforts and any other
reasonable reason.

SECTION 27SECTION 27

�If a summons is lost after issue, the

Court may order a new summons to

be issued bearing the date of and

having the like effect as the original

summons.

PEGUAM SYARIE PEGUAM SYARIE

PART VPART V--SS 28SS 28--33 33

� Who is a Peguam Syarie?

� Members of the Bar and non members of the
Bar. Peguam syarie refers to those who practice
in Syariah courts in Malaysia and is governed by
the respective states peguam syarie rules.

� Peguam syarie is a person who is given the right
by rules enacted by any state to appear and
represent his client in every shariah court case
within the confines of such state or federal
territories, respectively.

SECTION 28 SECTION 28

�Peguam syarie retained to represent a

party in any proceedings shall file a

memorandum of his retainer in the form

provided before taking any step and

declare it before the court.

SECTION 29SECTION 29

�Where more parties than one are
represented by the same peguam
syarie in any proceedings, service
of a single copy of any document
on the peguam syarie shall be
sufficient service on all such
parties.

SECTION 30SECTION 30

�If a party desires to change his

peguam syarie he shall file a

memorandum in the form provided

and serve all other parties and shall

comply with section 28.

SECTION 31 SECTION 31

�If a party desires to discharge his

peguam syarie he shall file a

memorandum in the form provided

and serve all other parties.

SECTION 32 SECTION 32

� If a peguam syarie representing any
party applies to be discharged the

court may discharge him.

�Notice of the application shall
ordinarily be given to the party

furnish a new address for service.

SECTION 33SECTION 33

�The death of either party or his

peguam syarie determines the

retainer.

SERVICESERVICE

PART VIPART VI--SS 34SS 34--4646

� There are four types of services:-

� (i) Personal Service;

� (ii) Service on person under disability;

� (iii) substituted service

� (iv) service out of jurisdiction

� Section 34- Every plaintiff and person filing
any document in any proceedings shall give
an address for service either plaintiff or his
lawyer’s address.

Personal servicePersonal service--ss ss 3535--4141

� Section 35-Service of summons and SOC shall
be made personally because the summons and
statement of claim is served to initiate the case.

� Inspection

� Seal of the court

� Signature of its proper officer

� Service shall be effected by an officer of the
court.

� Other person may serve the summons and SOC
with permission of the court.

Section 36Section 36

� If the person to be served refuses to accept

the document or copy, it may be left near

him and his attention directed to it.

Section 37Section 37

� A document may be served on the peguam

syarie of any party who has filed a

memorandum of retainer in accordance with

section 28.

Section 38 Section 38

� Any document delivered at the address for

service of any person shall be deemed to be

served on the said person.

� Provided that in the case of address not

within the local authority limits of the place

where the court is situated, any document

may be served by despatching the same by

prepaid registered post addressed.

Section 39Section 39

� A summons commencing an action shall be

served not less than 7 clear days before the

return date, unless the court shall otherwise

order. Return dates may be altered by the

Registrar if necessary.

Section 40Section 40

� Notice of all other proceedings shall be clear

days’ notice subject to the provisions of any

written law to the contrary and the court

otherwise order.

Section 41Section 41

� Service may be effected at any place on any day

and at any time of the day or night.

� Service after 4.00pm shall ordinarily be deemed

to have been effected on the following day.

� After noon on the day of proceeding or at any

time on, the weekly holiday or on any public

holiday shall be deemed to have been effected on

the after such holiday.

Service Person Under Disability Service Person Under Disability

Section 42Section 42

� Service shall be made on his guardian ad litem.

� If there is no GAL, on the person with whom he
resides or under whose care he is.

� The court may order that service upon PUD
shall be deemed to be good service.

� A person in prison shall be served on the officer
in charge of the prison-transmitted to him.

� Member of the armed forces- the commanding
officer or adjutant of his unit- transmitted to
him.

Substituted ServiceSubstituted Service--Section 43Section 43

� The court is satisfied that a party who has not given any

address for service at the date of the summons or other

documents to be served resident within selangor:-

� (i) If he is keeping out of the way for the purpose of

avoiding service

� (ii) sufficient reason  cannot be served in ordinary way.

� The court may order the summons/ documents to be

served: - (i) by affixing a copy in some conspicuous

place in the court house;

� (ii) in part of the building last resided

� (iii) advertisement in local newspapers

ContCont……..

� Substituted service shall be as effectual as
personal service.

� The court shall fix the time of appearance in
court .

� Exception: No order for SS shall be made in
respect of:-

� (i) a subpoena

� (ii) any document initiating proceedings for
the arrest or committal of any person.

Section 44Section 44

� Proof of service.

� (i) By affidavit of the person who effected service

� (ii) where the service was personal and the person was

not personally known to him by that affidavit and the

affidavit of the person who identified the person to be

served.

� The person served shall signed an acknowledgement

of service but refusal or inability to sign shall not

affect the validity of the service.

Section 45Section 45
� Any order for service or for SS may be

varied by the Court.

Section 46Section 46
� A court may issue a warrant for his arrest:-

� (i) seems to believe that he has absconded or

will not obey the summons:

� (ii) he fails to appear and the summons is

proved to have been duly served in time  and

no reasonable excuse is offered for such

failure.

CONCLUSION CONCLUSION

�Students should understand the
proceedings for summons, service

and and procedures involving

peguam syarie.

�These procedures must be complied

with in the proceedings.

Thank YouThank You

Zulkifli Bin Hasan

Lecturer Faculty of Syariah & Law

E-mail: zul361977@yahoo.com.

Tel. No: 03-42892237

H/Phone No: 012-9236107