MODERNISATION STRATEGIES ON MODERNISATION STRATEGIES ON

COLLECTION AND DISTRIBUTION COLLECTION AND DISTRIBUTION

OF ZAKATOF ZAKAT

ChallengesChallenges

�� 1. Low level of public confidence1. Low level of public confidence

�� 2. the need to introduce more 2. the need to introduce more

effective channel of paymenteffective channel of payment

�� 3. Lack of aggressive efforts in all 3. Lack of aggressive efforts in all

areas of improvement.areas of improvement.

�� 4. low level of understanding and 4. low level of understanding and

awarenessawareness

StrategiesStrategies

�� 1. 1. zakatzakat authorities must undertake authorities must undertake

administrative changes including administrative changes including

organizational change and organizational change and

restructuring for better and effective restructuring for better and effective

administration.administration.

�� Streamlining functional activities Streamlining functional activities

work processes and procedures work processes and procedures

�� Modern managementModern management

2. Technology2. Technology

�� Fast development of technology Fast development of technology

changes that are taking place.changes that are taking place.

�� Must upgrade efficiency by Must upgrade efficiency by utilisingutilising

modern technology or computer modern technology or computer

related devices.related devices.

3. 3. Strong legal frameworkStrong legal framework

�� The need to integrate both man The need to integrate both man

made law and made law and shariahshariah..

�� This includes coverage of This includes coverage of zakatzakat, ,

procedures, substantive laws, procedures, substantive laws,

penalties and etc.penalties and etc.

�� Must improve the enforcement Must improve the enforcement

mechanism.mechanism.

4. 4. MS ISO certificationMS ISO certification

�� In the context of Malaysia, it is In the context of Malaysia, it is

important to have ms important to have ms isoiso certification certification

in order to gain the public confidence in order to gain the public confidence

on the on the zakatzakat administration.administration.

�� This MS ISO will guarantee the This MS ISO will guarantee the

standard of services because there standard of services because there

will auditing by the authorities as will auditing by the authorities as

well as internal auditors.well as internal auditors.

55. Education System. Education System

�� FormalFormal-- schools and universitiesschools and universities

�� Informal educationInformal education-- mass media.mass media.

�� These roles should be played not These roles should be played not

only by Islamic religious dept but by only by Islamic religious dept but by

ministry of education and ministry of education and

information and etc. information and etc.

66. Reorganization of . Reorganization of zakatzakat

administrationadministration

�� Better if it is a corporate entity.Better if it is a corporate entity.

�� National entity to supervise and National entity to supervise and

monitor the performance.monitor the performance.

�� Combination with Combination with syariahsyariah

background personnel and economic background personnel and economic

and management related skills and management related skills

personnel.personnel.

7. Continuous Research and 7. Continuous Research and

DevelopmentDevelopment

�� There must be continuous R&D to There must be continuous R&D to

develop the economic of the develop the economic of the

ummahummah::--

�� Improving the method of collection.Improving the method of collection.

�� Develop Develop fiqhfiqh on on zakatzakat

�� Distribution of Distribution of zakatzakat fund effectively.fund effectively.

�� Study on efficient Study on efficient zakatzakat law.law.

CollectionCollection

�� To have some form of structure of To have some form of structure of
collecting collecting zakatzakat in place as part of in place as part of
the legislative and religious the legislative and religious
framework of framework of zakatzakat administration.administration.

�� Tax incentives.Tax incentives.

�� Greater emphasize to Greater emphasize to zakatzakat on on
property.property.

�� Broadening the economic and Broadening the economic and
revenue base of revenue base of zakatzakat..

DistributionDistribution

�� To establish an entity which is solely To establish an entity which is solely

responsible for the collection and responsible for the collection and

distribution of distribution of zakatzakat or separate or separate

function of collection or distribution.function of collection or distribution.

�� To vary the utilization of To vary the utilization of zakatzakat more more

effectively.effectively.

�� Sharing of experiences amongst the Sharing of experiences amongst the

zakatzakat institution world wideinstitution world wide

II--ZakatZakat SystemSystem

�� 1. Database of 1. Database of asnafasnaf..

�� Provides information of all Provides information of all muslimsmuslims

�� InformationInformation-- eligible or not eligible eligible or not eligible

recipients. recipients.

�� 2. Database on death or birth 2. Database on death or birth

information.information.

�� Automatic update the informationAutomatic update the information

II-- ZakatZakat SystemSystem

�� 3. 3. Speedy processSpeedy process--

�� Based on the databaseBased on the database--more more
effective distribution.effective distribution.

�� Disbursement can be done through Disbursement can be done through
internet by depositing into the internet by depositing into the
recipients account.recipients account.

�� 4. 4. Voucher systemVoucher system..

�� This voucher will be posted to This voucher will be posted to asnafasnaf
directly even without application. directly even without application.

II-- ZakatZakat SystemSystem

�� 5. 5. Database of shops and retail Database of shops and retail
sellers.sellers.

�� Identifying retails sellers where the Identifying retails sellers where the
recipients can redeem their recipients can redeem their
vouchers.vouchers.

�� 6. 6. Cooperation with other bodies Cooperation with other bodies
including related ministries.including related ministries.

�� Information on Information on asnafasnaf could be shared could be shared
by these bodies.by these bodies.

�� These bodies will provide various aid These bodies will provide various aid
such as education, medical and etc.such as education, medical and etc.

II-- ZakatZakat SystemSystem

�� 7. 7. Direct DebitDirect Debit..

�� Provide services to automatically Provide services to automatically

debit the account to pay debit the account to pay zakatzakat..

�� The payers do not have to do The payers do not have to do

anything, the calculation will be done anything, the calculation will be done

by the system and reminder will be by the system and reminder will be

given.given.

II-- ZakatZakat SystemSystem

�� 8. 8. ZakatZakat Auto Inclusion System.Auto Inclusion System.

�� Tax exemption is calculated Tax exemption is calculated

automatically when the payers pay automatically when the payers pay

zakatzakat..

�� The payers do not have to prove to The payers do not have to prove to

the inland revenue that they have the inland revenue that they have

paid paid zakatzakat..

II--ZakatZakat SystemSystem

�� 9. 9. Daily, Monthly and annual reportsDaily, Monthly and annual reports..

�� This reports can be accessed by This reports can be accessed by

public at any time.public at any time.

�� 10. Audit, finance and reporting 10. Audit, finance and reporting

systems.systems.

�� Can be done by accessing the Can be done by accessing the

system.system.

II-- ZakatZakat SystemSystem

�� 11. Computerized 11. Computerized zakatzakat assesmentassesment..

�� To assist the payers calculate To assist the payers calculate zakatzakat..

�� EE--calculators.calculators.

�� 12. Internet and Phone Banking.12. Internet and Phone Banking.

�� ZakatZakat could be paid through internet could be paid through internet

or phone. or phone.

�� SMS to pay SMS to pay zakatzakat..

II-- ZakatZakat SystemSystem

�� 13. 13. Special counters or outlets at shopping Special counters or outlets at shopping

complex and other placescomplex and other places..

�� Many channels to pay.Many channels to pay.

�� Payment could be made at the outlets.Payment could be made at the outlets.

�� 14. Newsletter of 14. Newsletter of zakatzakat..

�� Payers may subscribe newsletter of Payers may subscribe newsletter of zakatzakat..

�� Online information will be sent to the Online information will be sent to the

payers email, weekly, monthly and etc.payers email, weekly, monthly and etc.

�� There will be reminder to pay There will be reminder to pay zakatzakat..

II-- ZakatZakat SystemSystem

�� 15. Strategic Partner with banks, 15. Strategic Partner with banks,

LUTH, KWSP and LUTH, KWSP and ectect..

�� Online system with all of these Online system with all of these

bodiesbodies-- assessment, payment.assessment, payment.

�� EgEg banks branches could be used as banks branches could be used as

an agent to educate the public on an agent to educate the public on

zakatzakat. .

�� To share certain information.  To share certain information.


THE
  ISLAMIC
  FINANCIAL
  SERVICES
  ACT
  2013

Zulkifli Hasan (Ph.D)
Faculty of Syariah and Law

University Sains Islam Malaysia

1

Contents

•  Introduction
•  About the IFSA
•  Significant Features of

the IFSA

•  Implications, Issues and
Challenges

•  Conclusion

2

•  Considerable
  growth
  with
  16
  full-‐fledged
  IB,
  12
  Takaful

operators
  and
  six
  DFI.

•  Significant
  progress
  with
  market
  share
  increased
  up
  to

25%
  in
  2014
  (40%
  in
  2020)
  of
  the
  total
  banking
  system.

•  Total
  Islamic
  financing
  conMnued
  to
  grow
  16.6%
  and

represented
  26.9%
  of
  total
  loans/financing
  in
  the

banking
  system.

•  799
  Shari’ah-‐compliant
  securiMes
  were
  listed
  on
  Bursa

Malaysia,
  represenMng
  87.7%
  of
  the
  total
  listed

securiMes,
  with
  a
  market
  capitalizaMon
  of
  RM995.7

billion
  or
  63.7%
  of
  the
  total
  market
  capitalizaMon.

   3

An Overview of IF in Malaysia

•  The
  exis,ng
  framework
  of
  Islamic
  finance
  in
  various

jurisdic,ons
  demonstrates
  diverse
  prac,ces
  and
  dis,nct

models.
  Malaysia
  as
  the
  proponent
  of
  regulatory-‐based

approach
  has
  ins,tuted
  several
  ini,a,ves
  to
  promote

financial
  stability
  and
  this
  include
  the
  new
  law,
  the

Islamic
  Financial
  Services
  Act
  2013.

•  Features
  of
  this
  Act/
  New
  dimensions/
  Legal

consequences
  in
  the
  aspects
  of
  demarca,on
  between

Islamic
  banking
  and
  its
  conven,onal
  counterpart,

element
  of
  consumerism,
  interest
  of
  depositors
  and
  IAH,

corporate
  governance,
  Shari’ah
  compliance,
  liabili,es,

judicial
  oversight
  and
  products
  and
  services

4

Introduction

ABOUT THE IFSA

5

•  The
  Islamic
  Banking
  Act
  1983,
  the
  Takaful
  Act
  1984,
  the

BAFIA
  1989
  and
  the
  SecuriMes
  Commission
  Act
  1993.

•  The
  Central
  Bank
  of
  Malaysia
  Act
  2009

•  Malaysian
  Financial
  Sector
  Blueprint
  2011-‐2020:
  to

strengthen
  the
  relevant
  regulatory
  and
  legal
  framework.

•  The
  IFSA
  :
  Consolidates
  the
  IBA
  and
  the
  TA
  and
  repeals

both
  Acts.
  Royal
  Assent
  on
  18
  March
  2013,
  gazeYed
  on

22
  March
  2013
  and
  came
  into
  effect
  in
  June
  2013.

•  Guidelines
  for
  IFIs:

  Eg.
  Guidelines
  on
  the
  Disclosure
  of

Reports
  and
  Financial
  Statements
  of
  Islamic
  Banks
  and

the
  Shari’ah
  Governance
  Framework.

6

Background

Acts
  Repealed
  by
  the
  IFSA

7

IFSA

2013

Takaful
  Act
  1984

Islamic
  Banking

Act
  1983

(IBA
  1983)

•  “The
  regulatory
  and
  supervisory
  framework
  for
  the
  financial

sector
  was
  strengthened
  with
  the
  coming
  into
  force
  of
  the
  FSA

and
  IFSA
  on
  30
  June
  2013.
  This
  ensures
  that
  laws
  governing
  the

conduct
  and
  supervision
  of
  financial
  insMtuMons
  in
  Malaysia

conMnue
  to
  be
  relevant
  and
  effecMve
  in
  maintaining
  financial

stability,
  supporMng
  a
  sustainable,
  balanced
  and
  inclusive

growth
  of
  the
  economy,
  as
  well
  as
  providing
  adequate

protecMon
  for
  consumers.
  The
  laws
  further
  strengthen
  BNM’s

supervisory
  and
  regulatory
  powers,
  including
  comprehensive

powers
  to
  carry
  out
  consolidated
  supervision
  of
  financial

groups
  and
  to
  extend
  the
  regulatory
  perimeter
  to
  systemically

important
  non-‐bank
  enMMes
  that
  undertake
  financial

intermediaMon
  acMviMes”.

8

IMF Country Report No 14/80

Summary of the IFSA

9

18
  Parts
  in
  the
  IFSA
  with
  291
  secMons
  and
  16
  Schedules

Part
  I:
  Preliminary

Part
  II:
  Regulatory
  ObjecMves,
  Powers
  and
  FuncMons
  of
  Bank,

Part
  III:
  AuthorizaMon,
  Part
  IV:
  Shariah
  Requirements,

Part
  V:
  Payment
  Systems,
  Part
  VI:
  PrudenMal
  Requirements

Part
  VII:
  Ownership,
  Control
  and
  Transfer
  of
  Business

Part
  VIII:
  Financial
  Groups

Part
  IX:
  Business
  Conduct
  and
  Consumer
  ProtecMon

Part
  X:
  Islamic
  Money
  Market
  and
  Islamic
  Foreign
  Exchange

Market,
  Part
  XI:
  Submission
  of
  document
  or
  informaMon

Part
  XII:
  ExaminaMon,
  Part
  XIII:
  DirecMons
  of
  Compliance

Part
  XIV:
  IntervenMon
  and
  Remedial
  AcMon

Part
  XV:
  Other
  Powers
  of
  Bank,
  Part
  XVI:
  Enforcement
  and

PenalMes,
  Part
  XVII:
  General
  Provisions,
  Part
  XVIII:
  Repeal,
  savings

and
  transiMonal

•  The
  IFSA
  governs
  all
  IFIs
  including
  Islamic
  banks,
  takaful

operators,
  internaMonal
  Islamic
  banks,
  internaMonal

takaful
  operators
  as
  well
  as
  operators
  of
  payment

systems
  which
  the
  transfer
  of
  funds
  between
  Islamic

bank
  accounts
  or
  which
  enables
  payments
  to
  be
  made

by
  means
  of
  Islamic
  payment
  instruments,
  issuers
  of

Islamic
  payment
  instruments,
  takaful
  brokers
  and

Islamic
  financial
  advisor.

•  The
  IFSA
  nevertheless
  excludes
  development
  financial

insMtuMons
  and
  cooperaMve
  socieMes.

10

 Institutions under the IFSA

11

Enhancement

Entrenches

role
  of
  BNM

as
  Shariah

regulator

Embeds

Shariah

principles
  &

SAC
  rulings

Enforces

statutory

duty
  to

comply
  with

standards,

ensure

Shariah

compliance,

manage

Shariah

non-‐

compliance

risks

Vigorous

Shariah

compliance

requiremen

ts

Severe

PenalOes

RegulaOon
  on
  insOtuOons
  and
  financial
  acOviOes

Significant Features of the IFSA

12

•  Datuk
  Nor
  Shamsiah
  Mohd
  Yunus,
  Deputy
  Governor:

•  The
  emphasis
  on
  governance
  framework
  for
  an
  end-‐to-‐end

Shariah
  compliance.

•
  To
  provide
  a
  comprehensive
  legal
  framework
  that
  is
  fully

consistent
  with
  Shariah
  in
  all
  aspects
  of
  regula;on
  and

supervision,
  from
  licensing
  to
  the
  winding
  up.

•  To
  provide
  statutory
  founda;on
  for
  a
  Shariah
  contracts-‐
based
  regulatory
  framework
  that
  would
  facilitate
  the
  next

level
  of
  Islamic
  banking
  business,
  transcending
  beyond

financial
  intermedia;on
  to
  include
  real
  economic
  sector

par;cipa;on,
  complete
  with
  the
  consequent
  regulatory

checks
  and
  balance.

•  To
  realise
  further
  the
  value
  proposi;on
  of
  Islamic
  finance.

13

Objective

ObjecMves

•  S
  6:
  to
  promote
  financial
  stability
  and
  compliance
  with

Shariah.

•
  authorize
  the
  BNM
  as
  the
  authoritaMve
  body
  to
  ensure

stability
  parMcularly
  to
  foster
  the
  safety
  and
  soundness
  of

Islamic
  financial
  insMtuMons,
  orderly
  funcMoning
  of
  the

Islamic
  money
  market
  and
  the
  Islamic
  foreign
  exchange

market
  as
  well
  as
  efficient
  and
  reliable
  payment
  Islamic

payment
  instruments
  and
  fair,
  responsible
  and
  professional

business
  conduct
  of
  Islamic
  financial
  insMtuMons.

•  The
  IFIs
  are
  also
  required
  to
  strive
  to
  protect
  the
  rights
  and

interests
  of
  consumers
  of
  Islamic
  financial
  services
  and

products.

14

Scope
  of
  IFSA

•  Focus
  of
  regulaMon
  now
  on
  financial
  acMviMes

and
  not
  just
  financial
  insMtuMons

•  Specific
  provisions
  on
  consumer
  protecMon

and
  shareholding.

•  Corporate
  IntervenMon

•  Consumer
  Shareholding

•  Governance
  ProtecMon

•  New
  and
  enhanced
  powers

16

BNM
  as
  Financial
  and
  Shari’ah
  Regulator

Division
   Provision

Division 1:
Shari’ah
Compliance

S 27: Interpretation

S 28: Duty of institution to ensure compliance with
Shariah

S 29: Power of Bank to specify standards on Shariah
matters

Division 2:
Shari’ah
Governance

S 30: Establishment of Shari’ah committee

S 31: Appointment of Shari’ah committee member

S 32: Duties of Shari’ah committee and its members

S 33: Cessation as member of Shari’ah committee

S 34: Notice of cessation as member of Shari’ah
committee

S 35: Information to be provided to Shari’ah committee

S 36: Qualified privilege and duty of confidentiality

Division 3:
Audit on
Shariah
compliance

S 37: Appointment of person by institution to conduct
audit on Shari’ah compliance

S 38: Appointment of person by Bank to conduct audit on
Shari’ah compliance

17

•  Statutory
  foundaMon
  for
  a
  Shariah
  contracts-‐based

regulatory
  framework
  transcending
  beyond
  financial

intermediaMon.

•  To
  realise
  further
  the
  value
  proposiMon
  of
  Islamic
  finance

•  Eg.
  IFSA
  clearly
  disMnguished
  CASA
  holders
  from
  an
  IAH.

•  Investment
  account
  as
  an
  account
  for
  the
  purposes
  of

investment,
  including
  for
  the
  provision
  of
  finance,
  on

terms
  that
  there
  is
  no
  express
  or
  implied
  obligaMon
  to

repay
  the
  money
  in
  full
  and

–  (a)
  with
  profits-‐sharing,
  or
  both
  the
  profits-‐or-‐losses-‐sharing

features

–  (b)
  with
  or
  without
  any
  return.

Islamic
  v
  ConvenOonal
  Finance

IFIs

•  “IFIs”
  means
  a
  financial
  insMtuMon
  carrying
  on

Islamic
  financial
  business;

•  S
  2
  IFSA:
  Islamic
  banking
  business”
  means
  the

business
  of

•  (a)

  accepOng
  Islamic
  deposits
  on
  current

account,
  deposit
  account,
  savings
  account
  or

other
  similar
  accounts,
  with
  or
  without
  the

business
  of
  paying
  or
  collecOng
  cheques
  drawn

by
  or
  paid
  in
  by
  customers;
  or
  (b)

  accepOng

money
  under
  an
  investment
  account;
  and
  (c)

provision
  of
  finance;

18

(S
  15
  of
  the
  FSA
  2013)

•  Upon
   an
   applicaMon
   to
   the
   Bank
   and
   where
   the
   Bank
   has
   granted
   its
   wriYen

approval–

•  A
   licensed
   bank
   or
   licensed
   investment
   bank
   may
   carry
   on
   Islamic
   banking

business

•  An
  approved
  insurance
  broker
  may
  carry
  on
  takaful
  broking
  business

•  An
  approved
  financial
  adviser
  may
  carry
  on
  Islamic
  financial
  advisory
  business

•  An
   operator
   of
   a
   designated
   payment
   system
   or
   approved
   operator
   of
   a

payment
   system
   may
   facilitate
   parMcipants
   engaged
   in
   Islamic
   financial

business
  to
  transfer,
  clear
  or
  seYle
  funds
  or
  securiMes

•  An
   approved
   issuer
   of
   a
   designated
   payment
   instrument
   may
   issue
   a

designated
  Islamic
  payment
  instrument

•  Subjected
  to
  the
  following
  provisions
  of
  the
  IFSA
  2013
  parMcularly

•  Parts
   IV
   (Shariah
   Requirements),
   VI
   (PrudenMal
   Requirements),
   IX
   (Business

Conduct
   and
   Consumer
   ProtecMon),
   X
   (Islamic
   Money
   Market
   and
   Islamic

Foreign
  Exchange
  Market)
  and
  XIII
  (DirecMons
  of
  Compliance)

•  Any
   standards,
   noMces,
   direcMons,
   condiMons,
   specificaMons
  or
   requirements

specified
  or
  made
  under
  the
  IFSA

©
  ZICOlaw.
  All
  Rights
  Reserved.

19

DefiniOon
  of
  ‘Depositors’

Previously
  under
  the
  Islamic
  Banking
  Act
  1983:

•  means
  a
  person
  who
  has
  an
  account
  at
  an
   Islamic
  bank,
  whether
   the

account
  is
  a
  current
  account,
  a
  savings
  account,
  an
  investment
  account

or
  any
  other
  deposit
  account

Now
  under
  the
  IFSA
  2013:

•  means
   a
   person
   enMtled
   to
   the
   repayment
   of
   an
   Islamic
   deposit,

whether
  the
  Islamic
  deposit
  was
  made
  by
  him
  or
  any
  other
  person

  and
  dis;nguished
  from
  an
  “investment
  account
  holder”,
  as:

•  “investment
  account”
  refers
  to
  an
  account:

–  for
   the
   purposes
   of
   investment,
   including
   for
   the
   provision
   of

finance,

–  on
  terms
  that
  there
  is
  no
  express
  or
  implied
  obligaMon
  to
  repay
  the

money
  in
  full
  and
  —

(a)
  with
  profits-‐sharing,
  or
  both
  the
  profits-‐or-‐losses-‐sharing
  features

(b)
  with
  or
  without
  any
  return

DefiniOon
  of
  ‘Islamic
  Deposit’

Previously
  under
  the
  Islamic
  Banking
  Act
  1983:

•  means
   a
   sum
  of
  money
  or
  monies
  worth
   received
  by
  or

paid
   to
   any
   person,
   under
   which
   the
   receipt
   and

repayment
   shall
   be
   in
   accordance
   with
   the
   terms
   of
   an

agreement
  made
  under
  any
  Syariah
  principle
  on
  any
  basis

including
  custody
  or
  profit
  sharing

Now
  under
  the
  IFSA
  2013:

•  means
   a
   sum
   of
  money
   accepted
   or
   paid
   in
   accordance

with
  Shariah
  —

(a)
  on
  terms
  under
  which
  it
  will
  be
  repaid
  in
  full;
  or

(b)
  whereby
  the
  proceeds
  to
  be
  paid
  shall
  not
  be
  less
  than
  such

sum
  of
  money.

•  May
   include
   precious
   metal
   or
   precious
   stone,
   or
   any
   arMcle
   or
   thing
   as
   may
   be
   prescribed
   by
   the

Minister
   regardless
   of
   whether
   the
   transacMon
   is
   described
   as
   a
   loan,
   a
   financing,
   an
   advance,
   an

investment,
  a
  savings,
  a
  sale
  or
  a
  sale
  and
  repurchase
  or
  by
  whatever
  name
  called!

DefiniOon
  of
  ‘return’

•  in
   relaMon
   to
   the
   definiMons
   of
   “financing

facility”,
   “investment
   account”
   and
   “Islamic

deposit”,
   and
   “Islamic
   securiMes”
   as
   defined
   in

subsecMon
   224(1),
   includes
   any
   form
   of
   rental,

profit,
   dividend
   or
   benefit,
   and
   any
   fee
   or
   gio,

payable
  or
  to
  be
  given.

Hibah
  in
  Islamic
  Deposit

•  Shariah
  Parameter
  on
  Hibah
  BNM;

•  S
  16.1
  The
  hibah
  contract
  may
  be
  arranged
  together
  with

the
  qard
  contract
  whereby
  the
  borrower
  at
  his
  own

discreMon,
  may
  give
  hibah,
  either
  in
  monetary
  or
  non-‐
monetary
  form,
  to
  the
  lender
  provided
  that
  it
  is
  not
  a
  pre-‐
condiMon
  at
  the
  Mme
  of
  entering
  into
  the
  qard
  contract
  and

provided
  that
  such
  pracMce
  does
  not
  become
  a
  customary

pracMce
  (`urf).

•
  S
  16.2
  Pursuant
  to
  paragraph
  16.1,
  the
  pracMce
  of
  giving

hibah
  is
  considered
  customary
  if
  the
  hibah
  is
  given
  to
  a

majority
  of
  the
  borrower’s
  lenders.

•  S
  16.3
  The
  borrower
  in
  the
  qard
  contract
  shall
  not

undertake
  to
  give
  hibah
  to
  the
  lender.

23

Corporate
  Governance

24

•  The
  IFSA
  expects
  greater
  responsibility
  to
  IFIs

•  ResponsibiliMes:
  S
  29:
  every
  insMtuMon,
  its
  director,
  chief

execuMve
  officer,
  senior
  officer
  or
  member
  of
  a
  Shari’ah

commiYee

•  Offence:
  S
  28(6):
  failure
  to
  comply
  with
  the
  standards
  is
  an

offence
  under
  the
  Act.

•  Duty
  of
  Care:
  IFIs
  cannot
  simply
  rely
  on
  their
  professional

advisors
  or
  experts.
  The
  IFIs
  must
  ensure
  that
  they
  have

taken
  reasonable
  measures

•  PotenMal
  exposure
  to
  board
  or
  directors,
  management,

officers
  and
  even
  Shari’ah
  commiYee
  members
  with
  heavy

penalMes
  including
  imprisonment.

  includes:

  (f)
  have
  due
  regard
  to
  any
  decision
  of

the
   Shariah
   commi^ee
   on
   any
   Shariah
   issue

relaMng
   to
   the
  carrying
  on
  of
  business,
  affairs
  or

acMviMes
  of
  the
  insMtuMon.

(3)
   In
  carrying
  out
   its
  funcMons
  or
  duMes
  under
  this

Division—

(a)
  the
  board
  of
  directors
  of
  an
  insMtuMon
  shall
  have

regard
   to
   the
   interests
   of,
   as
   the
   case
   may
   be,

depositors,
  investment
  account
  holders
  and
  takaful

parMcipants
  of
  the

  insMtuMon
  or
  parMcipants

FuncOons
  and
  duOes
  of
  board
  of
  directors
  (SecOon
  65
  of

the
  IFSA
  2013)

Khiudin
  bin
  Mohd
  &
  Anor
  v
  Bursa
  Malaysia
  Securi,es

Bhd
  and
  another
  Applica,on
  [2012]
  MLJU
  445

•  Rohana
  Yusof
  J
  held
  that
  reliance
  to
  advisor
  is
  no

longer
  a
  good
  defense.
  She
  said:
  “A
  CEO
  and

a
  director
  have
  du,es
  to
  exercise
  care
  and

diligence
  in
  the
  exercise
  of
  their
  func,ons
  in
  the

company.
  Relying
  on
  the
  expert
  did
  not
  per
  se

discharge
  directors
  from
  their
  du,es.
  Reasonable

steps
  must
  be
  taken
  which
  requires
  each

individual
  to
  take
  up
  upon
  themselves
  the

responsibili,es
  which
  commensurate
  their
  roles
  in

rela,on
  to
  reading
  and
  understanding
  the

financial
  statement.
  Complexi,es
  and
  volume

cannot
  be
  an
  excuse.”

26

Shariah
  Governance
  Framework

•  2.1
  The
  board
  is
  ulMmately
  ACCOUNTABLE
  &

RESPONSIBLE
  on
  the
  overall
  Shariah

governance
  framework
  &
  Shariah
  compliance

of
  the
  IFI,
  by
  puvng
  in
  place
  the
  appropriate

mechanism
  to
  discharge
  the
  aforemenMoned

responsibiliMes.

•  The
  board
  is
  also
  expected
  to
  perform
  diligent

oversight
  over
  the
  effecMve
  funcMoning
  of
  the

IFI’s
  Shariah
  governance
  framework

27

AddiMonal
  issues
  for
  Boards

•  BOD
  to
  have
  due
  regard
  to
  interest
  of

depositors,
  investment
  account
  holders
  and
  and

policy
  holders

•  Compare
  with
  previous
  duty
  to
  only
  act
  in
  the

best
  interest
  of
  shareholders

•  PotenMal
  conflict
  of
  interest
  between
  majority

shareholder
  and
  depositors
  or
  policy
  Holders.

AddiMonal
  DuMes
  of
  BOD

•  Higher
  and
  wider
  standards
  expected
  of

boards
  of
  companies
  under
  FSA

•  UlMmate
  responsibility
  moved
  to
  Board
  of

Directors

•  Consumerism
  invades
  the
  Board
  of
  Directors:

•  Duty
  to
  act
  in
  best
  interests
  of
  company

•  Duty
  to
  act
  in
  best
  interests
  of
  third
  party

consumer

•  Duty
  to
  prevent
  breaches

Consumerism

30

•  Shall
  have
  due
  regard
  to
  the
  interest
  of
  depositors,
  IAH
  and

takaful
  parMcipants.

•  S
  6
  (b):
  IFIs
  are
  required
  to
  strive
  to
  protect
  the
  rights
  and

interests
  of
  consumers
  of
  Islamic
  financial
  services
  and

products.

•  The
  BOD
  has
  the
  duMes
  to
  act
  in
  the
  best
  interests
  of
  the

IFIs
  and
  to
  act
  in
  the
  best
  interests
  of
  customers.

•  Takaful:
  Establishment
  and
  maintenance
  of
  takaful
  fund,

takaful
  funds
  to
  be
  separate
  from
  shareholders’
  fund,

requirements
  relaMng
  to
  takaful
  funds,
  shareholders’
  fund,

withdrawal
  from
  takaful
  funds
  and
  deficiency
  of
  takaful

funds).

•  In
  general,
  the
  IFSA
  imposes
  two
  statutory
  duOes.

•  Compliance:
  (1)
  aims,
  operaOons,
  business,
  affairs
  and

acOviOes.
  (2)
  Internal
  policies
  and
  procedures.
  (3)
  To

carry
  out
  an
  audit
  on
  Shariah
  compliance.

ResponsibiliOes:
  The
  BOD,
  CEO,
  Senior
  Officer
  and

Shariah
  Commi^ee.

•  ReporOng
  duty:
  IFIs
  are
  required
  to
  immediately
  noOfy

the
  BNM
  and
  its
  SC
  of
  any
  non-‐Shariah
  compliant

acOviOes
  and
  immediately
  cease
  from
  carrying
  on
  such

business,
  affair
  or
  acOvity.
  Within
  30
  days,
  to
  submit
  to

the
  regulator
  a
  plan
  on
  the
  recOficaOon
  of
  the
  non-‐
compliance.

31

Statutory Duty

EVERY

InsOtuOon
   Director
   CEO
   Senior

officer

   Shariah
  commi^ee

•  at
  all
  Mmes
  comply
  with
  the
  standards
  specified
  by
  BNM

•  to
  ensure
  that
  its
  internal
  policies
  and

procedures
   are
   consistent
   with
   the

standards
  specified
  by
  BNM

•  to
  comply
  with
  the
  internal
  policies
  and
  procedures
  adopted
  by
  such
  insMtuMon
  to

implement
  the
  standards
  specified
  by
  BNM

•  to
   manage
   its
   business,
   affairs
   and

acMviMes
   in
   a
   manner
   which
   is
   not

contrary
  to
  Shariah
  (S.28)

•  not
   to
   accept
   appointment
  unless
   have
  met
   the
   requirements
   specified
  by
  BNM

and
  has
  obtained
  BNM’s
  prior
  wriYen
  approval
  (S.31
  &
  64)

•  to
   establish
   a
   Shariah
   CommiYee
   (S.
30)

•  insMtuMon
  to
  noMfy
  BNM
  within
  7
  days
  upon
  cessaMon

of
  posiMons
  (S.71)
   •  InsMtuMon
   and
   the

member
   to
   noMfy

BNM
   within
   14
   days

upon
   cessaMon
   of

posiMon
  (S.33
  &
  34)

•  An
   insMtuMon
   cannot

t e r m i n a t e
   t h e

appointment
   of
   a

m e m b e r
   o f
   i t s

Shariah
   CommiYee

without
   prior
  wriYen

approval
   of
   BNM
   (S.
33)

•  to
  have
  a
  CEO
  (S.63)

•  have
   due
   regard
   to

any
   decision
   of
   the

Shariah
   commiYee

(S.65(2)(f))

•  have
   regard
   to
   the

i n t e r e s t s
   o f

d e p o s i t o r s ,

investment
   account

holders
   and
   takaful

parMcipants
   (S.65(3)
(a))

Statutory
  Duty:
  Compliance

•  S28
  (1)
  requires
  IFIs
  to
  ensure
  at
  all
  Mmes
  that
  their

aims,
  operaMons,
  business,
  affairs
  and
  acMviMes
  are
  in

compliance
  with
  Shariah.

•  to
  ensure
  that
  its
  internal
  policies
  and
  procedures
  are

consistent
  with
  the
  standards
  specified
  by
  BNM,
  to

manage
  its
  business,
  affairs
  and
  acMviMes
  in
  a
  manner

which
  is
  not
  contrary
  to
  Shariah
  and
  to
  establish
  a

Shariah
  CommiYee

•  IFIs
  to
  carry
  out
  an
  audit
  on
  Shariah
  compliance.
  The

BOD,
  CEO,
  Senior
  Officer
  and
  Shariah
  CommiYee
  shall
  be

responsible
  to
  ensure
  that
  IFIs
  are
  at
  all
  Mmes
  to
  comply

with
  the
  standards
  specified
  by
  BNM.

Shari’ah
  Compliance

34

•  The
  IFSA
  complements
  and
  strengthens
  the
  Shari’ah

Governance
  Framework.

•  PotenMal
  exposure
  of
  Shari’ah
  scholars
  to
  jail
  terms
  (First
  of

its
  kind).

•  Strict
  condiMon
  and
  vigorous
  Shari’ah
  compliance
  process

and
  requirements.

•  S
  28
  (3)
  to
  immediately
  noMfy
  any
  incidents
  of
  Shari’ah

Non-‐Compliance,
  immediately
  cease
  from
  carrying
  on
  such

business,
  and
  within
  30
  days
  submit
  a
  plan
  to
  the
  BNM
  on

the
  recMficaMon
  of
  the
  non-‐compliance.

•  BNM
  Circular
  on
  Shariah
  Non-‐Compliance
  ReporMng
  issued

on
  15
  March
  2013
  and
  came
  into
  effect
  on
  1
  May
  2013.

Shari’ah
  Audit

35

•  S
  37
  and
  38:
  External
  Shari’ah
  Audit

•  BNM
  may
  require
  an
  IFI
  to
  appoint
  any
  person
  to

carry
  out
  Shariah
  audit.

•  BNM
   may
   appoint
   for
   an
   IFI
   any
   person
   to

conduct
  a
  Shariah
  audit

•  The
  IFI
  will
  bear
  remuneraMon
  &
  expenses
  of

the
  Shariah
  auditor/s.

(3)
  Where
  an
  insMtuMon
  becomes
  aware
  that
  it
  is
  carrying
  on
  any
  of
  its
  business,

affair
  or
  acMvity
  in
  a
  manner
  which
  is
  not
  in
  compliance
  with
  Shariah
  or
  the

advice
  of
   its
  Shariah

   commiYee
  or
   the
  advice
  or
   ruling
  of
   the
  SAC,
   the

insMtuMon
  shall
  —

  (a)
  immediately
  noOfy
  BNM
  and
  its
  Shariah
  commiYee
  of
  the
  fact;

  (b)
   immediately
  cease
  from
  carrying
  on
  such
  business,
  affair
  or
  acMvity
  and

from
  taking
  on
  any
  other
  similar
  business,
  affair
  or
  acMvity;
  and

  (c)
  within
  30
  days
  of
  becoming
  aware
  of
  such
  noncompliance
  or
  such
  further

period
   as
   may
   be
   specified
   by
   BNM,
   submit
   to
   BNM
   a
   plan
   on
   the

recMficaMon
  of
  the
  non-‐compliance.

Duty
  of
  insOtuOon
  to
  ensureShariah
  compliance
  (s.28)

Statutory
  Duty:
  ReporMng

•  IFIs
  are
  required
  to
  immediately
  noMfy
  the

BNM
  and
  its
  Shariah
  commiYee
  of
  any
  non-‐
Shariah
  compliant
  acMviMes
  and
  immediately

cease
  from
  carrying
  on
  such
  business,
  affair
  or

acMvity.
  The
  IFIs
  are
  required,
  within
  30
  days,

to
  submit
  to
  the
  regulator
  a
  plan
  on
  the

recMficaMon
  of
  the
  non-‐compliance
  as

provided
  in
  secMon
  28(3)(c).

•  SecMon
  37
  requires
  IFIs
  to
  submit
  Shariah

audit
  compliance
  report.

BNM
  Circular
  on
  Shariah
  Non-‐Compliance
  ReporMng

15
  March
  2013
  and
  came
  into
  effect
  on
  1
  May
  2013

38

Actual
  Event
   Poten;al
  Event

•  Report
  shall
  be
  submi^ed
  on
  an

“immediate”(14
   days
   upon

realizaOon)
  basis
  “as
  and
  when”

necessary.

•  During
   this
   period,
   the
   IFIs
   are

r e q u i r e d
   t o
   o b t a i n
   t h e

confirmaOon
   from
   the
   Shariah

Commi^ee.

•  To
   submit
   recOficaOon
   plan,
   to

be
   approved
   by
   the
   BOD
   and

the
  SC
  within
  30
  days.

•  Any
  pending
  decision
  by
   the
  SC

on
   the
   idenOfied
   issue
   shall
   be

treated
   as
   potenOal
   Shariah

non-‐compliance
  event.

•  Report
   shall
   be
   made
   on
   a

monthly
   basis
   based
   on
   a

calendar
  year
  which
   is
  not
   later

than
   2
   weeks
   aier
   the
   end
   of

each
  monthly
  period.

BNM
  Circular:
  Shariah
  Non-‐Compliance
  ReporOng

No
  Shariah
  non-‐compliance
  event
  is
  detected

•  Where
  there
  is
  no
  Shariah
  non-‐compliance
  event
  in

the
   IFIs
   for
   any
   parMcular
   period,
   the
   IFIs
   are
   sMll

required
   to
   submit
   the
   reports
   on
   a
  monthly
   basis

which
   serves
  as
   a
  declaraMon
  or
  official
   aYestaMon

on
  the
  status
  of
  Shariah
  compliance
  of
  the
  IFIs.

Responsible
  Person

•  The
  Chief
  Risk
  Officer/
  senior
  management
  in
  charge

of
   statutory
   reporMng
   of
   the
   IFI
   is
   responsible
   and

will
   be
   held
   accountable
   for
   the
   quality
   and

accuracy
  of
  the
  informaMon
  submiYed
  to
  the
  Bank.

InformaOon
  to
  be
  provided
  to
  Shariah

commi^ee
  (S
  35
  of
  the
  IFSA)

(1)
   An
   insMtuMon
   and
   any
   director,
   officer
   or
   controller
   of

such
  insMtuMon
  shall
  —

  (a)
  provide
  any
  document
  or
  informaMon
  within
  its
  or
  his

knowledge,
   or
   capable
   of
   being
   obtained
   by
   it
   or
   him,

which
  the
  Shariah
  commiYee
  may
  require;
  and

   (b)
  ensure
   that
   such
  document
  or
   informaMon
  provided

under
   paragraph
   (a)
   is
   accurate,
   complete,
   not
   false
   or

misleading
   in
   any
   material
   parMcular,
   to
   enable
   the

Shariah
  commiYee
   to
   carry
  out
   its
  duMes
  or
  perform
   its

funcMons
  under
  this
  Act.

(2)
  Except
  as
  provided
  in
  secMon
  36,
  a
  member
  of
  a
  Shariah

commiYee
   shall
   not
   disclose
   any
   document
   or

informaMon
  furnished
  under
  subsecMon
   (1)
   to
  any
  other

person.

42

Extended
  to
  Financial
  Holding
  Companies

43

•  The
  BNM
  has
  powers
  to
  control,
  supervise
  and

monitor
  FHC
  and
  these
  include
  authority
  to
  issue

prudenOal
  requirements
  and
  direcOons.

•  S
  122
  and
  123
  of
  the
  IFSA:
  FHC
  refers
  to:-‐

•  Companies
  that
  holds
  in
  aggregate
  more
  than
  50%

interest
  in
  shares
  in
  a
  licensed
  enOty;
  or

•  Less
  than
  50%
  of
  shares
  but
  has
  “control”,
  i.e.
  power:

•  to
  elect,
  appoint
  remove
  or
  prevent
  the
  elecOon,

appointment
  or
  removal
  of
  a
  majority
  of
  the

directors
  of
  the
  licensed
  enOty;

•  to
  make
  or
  cause
  to
  be
  made
  business
  decisions
  of

the
  licensed
  enOty;

Strict
  Liability

•  A
  director
  may
  be
  deemed
  guilty
  of
  an
  offence
  commiYed

by
  a
  company,
  unless
  he
  proves
  that
  the
  offence
  was

commi^ed
  without
  his
  knowledge,
  consent
  or
  connivance

and
  that

•  “he
  took
  all
  reasonable
  precau,ons
  and
  had
  exercised
  due

diligence
  to
  prevent
  the
  commission
  of
  the
  offence
  as
  he

ought
  to
  have
  taken
  precau,ons
  or
  to
  have
  exercised...”
  (s.
241(4),
  FSA)
  (in
  rela,on
  to
  civil
  ac,ons
  for
  compensa,on)

•  “he
  exercised
  such
  diligence
  to
  prevent
  the
  commission
  of

the
  offence
  as
  he
  ought
  to
  have
  exercised,
  having
  regard
  to

the
  nature
  of
  his
  func,on
  in
  that
  capacity
  and
  to
  the

circumstances.”
  (s.249(1),
  FSA)
  (in
  rela,on
  to
  criminal

offences)

44

Strict
  Liability
  and
  Defense

45

•  The
  words
  “deemed
  to
  be
  commiYed”
  by
  Director,

Controller,
  Officer,
  Partner
  or
  anyone
  concerned
  with

management
  of
  its
  affairs:

  PresumpMon
  that
  they
  have

commiYed
  the
  offence
  unless
  if
  they
  can
  prove
  otherwise.

•  The
  burden
  of
  proof
  is
  upon
  them
  to
  show
  that
  they
  have

taken
  all
  reasonable
  precauMons
  and
  exercised
  due

diligence.

•  Limit
  the
  element
  of
  defence

•  (1)
  the
  act
  done
  without
  consent
  and
  connivance
  and

(2)
  diligent
  acMon
  taken
  to
  prevent
  commission
  of

offence,
  as
  he
  would
  have
  exercised.

Penalty

•  The
  BNM
  may
  impose
  monetary
  penalty
  to
  IFIs
  in
  the

case
  of
  breach
  to
  comply
  as
  provided
  in
  secMon
  245
  (4).

•  The
  penalMes
  provided
  in
  the
  IBA
  just
  range
  from
  a
  fine

not
  exceeding
  RM2k
  for
  every
  day
  during
  which
  the

default
  conMnues
  to
  RM50k
  or
  three
  to
  five
  years

imprisonment
  or
  both.

•  IFSA:
  the
  penalMes
  provided
  range
  from
  one
  year
  to
  10

years
  imprisonment
  or
  5
  to
  RM
  50m
  fine
  or
  both.
  Eg.

any
  person
  who
  commits
  an
  offence
  for
  acMng
  on
  behalf

of
  unlicensed
  person
  shall
  on
  convicMon,
  be
  liable
  to

imprisonment
  for
  a
  term
  not
  exceeding
  10
  years
  or
  to
  a

fine
  not
  exceeding
  RM50
  m
  or
  to
  both.

PenalMes

•  The
  IFSA
  vests
  the
  BNM
  with
  wide
  ranging

powers
  to
  issue
  standards
  which
  are
  binding

upon
  every
  director,
  officer
  or
  Shariah

commiYee
  member
  of
  the
  insMtuMon.

•  SecMon
  28
  (6)
  provides
  that
  a
  failure
  to

comply
  with
  the
  standards
  issued
  is
  an
  offence

under
  the
  Act
  and
  carries
  with
  a
  maximum

penalty
  of
  8
  years
  imprisonment
  or
  a
  fine
  of

25
  million
  ringgit
  or
  both.

47

PenalOes

48

Form
  of
  PenalOes
   PenalOes

AdministraOve
   the
  BNM
  may
  make
  an
  order
  in
  wriOng

requiring
  the
  person
  in
  breach
  to
  comply

with
  or
  give
  effect
  to
  or
  to
  do
  or
  not
  to

do
  any
  act
  in
  order
  to
  ensure
  compliance

with
  such
  provision

Monetary
   such
  amount
  as
  the
  Bank
  considers

appropriate,
  not
  exceeding
  (RM5
  mil-‐
body
  corporate
  or
  RM1mil-‐
  individual);

Criminal
  Offence

Up
  to
  10
  years
  imprisonment
  or
  5-‐50

million
  ringgit
  fine
  or
  both

49

Offence/Breach
  S
  28
  and
  29
   Penalty

Failure
  to
  comply
  with
  BNM
  standards
  on

Shariah
  maYers/
  that
  give
  effect
  to
  SAC

rulings,
  ruling
  of
  BNM
  SAC,
  advice
  of
  SC,

Shariah
  principles
  (in
  general)

Not
  exceeding
  8
  years

imprisonment
  or
  RM
  25
  M
  fine

or
  both.

Failure
  to
  immediately
  report,
  or
  cease

Shariah
  noncompliant
  acMvity,
  or
  submit

recMficaMon
  plan
  in
  accordance
  with
  the

IFSA
  &
  Circular

Not
  exceeding
  8
  years

imprisonment
  or
  RM
  25
  M
  or

both.

Failure
  to
  comply
  with
  BNM
  standards
  on

Shariah
  governance

s.245
  (3),
  or
  247,
  Schedule
  15

(3).

-‐
  not
  exceeding
  RM
  5M
  if
  body

corporate/RM
  1
  M
  if
  individual;

-‐
  shall
  not
  exceed
  3x
  the
  gross

amount
  of
  pecuniary
  gain
  made

or
  loss
  avoided
  as
  a
  result
  of
  the

breach;
  or

-‐
  shall
  not
  exceed
  3x
  the
  amount

of
  money
  which
  is
  the
  SM
  of
  the

breach,
  whichever
  is
  greater
  for

each
  breach
  or
  failure
  to

comply.

Failure
  to
  comply
  with
  BNM
  standards
  in

relaMon
  to
  the
  business,
  affair
  &
  acMvity
  of

an
  insMtuMon
  for
  the
  purpose
  of
  Shariah

Compliance

Failure
  to
  ensure
  that
  internal
  policies
  &

procedures
  on
  are
  consistent
  with
  BNM

standards

Failure
  to
  comply
  with
  internal
  policies
  &

procedures
  adopted
  to
  implement
  BNM

standards

Director,
  controller,
  officer,
  partner,
  management

deemed
  liable
  for
  offences.

•  Only
  defence
  is
  that
  offence
  was
  commiYed

without
  consent
  AND
  diligence
  has
  been

exercised
  to
  prevent
  its
  commission

•  DelegaMon
  to
  or
  reliance
  on
  3rd
  parMes
  is
  not

a
  defence

•  Civil
  acMons
  can
  be
  brought
  by
  any
  persons
  or

insMtuMons
  or
  by
  BNM
  on
  their
  behalf
  against

any
  persons
  who
  contravenes
  or
  is
  in
  breach

of
  the
  IFSA
  provisions.

Statutory
  ProtecMon

•  the
  BNM
  to
  specify
  the
  duMes
  and
  funcMons
  of
  the
  SC.

•  SC
  enjoys
  statutory
  protecMon
  for
  acMons
  for
  breach
  of

confidenMality
  provided
  they
  have
  acted
  in
  good
  faith

in
  the
  course
  of
  the
  discharge
  of
  their
  duMes
  and

performance
  of
  their
  funcMons.

•  Shariah
  commiYee
  members
  are
  also
  statutorily

protected
  from
  acMons
  for
  defamaMon
  in
  respect
  of

any
  statement
  made
  by
  them
  without
  malice
  in
  the

discharge
  of
  their
  duMes
  as
  sMpulated
  in
  secMon
  36
  (b).

51

•  Single
  licensed
  takaful
  business.
  S
  16
  of
  the
  IFSA
  requires

takaful
  operator
  to
  separate
  its
  family
  business
  with

general
  takaful
  business.
  (5
  years
  to
  split
  both
  business,

family
  business
  and
  general
  takaful
  business
  into
  separate

enOOes).

•  S
  94
  prohibits
  a
  licensed
  takaful
  operator
  from
  making
  any

withdrawal
  from
  a
  takaful
  fund,
  whether
  from
  the
  surplus,

or
  otherwise,
  of
  that
  takaful
  fund
  unless
  all
  the
  condiOons

set
  out
  is
  fulfilled.

•  S
  91
  makes
  it
  mandatory
  for
  takaful
  operator
  to
  separate

takaful
  fund
  and
  shareholders’
  fund.

•  S
  95
  makes
  qard
  or
  loan
  provision
  is
  compulsory
  to
  every

takaful
  operator
  in
  the
  event
  of
  deficit
  of
  the
  risk
  fund.
   52

New
  Requirements
  under
  Takaful

IFSA 2013
   IBA & TA

Express provision to
empower the Minister on
recommendation of BNM
to prescribe certain
activities

BNM had implied power to
prescribe for certain
businesses or activities

Powers of the Bank to
prescribe Prudential
Requirements – relates to
capital adequacy, liquidity,
corporate governance, risk
management,
maintenance of reserve
funds, etc.

Provides for business to
be conducted in a prudent
manner – relates to
maintenance of net assets,
integrity and skill of
business,

IFSA 2013
   IBA & TA

‘Fit and Proper’
requirements for directors,
etc. – BNM allowed to set
and specify requirements
in the future

Scope of ‘Fit and Proper’
requirements are laid out
in the Acts

BNM empowered to fix
breaches of IFSA/
prudential issues. Broader
triggers for exercising
power. Ministerial
approval not required.

Power
  to
  step
  in
  where

interests
  of
  depositors

affected.
  IntervenMon
  by

BNM
  requires
  Ministerial

approval.

IFSA 2013
   IBA & TA

Assume control of an
institution with approval of
the Minister, suspending
the powers of the Board.
Also, allowed to order the
sale of the business or
assets, or parts of the
business

No direct predecessor.
Previously, parties to a
transaction could apply to
the High Court for approval

Appoint receiver to an
Institution

No previous power. Other
parties could apply to High
Court for such an order.

IFSA 2013
   IBA & TA

Requires Ministerial approval
on advise by Bank for changes
of share control

Changes of control not directly
regulated: regulated via
requiring changes to holdings
of more than 5% to be
approved

Bank to order that another
company in a corporate
group be designated as the
group’s ‘financial holding
company’, requiring
corporate rearrangement.

No power to dictate precise
corporate structure

IMPLICATIONS,
  ISSUES
  AND
  CHALLENGES

57

The
  LHC

•  The
  Law
  HarmonizaMon
  CommiYee
  Report
  formulated

several
  recommendaMons
  to
  resolve
  issues
  in
  Islamic

finance.
  The
  CommiYee
  is
  also
  studying
  the
  legal

implicaMons
  on
  the
  implementaMon
  of
  Islamic
  Financial

Services
  Act
  2013.

•  The
  CommiYee
  introduced
  several
  new
  legal

provisions
  in
  court
  such
  as
  rules
  on
  imposiMon
  of
  late

payment
  charges
  on
  judgment
  debts,
  to
  allow
  beYer

access
  to
  Islamic
  financing
  for
  consumers
  through

recommended
  amendments
  to
  reserve
  land

legislaMons
  at
  all
  states,
  to
  facilitate
  Islamic
  financing

involving
  landed
  property
  through
  recogniMon
  of

Islamic
  finance
  in
  the
  NaMonal
  Land
  Code
  1965
  and
  to

amend
  the
  Companies
  Act
  1965

58

Shariah
  Non-‐Compliance
  Framework

•  The
  BNM
  uMlises
  an
  integrated
  system
  known
  as
  the

OperaMonal
  Risk
  Integrated
  Online
  Network
  (ORION)

for
  guidance
  on
  treatment
  of
  Shari’ah
  non-‐compliant

items.

•  ORION
  is
  the
  BNM
  regulatory
  reporMng
  system
  and

processes.
  This
  system
  enables
  efficient
  reporMng
  and

supervision.
  Through
  this
  system,
  the
  BNM
  can
  easily

monitor
  and
  supervise
  any
  Shari’ah
  non-‐compliance

cases
  in
  IFIs.
  It
  is
  reported
  that
  since
  its
  effecMve
  date,

the
  BNM
  received
  more
  than
  100
  submissions
  from

IFIs
  for
  Shari’ah
  non-‐compliance
  reporMng
  and
  less

than
  21%
  are
  actual
  Shari’ah
  non-‐compliance.

59

Professional
  Indemnity
  Insurance

•  the
  IFSA
  makes
  Shari’ah
  scholars
  legally

accountable
  and
  liable
  for
  their
  duMes
  as
  any

Shari’ah
  commiYee
  members
  may
  be
  jailed
  for

up
  to
  eight
  years
  or
  fined
  up
  to
  RM25
  million

which
  is
  equivalent
  of
  approximately
  USD7.6

million
  if
  they
  fail
  to
  comply
  with
  the
  IFSA.

•  This
  serious
  legal
  implicaMon
  triggers
  the
  need
  of

having
  professional
  indemnity
  Islamic
  insurance

for
  Shari’ah
  scholars
  as
  in
  the
  case
  of
  advocate

and
  solicitor
  or
  medical
  pracMMoners.

60

ReclassificaMon
  of
  Deposit

•  30th
  June
  2015
  was
  the
  deadline
  for
  IFIs
  to
  clearly

separate
  between
  the
  deposits
  account
  and

investment
  account.

•  IFIs
  must
  introduce
  a
  new
  structure
  of
  mudharabah

investment
  account,
  which
  reflect
  the
  actual

characterisMcs
  of
  investment.

•  Islamic
  deposit
  as
  principal
  guaranteed
  and
  investment

as
  non-‐principal
  guaranteed.
  The
  deposit
  insurance
  or

takaful
  also
  will
  be
  no
  longer
  relevant
  for
  investment-‐
type
  of
  accounts.

•  The
  reclassificaMon
  of
  deposits
  is
  not
  favourable
  to
  IFIs.

The
  reclassificaMon
  of
  deposits
  imposes
  a
  great

challenge
  to
  IFIs
  to
  accumulate
  deposits,
  which
  are

based
  on
  mudharabah
  principle.

61

Investment
  Account
  Plaxorm

•  The
  IFSA
  requirement
  on
  the
  separaMon
  of
  Islamic

deposit
  and
  investment
  account
  is
  actually
  to
  allow
  the

banks
  to
  customise
  their
  products
  according
  to
  the

customers'
  profile
  and
  risk
  appeMte.

•  IFIs
  are
  now
  can
  offer
  higher
  returns
  to
  any
  investors

for
  their
  investment
  account.

•  To
  facilitate
  this
  transiMon
  period,
  the
  Malaysian

government
  backed
  the
  IAP
  with
  an
  iniMal
  start-‐up

fund
  for
  RM150
  million
  and
  tax
  exempMon
  for
  3

consecuMve
  years.
  Lembaga
  Tabung
  Haji
  also
  allocated

RM200
  million
  for
  the
  establishment
  of
  the
  Shari’ah

compliant
  Restricted
  Investment
  Account.

•  There
  are
  four
  IFIs
  have
  parMcipated
  in
  the
  IAP
  namely

BIMB,
  Maybank
  Islamic,
  Affin
  Islamic
  and
  BMMB.

62

•  The
  BNM
  has
  more
  power
  to
  dictate-‐
  IFIs
  and
  and

its
  holding
  company
  and
  these
  include
  its
  Capital

Requirements,
  Corporate
  Governance,
  Consumer

ProtecMon,
  Shareholding,
  IntervenMon
  and
  even

Shari’ah
  compliance.

•  Power
  not
  only
  to
  advise
  but
  also
  to
  recommend

the
  decision
  made
  by
  the
  Minister.

•  There
  must
  be
  certain
  legal
  mechanism
  to
  limit

and
  restrict
  such
  authoriMes
  and
  to
  find
  the
  best

avenue
  to
  review
  and
  oversee
  the
  BNM’s
  acMon.

63

Judicial
  Oversight
  over
  the
  BNM

•  The
  BOD
  of
  an
  insMtuMon
  shall
  have
  regard
  to
  the

interests
  of
  depositors,
  IAH
  and
  takaful

parMcipants.

•  The
  IFSA
  seems
  to
  promote
  stakeholders
  value

based
  approach
  in
  Islamic
  financial
  insMtuMons

rather
  than
  the
  shareholders
  value
  model.

•  PotenMal
  conflict
  of
  interest
  between

shareholders
  and
  other
  stakeholders.

64

PotenOal
  Conflict
  of
  Interest
  Between

Shareholders
  and
  Other
  Stakeholders

•  The
  element
  of
  strict
  liability
  in
  the
  IFSA
  will

expose
  IFIs
  with
  further
  cost
  and
  expenses.

•  Vigorous
  Shari’ah
  compliance
  requirements
  will

also
  increase
  the
  cost
  of
  business
  and
  finally
  will

affect
  the
  level
  of
  efficiency.

•  Since
  precauMons
  and
  due
  diligence
  have
  to
  be

exercised
  to
  prevent
  the
  commission
  of
  the

offence,
  any
  measures
  to
  miMgate
  this
  legal
  risk

will
  cost
  addiMonal
  expenses.
  Eg.
  Professional

Indemnity
  Insurance.

65

Cost and Efficiency

•  Heavy
  regulated
  business
  environment-‐
  may
  negate

innovaMon/
  lack
  of
  innovaMon/
  influence
  the
  market

behavior
  and
  the
  players
  will
  opt
  for
  products
  of

lesser
  constrains.

•  Eg.
  All
  contracts
  under
  wakalah
  and
  mudharabah
  are

deemed
  as
  investment
  products
  and
  hence
  require

addiMonal
  treatment:
  DocumentaMon,
  operaMon,

system
  and
  etc.

•  Effect:
  ConcentraMng
  on
  debt-‐based
  products
  and

consistently
  neglecMng
  the
  equity-‐based
  products

both
  from
  asset
  and
  liabiliMes
  sides.

   66

InnovaOon
  of
  Product
  and
  Services

CONCLUSION

67

•  Exercise
  extra
  care
  &
  vigilance
  on
  Shariah
  compliance

ma^ers
  through
  effecOve
  internal
  Shariah
  compliance

funcOons:
  Full
  informaOon
  on
  products
  &
  transacOons;

pre-‐
  and-‐
  post
  approval
  monitoring,
  supervising
  conduct

of
  Shariah
  review
  &
  Shariah
  audit
  reports;
  monitoring

recOficaOon
  measures.

•  Examine
  internal
  gaps
  to
  a^ain
  “end-‐to-‐end”
  Shariah

compliance;

•  Examine
  Shariah
  review
  &
  audit
  reports
  &
  implement

recOficaOon
  plans;

•  Assess
  and
  adhere
  internal
  policies
  &
  procedures
  and
  also

BNM
  standards;

68

Recommendations

•  The
  IFSA
  provides
  a
  framework
  to
  facilitate
  the

creaOon
  and
  opOmize
  a
  healthy
  and
  viable

environment
  for
  Islamic
  finance
  system
  in
  Malaysia.

•  Despite
  posiOve
  features
  of
  the
  IFSA,
  there
  are

loopholes,
  issues
  and
  shortcomings
  that
  may
  negate

its
  objecOves.

•  These
  factors
  finally
  may
  lead
  to
  lack
  of
  appeOte
  for

product
  innovaOon
  on
  the
  part
  of
  IFIs.

•  Considering
  these
  great
  challenges,
  it
  is
  recommended

for
  the
  BNM
  and
  the
  industry
  stakeholders
  to
  review

and
  discuss
  seriously
  the
  implicaOons
  and

consequences
  of
  the
  IFSA.

•  Years
  ahead
  will
  be
  a
  real
  test
  for
  true
  potenOal
  of

Islamic
  finance
  in
  Malaysia.

   69

Concluding Remarks

THANK YOU!


BLOG OF KNOWLEDGE (Shari'ah, Law, Islamic Finance and Muslim News)
Shari'ah, Law, Islamic Finance and Muslim News
Monthly Archives: April 2013
April 27, 2013
DR. ZULKIFLI HASAN
THE NEED FOR AN ARAB CULTURAL REVOLUTION
THE NEED FOR AN ARAB CULTURAL REVOLUTION
By Tariq Ramadan Available at:
http://www.tariqramadan.com/spip.php?article12840
Culture constitutes an essential element of human life. As people have risen up across the Middle East and North Africa, the diversity of their cultures is not only the means but also the ultimate goal of their liberation and their freedom. Though imperialism was primarily political and economic, it was also cultural; it imposed ways of life, habits, perceptions and values that rarely respected the societies under its domination, that seized control of minds — a true colonisation of human intelligence.
Globalisation extends to culture, often leading, in the societies of the Global South, to self-dispossession. Genuine liberation, the march toward dignity and democracy, requires a “cultural uprising” in all dimensions of its popular, artistic, intellectual and religious expressions. The importance of culture and the arts in undertaking the task of re-appropriation is critical: the tools of thought and tradition must be used to lend shape and substance to the sense of belonging that alone can guarantee the well-being of individuals. If there is no culture without religion, and no religion without culture and if, finally, culture is not religion, the issue must be explored; the complex questions of values, meaning, spirituality, tradition and the arts — the factors that give form to history, memory, nations and identities; that transmit well-being and freedom, or fail to — must be faced squarely.
Arab and Muslim majority societies are riven by religious and cultural tensions that have at times torn them apart. The role of the religious reference is a subject of constant discussion and heated debate over relations with tradition and with Arabic — or other national languages — have set ruling elites and intellectuals at loggerheads. Close examination and study of these experiences leads but to one sole conclusion: we are dealing with a complex, deeply rooted malaise. Its dimensions are manifold: cultural, religious, linguistic and therefore, a fortiori, strongly identity-related.
It cuts across all social sectors, all classes, and all trends of thought, from secularists to Islamists and from atheists to believers, whether observant or not. The attraction-repulsion complex vis-à-vis the West is not new; it existed even before the colonial period. It has created an ambiguous relationship in which imaginations are fascinated and attracted by the now-global Western culture, while the same force of attraction is rejected by the analytical, cultural and ethical conscience that is experienced as self-dispossession, colonisation and on occasion as the violence of cultural rape. The “Arab problem” was never simply one of the violent dictatorships that succeeded political decolonisation; it has always lain in the perpetuation of an alienating and paralysing, if not destructive, intellectual colonisation.
More than intellectual constructs
The process of reclaiming the self is one of reconciliation with meaning. Cultures, along with the religions that shape and nurture them, are value systems, sets of traditions and habits clustered around one or several languages, producing meaning: for the self, for the here and now, for the community, for life. Cultures are never merely intellectual constructs. They take form through the collective intelligence and memory, through a commonly held psychology and emotions, through spiritual and artistic communion. The Arab awakening cannot afford to overlook these, the fundamental dimensions of freedom and of the liberation of individuals and societies. The Islamic reference is of crucial importance and cries out for special attention for, like all religious references, it can have, in particular historical circumstances, a positive, liberating function — or become a reactionary, dogmatic and authoritarian instrument, an instrument of oppression. Its examination must be preceded by political and economic analysis, by systematic reference to studies in anthropology, cultures and religions.
Cultural emancipation is imperative, and will require a holistic approach. If the message of religion is to be reconciled with spirituality, cultural fulfillment can only be achieved through the celebration of and respect for the languages, memories and heritage of all, and with the positive integration of minority ethnic affiliations and dialects.
Negative effects of globalisation
Along with the West, Africa, the Islamic Orient and Asia have fallen into the trap set by the negative effects of globalisation, including but not limited to exclusivist, sectarian if not deadly claims to culture and identity. The same claims are omnipresent in the Arab world as well. Hence the importance of cultural policies, which must be developed in tandem with social policy, drawn from the common ground that determines the sense of national belongs.
Culture lends meaning to a horizon. Everything in the heritage of culture and tradition is worthy of celebration. To achieve cultural liberation means calling into question all possible forms of parallel and/or secondary alienation: economic dispossession is devastating, just as cultural imperialism can be. Spirituality, posited as a point of recall, as a quest for meaning in and through itself, individually and collectively, is an act of liberation. Yet it must be part of an open, constructive involvement that, acting from within society and in full respect of the pluralism that distinguishes those of the Middle East and North Africa, will determine the ultimate goals that body forth the cultures whose substance constitutes the narrative of each nation.
To assert culture, memory and identity is to assert that they are meaningful, to affirm that they are capable of addressing the challenges of the day. To assert one’s self is to become a subject, to take full responsibility for one’s heart, body and mind, as well as for one’s fellows, one’s society, and for nature itself. The imperative of coherence is incontrovertible; the very condition of genuine well-being and freedom. Western societies are today taking stock of the deficiencies that afflict them, that undermine the principles of democracy by maintaining a culture of fear and insecurity. Insecurity of mind is the negative image of peace of heart. Arab societies are undergoing a similar crisis, in a different way perhaps, but with equal intensity.
An awakening required
They suffer from a malaise of incoherence, and no amount of reform, or of political freedom, will resolve the feeling of unease that has sapped the foundations of East and West alike. There is no lack of obstacles to be overcome in the Middle East and North Africa. Both the political and economic difficulties are well known, as is the strength of the people’s cultural and religious references; the potential for spiritual and ethical opening is palpable. What remains is to find the means for their multiform expression. It is time to remind ourselves that in the profoundest of Islamic teachings, believers do not rise to pray during the night in order to find themselves and forget the world; they do so indeed to find themselves, the better to invest the daylight hours with meaning, and to reform the world. The Arab world and Muslim majority societies stand in need of an awakening that is responsible, free of illusions, self-critical and resolutely positive as much as they stand in need of creativity and imagination.
Reconciliation with self, liberation from intellectual and cultural colonialism, not to mention the emergence of an “Arab subject” can only take place when new life is breathed into our relationship with meaning and with ultimate goals, only when imagination, art, literature, painting and music are reclaimed. Science too, along with knowledge and the ways in which women and men express themselves and their imaginations, their hurts and desires, their grief and their hopes. The Arab world is in the throes of another crisis: the crisis of a fettered imagination from which it is struggling to escape, and that has a powerful impact on its very wellbeing. By this token, the Arab awakening must do more than overthrow dictators. It must break free of the fetters that decades of abdication have applied to the order of science, knowledge, esthetics, art and beauty in general.
Regards
With grand Mufti of Bosnia and Herzegovina, Dr Mustafa Ceric
Muslims News
News
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April 21, 2013
DR. ZULKIFLI HASAN
Risk Management in Islamic Finance
Risk Management in Islamic Finance
by MOHAMMAD NAUSHAD KHAN Available at:
http://www.radianceweekly.com/353/10423/obama039s-peace-antics-in-israel-four-more-years-of-this/2013-04-07/report/story-detail/risk-management-in-islamic-finance.html
A case study of Bahrain was presented in order to focus on issues and challenges of risk management in Islamic financial industry by Kashif Hasan Khan at a programme organised by Forum for Discussion on Economic Issues, a joint forum of Sahulat and Radiance Viewsweekly in the Capital on 24 March.
The crux of his case study is to decode and simplify the problems of survival of Islamic finance industry which is expanding on each passing day despite confronting risk of varied nature. The other key aspect of his study is also aimed to find out and understand how the concerned scholars of this field have dealt with this emerging trend in the recent years and also to understand the nature of theoretical and practical development in the area of Islamic finance. As of now, the Islamic Banking and Finance is considered to be an alternative to the conventional banking and finance system.
The history of Islamic finance is roughly forty years old and surely has got ample space to grow in the present system despite many hurdles and resistance at various levels. Islamic banking and finance is in practice for a long time but it has gained popularity in the last decade. These banks operating on Islamic principles have managed to attract business not only from Islamic countries but also from some non-Islamic countries. Even after noticeable advancement and achievement it has faced controversies based on concept and practices.
On general note, the risk faced by conventional bank and Islamic Financial Institution are more or less the same but the magnitude of these risks are different for Islamic banks because of their compliance with Shari’ah. Apart from risk faced by traditional institutions, the Islamic institution faces some other forms of risk such as Shari’ah risk, unique risk, credit risk and operational risk. Also profit sharing feature of Islamic banking induces some additional risks.
The other important aspect is to be noted as per his study is that Islamic banks still lack the robust and effective risk management practices. In order to come out from such type of risk some banks in the Gulf region like ABC Islamic Bank in Bahrain has decided to make operational risk transparent throughout its enterprise to which end process is being developed to provide for regular reporting of relevant operational risk management information to business management, senior management, as well as to the Operational Risk Committee of ABC and the Board of Directors.
As per the findings of his study, he has concluded that risk management should be tackled in view of the cost implication because by not managing the cost the risk at times be larger than managing it. For Islamic banks effective regulation authorities must have sound knowledge and experience in dealing with risk management issues. The finding also shows that a majority of Islamic banks in Bahrain are using RAROC, GAP Analysis and value at risk for risk measurement. And for risk mitigation banks are normally dependent on derivatives followed by securitization, Guarantees, loan loss reserves, etc. The study also reflects that many banks in Bahrain have made substantial progress and progress in their development and implementation of risk measures.
Regards

Zulkifli Hasan
With MH Faruqi, Chief Editor and Founder of Impact International in London.
Islamic finance news
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April 14, 2013
DR. ZULKIFLI HASAN
Qatar to emerge as Islamic finance hub
Qatar to emerge as Islamic finance hub
Available at:
http://arabiangazette.com/qatar-to-emerge-as-islamic-finance-hub-20130411/
Qatar is expected to assume a prominent position in the global Islamic finance market with its increased public spending and favorable financial regulations.
A new report has predicted that Qatar will soon become a “key international distribution hub” for Shariah-compliant products as the Islamic finance market grows at an unprecedented pace.
Qatar Financial Centre Authority in its first ‘Mena Asset Management Barometer‘ suggests that Qatar’s position in the Islamic finance market will be boosted with the development of new infrastructure projects that will help in the growth of alternative fund structures and encourage public-private partnerships.
Currently, about 50 percent of the funds in Qatar are Shariah-compliant. Therefore, along with Saudi Arabia, Qatar is rated as a prominent Islamic finance fund centre. The demand for Shariah-compliant products is expected to grow because of increased interest from MENA’s internal markets, Southeast Asia, Australia and pension funds in the UK and Europe.
The report also highlights that the asset management sector in Qatar is still in its infancy and the alternative sector will need time to develop. In 2013, the respondents believe that asset management sector will develop well because of increased infrastructure spending, financial support of government agencies and financial regulation to promote strategy diversity among the country’s pool of asset management firms.
As Qatar accelerates infrastructure investment on projects related to  hosting the 2022 FIFA World Cup, the country envisages public investment plans worth USD 95 billion over five years. Several private equity and infrastructure funds are keen to relocate to Qatar in order to benefit from the country’s infrastructure boom through direct investment or by holding stakes in firms engaged in supply chains of the development projects.
The survey respondents also believe that within the MENA region, Qatar was most likely to introduce short-selling regulations that would help in the creation of a domestic hedge fund sector. The country was also chosen by hedge fund management firms as the most favored location to establish a presence in the GCC.
Regards

Zulkifli Hasan
Visited MH Faruqi, Editor of Impact International, London
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April 9, 2013
DR. ZULKIFLI HASAN
Strengthening Islamic finance’s link to real economy to provide new growth impetus for Islamic finance industry
Strengthening Islamic finance’s link to real economy to provide new growth impetus for Islamic finance industry
Available at:
http://www.ameinfo.com/strengthening-islamic-finances-link-real-economy-335753
The 3rd Annual Middle East Islamic Finance and Investment Conference (MEIFIC 2013) to gather more than 250 Islamic finance industry leaders in Dubai this April for strategic discussions on mapping a new growth path for the regional Islamic finance and investments industry.
The Ernst and Young World Islamic Banking Competitiveness Report, which was launched last December at the 19th Annual World Islamic Banking Conference (WIBC Global), noted that the Islamic banking industry is growing 50% faster than overall banking sector in several core markets.
With the global Islamic banking assets with commercial banks now surpassing the $1.5 trillion mark and estimates projecting the industry to hit the $2 trillion mark by 2015, the global Islamic finance industry is undoubtedly one of the fastest growing components of the global financial system. According to recent estimates by Ernst & Young’s Global Islamic Banking Centre, Islamic banking assets with commercial banks in the GCC reached $445bn at the end of 2012, up from $390bn in 2011, with the outlook for the industry remaining relatively positive in 2013.
Globally, the Islamic banking industry continues to record robust growth with industry reports indicating Saudi Arabia, Malaysia and the United Arab Emirates, as the top three markets for Islamic assets. Reports indicate that in 2012 the Islamic banking industry in the GCC registered a 14% year-on-year growth, which represents a slight deceleration in the average growth rate over the past 5 years of 19%. Reports also indicate that profitability now looks to be stabilizing in major Islamic banking markets though Islamic banks have experienced a mixed recovery across markets. Given the current market conditions and the increasing demand for Islamic finance not only in the traditional markets of Middle East and South East Asia, but globally, the time is now perfect for the Islamic finance industry to further leverage its inherent strengths of being linked to real economic activities and play a key role in putting in place a holistic Islamic economic ecosystem.
It is against this background that the 3rd Annual Middle East Islamic Finance and Investment Conference (MEIFIC 2013) will be held at the Dusit Thani Hotel in Dubai on the 17th of April 2013. Co-located with the 8th Annual World Takaful Conference (WTC 2013) and held under the theme “Building the Islamic Economy: Strengthening Islamic Finance’s Links to the Real Economy”, MEIFIC 2013 is set to gather more than 250 regional and international Islamic finance leaders in a powerful dynamic platform to explore the emerging opportunities for Islamic finance and investments in the Middle East.
MEIFIC 2013 will be opened by a special inaugural address by Ahmed Bin Sulayem, Executive Chairman of Dubai Multi Commodities Centre (DMCC). Confirming his participation, Ahmed Bin Sulayem noted, “Islamic finance is playing an ever-increasing role in the global economic system. The substantial growth witnessed by the Islamic finance industry and its steady progress from niche to mainstream indicate a growing demand for financial products and services that are Sharia compliant. Islamic products have always been a major focus of the DMCC’s growth plan. We have built strong credentials as an Islamic trading centre, especially within the commodity trade finance sector. Our core product, DMCC Tradeflow, which operates as a web-based ownership registry, now offers Sharia compliant commodity Murabaha as well. We have identified asset-backed transactions, particularly the Islamic interbank liquidity market conducted through Murabaha mechanisms as a key growth sector. I look forward to attending MEIFIC 2013 and sharing our experience with DMCC Tradeflow and other developments within the Islamic finance industry.”
The inaugural address will be immediately followed by a special keynote address by Tayeb Abdulrahman Al Rais, Secretary General of the Awqaf & Minors Affairs Foundation in Dubai, who will discuss the role of AWQAF in supporting the Islamic economy.
A key highlight of MEIFIC 2013 will be the high profile keynote power debate that will focus discussions on boosting growth and the value of Islamic finance by further strengthening linkages to the real economy and mainstreaming products. The power debate session, chaired by Dr. Sayd Farook, Global Head Islamic Capital Markets at Thomson Reuters and featuring Harun Kapetanovic, Economic Adviser at Department of Economic Development, Government of Dubai; Moinuddin Malim, Chief Executive Officer of Mashreq Al Islami; Amr Al Menhali, EVP, Head of Islamic Banking at ADCB Islamic Banking; and Anouar Adham, Head of Asset Management at QIB – UK, will assess new growth opportunities for Islamic finance and will analyze how Islamic finance institutions can scale-up to better meet the needs of the real economy.
Commenting on their participation at the event, Amr Al Menhali, EVP, Head of Islamic Banking, ADCB Islamic Banking, said, “The Islamic finance industry is currently witnessing rapid transformation and continues to undergo significant change as the market moves from its niche status and gains a stronger foothold as an integral part of the financial system. With the rapid internationalization of Islamic finance and new jurisdictions – even non-Islamic, now embracing Islamic finance, the industry is experiencing even stronger growth momentum, especially given the increasing awareness of Islamic finance and its benefits of being more closely linked to real economic activities. The Middle East has been at the centre of Islamic finance activity and the region is viewed as one of the more mature markets. With a young, fast-growing population; robust macroeconomic factors and the boost in government spending and large infrastructure projects, major economies in the region, particularly the UAE, are witnessing promising signs of economic growth and it is now time for the region to further grow their Islamic finance capabilities. In addition to developing sophisticated products, improving distribution channels, which would certainly assist in increasing the market share of Islamic finance, the real opportunity is to create an integrated Islamic economic system by further strengthening the linkage of Islamic finance to real economic activities.”
“As a leading industry player, ADCB Islamic Banking is delighted to support the annual Middle East Islamic Finance and Investment Conference and we look forward to discussing new growth opportunities for Islamic finance in the region,” he added.
Regards

Zulkifli Hasan
With my friends in Texas
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April 4, 2013
DR. ZULKIFLI HASAN
CONTEMPORARY ISLAMIC CONSCIENCE IN CRISIS
CONTEMPORARY ISLAMIC CONSCIENCE IN CRISIS
Tariq Ramadan Available at:
http://www.tariqramadan.com/spip.php?article12816
From Asia to North America, by way of the Middle East, Africa and Europe, the conclusion is inescapable: The contemporary Islamic conscience is in deep crisis. How to be a Muslim today? How to be faithful to one’s principles while remaining open to the world? How can Muslims deal with their diversity and overcome their multiple divisions? Can Muslim majority societies create new models of development, education and social justice; can they imagine economic alternatives?
Can the 1,000-year Islamic civilisation make an original contribution to the concert of cultures and civilisations? Everywhere, Muslim women and men, individuals and societies, ask themselves the same burning questions. The crisis drags on; no answer seems in sight. The light at the end of the tunnel seems nothing but an illusion.
Islam’s spiritual, religious and philosophical message is as clear as it is demanding. Humans are free beings who must assume full responsibility for their freedom by striving spiritually and intellectually for peace. Islam means the quest for peace: that of the heart as well as that of society: peace between citizens as well as nations. The message requires that we not neglect a single condition of peace, to keep constantly in mind the order and priority of ultimate goals. And if the ultimate of these goals is to respond to the Creator, and to love Him, if the essence of hope goes beyond the horizon of our earthly lives, it is no less true that life on this earth (“do not forget your part in this world”), knowledge (a message for those “imbued with intelligence”), dignity (“We have conferred dignity upon the children of Adam”), freedom (“No compulsion in religion”) and justice (“God commands justice and spiritual excellence”) are values and principles, and objectives to be attained in the here and now.
Our ultimate goals are clear; believers must participate in a jihad of humanity, dignity and conscience with their full hearts, minds and souls. As free beings they are called upon to act, with all the intensity of their faith, and to reform themselves and the world. Faith and belief in the One and Only means that they must never abandon hope among human beings. The most visible, the most serious signs of the crisis of the contemporary Islamic conscience can be found in the inversion of means and ends, and in the reversal of the order of the essential and the secondary. Inversion and reversal best describe the crisis that afflicts virtually every aspect of human activity, up to and including Islam’s spiritual message.
Believers are summoned to live their lives in the presence of the One and Only, by consciously behaving “as though they can see Him”. But many today, obsessed by their actions, their organisations, their movements, by power and money act in His name while forgetting the ultimate goal. Means have replaced ends, and the spiritual basis of action is lost, like a person at prayer who focuses his entire attention on the ritual movements of his body while forgetting to turn his heart upwards.
In dismay, some have sought to resist the drift by turning to spiritual teachings or joining mystic circles. Some have found genuine equilibrium, while among others we can observe troublesome excesses. While spirituality should help us change our lives, such peoples’ spiritual experience stands apart from their lives, which remain almost entirely untouched by the spiritual and ethical teachings they claim to follow. Still others turn their hearts almost entirely over to masters and guides whom they idealise, reducing themselves to a childish state. But at the heart of the Islamic message lies the shaping of free, responsible and autonomous beings in their relationship with God and with man. We have entered into a danger zone where a warped Muslim spirituality engenders human beings who are either potentially schizophrenic or suffer from serious emotional handicaps. The education of the heart should remind us of the ultimate goals of our existence; instead it ends up neglecting the most basic of all teachings. Spiritual exile is a means whose ultimate objective is reconciliation of the human being with his heart in a state of humility and peace. To exile oneself for the sole sake of exile may well be, in this perspective, a trap set by the ego that must be mastered and that, maliciously, may well end up dominating once again: the inversion is a pernicious one.
We find the same inversion when we examine the question of Islamic rules and regulations (the licit and the illicit, halal and haram) in today’s world. Whether a question of personal practice or social regulation, or even of applied legislation, we encounter the same dilemma: the hypertrophy of norms that limit, forbid and accuse while forgetting the higher objectives for the attainment of which these selfsame rules and laws were established in the first place. Discounting the most literalist trends, this reflex can be noted among a large number of jurisprudents (fuqaha) and simple believers who confuse respect for norms — while failing to take account of context and ultimate goals — with fidelity and its finality. The rule should be the means; now it has been transformed into an end.
Of course, we must assert, and emphasise, that clear-cut and unchangeable practices, duties, and proscriptions exist and must be respected. It is also true that some of them require knowledge of the context in which they apply if we wish to remain faithful to their logic. If we fail to do so, fundamental issues are neglected: over-definition of norms makes it possible to legitimise attitudes that may be legally licit, but do not respect Islamic ethics in matters of behaviour.
The treatment of animals provides an excellent example. Concentrating on the licit quality of meat slaughtered according to strict Islamic rules leads to overlooking, and not challenging, the unacceptable treatment of living creatures (including by Muslims). Examples are legion: the licit nature of the rule by no means guarantees the ethical basis of behaviour. This holds true in such diverse areas as social justice, relations between women and men, racism, pluralism, etc. The obsession with norms transforms them into an ultimate goal; they are no longer a means to an end, but the end itself, an inversion of priorities: the essence is forgotten and vanishes.
The Messenger (PBUH) clearly defined his message in terms of rules and regulations but also above and beyond them: “I was sent to complete proper [ethical] behaviour.” A rule is only as good as the ultimate goal that lends it its meaning. To pray without remembering the Unique One is no longer to pray.
The crisis is acute. To resolve it there must be an awakening, a renewal, and a revolution — in the literal sense — in our way of thinking. What the current state of confusion, the inversions and the reversals reveal is a state of mind, a collective psychology that, for generations, has attempted to integrate — to the point of transforming it into second nature — the idea of the victim who must so surround himself with rules, regulations and interdictions that he ultimately denatures the very meaning of Islam’s teachings. Shaped by psychological victimhood, constantly on the defensive, the norm indeed becomes an objective in and of itself, a limit, a framework that must be affirmed in order to prevent the loss of selfhood, alienation and ultimately, disintegration off the self. Such an attitude, natural enough as a first reflex of survival, can only produce a crisis of confidence and meaning if we remain entrapped by it, as we are today.
We are coming to the end of a historic cycle the likes of which Islamic civilisation has experienced many times before. Scholars and thinkers of the new generations will emerge to carry out the fundamental reform as to the way of reading the sacred texts in a spirit of renewal, faith and courage. Women and men who embody a reform of consciences that resists the dehumanisation of their spiritual being, who refuse to accept the world as it is, and who commit themselves to reform in their hearts and societies, not by adapting to what they have become, but by transforming them and leading them to what they must become, in freedom, dignity and peace.
Regards

Zulkifli Hasan
With Yvonne Ridley, Dr. Mazlee and my Palestinian friend in Durham.
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