Merungkai Persoalan Krisis di Syria

Merungkai Persoalan Krisis di Syria

Zulkifli Hasan

Berbanding dengan siri kebangkitan rakyat di Tunisia dan Mesir, krisis di Syria mendapat liputan dan analisis yang agak berbeza daripada pelbagai pihak. Secara umumnya, terdapat dua teori yang berkaitan dengan krisis di Syria. Golongan pertama berpandangan bahawa jatuhnya rejim Bashar Al-Assad akan mengukuhkan pengaruh Israel di Timur Tengah. Golongan kedua pula mempunyai teori dan pandangan yang berlainan di mana krisis di Syria dianggap sebagai sesuatu yang ’genuine’ dan penentangan terhadap rejim Bashar al Assad adalah suatu tuntutan jihad. ’Dichotomy’ dan dua teori yang bertentangan ini telah menimbulkan kesulitan kepada aktivis dan badan bukan kerajaan yang sedang memperjuangkan nasib dan kehidupan rakyat Syria yang kini menghadapi krisis kemanusiaan yang sangat membimbangkan. Hingga kini dilaporkan bilangan penduduk yang menghadapi krisis kemanusiaan akan mencecah lebih 2.5 juta.

Pandangan yang menganggap rejim Bashar al Assad sebagai pengancam Israel dan kejatuhannya hanya akan mengukuhkan hegemoni Israel di Timur Tengah ini disuarakan oleh ramai penganalisis politik dan jurnalis antarabangsa seperti Robert Fisk termasuk tokoh ulama iaitu Sheikh Imran Hossein. Robert Fisk di dalam artikelnya bertajuk ”Bashar al Assad, Syria, and The Truth About Chemical Weapons” menyuarakan pandangannya mengenai usaha Amerika memburukkan rejim Bashar al Assad dengan hasrat untuk menjatuhkannya melalui tuduhan menggunakan senjata kimia. Ini disokong oleh Professor Michel Chossudovsky di dalam artikel beliau ”Confronting Iran, Protecting Israel: The Real Reason for America’s War on Syria”. Beliau berpandangan bahawa kejatuhan rejim al Assad hanya akan mengakibatkan Syria dapat dikuasai oleh sekutu atau agen Amerika dan Israel dan dengan itu, Hamas dan Hezbollah dapat dihapuskan sekali gus melemahkan Iran yang dianggap musuh dan ancaman kepada mereka. Terdapat juga segelintir ahli akademik tanahair yang cenderung dengan pandangan ini malahan melabelkan pejuang pembebasan Syria ini dengan gelaran ”pemberontak” dan ”pengganas” yang sama sekali bertentangan dengan mauqif ulama muktabar.

Berdasarkan permasalahan di atas, penulis ingin berkongsi pandangan mengenai krisis yang berlaku di Syria dan cuba merungkaikan beberapa persoalan yang kini membelenggu pemikiran sesetengah pihak. Penulis telah merujuk pelbagai sumber makalah, artikel, buku, berita, laporan, jurnal dan sebagainya termasuk menghadiri syarahan ulama tersohor Syria, maklumat sumber pertama sahabat-sahabat di Syria serta penerangan oleh aktivis yang telah masuk ke Syria. Artikel ini juga ingin memperkenalkan buku terkini tulisan Dr. Zulkifli Al Bakri bertajuk ’Krisis Syria dan Mauqif Ulama’ yang menjelaskan pendirian dan pandangan ulama muktabar mengenai krisis di Syria. Berdasarkan sumber-sumber sahih ini, penulis sangat berkeyakinan bahawa krisis di Syria ini adalah sesuatu yang ’genuine’ dan segala bentuk perjuangan dan bantuan adalah dianggap suatu jihad. Rakyat Syria yang berjihad menentang kezaliman dan kemungkaran diketuai rejim Bashar al Assad ini bukanlah ’pemberontak’ tetapi adalah pejuang pembebasan dan jika gugur dikategorikan sebagai syahid. Bersama-sama dengan rakyat Syria bangun menentang kezaliman, keganasan, ketidakperikemanusiaan dan ketidakadilan adalah suatu tuntutan dan kewajipan umat Islam.

Bagi memahami krisis di Syria ini, perlu juga dilihat terlebih dahulu Syria dari sudut demografi. Syria mendapat kemerdekaan pada 1946 dengan penduduk berjumlah lebih 23 juta. 75% adalah Muslim-sunni tetapi kerajaan Syria dikuasai oleh parti Baath iaitu diwakili minoriti Alawi yang hanya 3-4%. Parti Baath yang minoriti Alawi ini bermazhab Syiah Nusairiah dan berideologi sosialis. Berdasarkan demografi ini, amatlah bermanfaat untuk menelusuri serba sedikit asal usul rejim al Assad di Syria ini. Setelah kemerdekaan Syria telah dipimpin oleh keluarga al Assad. Kemuncak kezaliman rejim al Assad ini telah berlaku pada 1982 di bawah pimpinan Hafiz al Assad (memerintah selama 32 tahun) sewaktu tragedi berdarah di bandar Hamah yang meragut nyawa lebih 40 ribu penduduk, 15 ribu hilang tempat tinggal dan 150 ribu menjadi mangsa pelarian. Bukan itu sahaja, dilaporkan lebih 88 buah masjid dimusnahkan dan infrastruktur awam dihancurkan. Sebegitu ramai ulama dan ilmuan Islam yang dipenjara, diseksa dan dibunuh. Di antara ulama yang menjadi pelarian politik ialah Sheikh Abu Fattah Abdu Ghuddah, Sheikh Said Hawa, Sheikh Muhammad Ali Al Sabuni, Sheikh Muhammad Hashim al Majzub, Sheikh Usamah al Rafie dan ramai lagi.

Bashar al Asad telah mengambil alih pemerintahan daripada Hafiz al Assad pada tahun 2000 setelah Perlembagaan Negara dipinda semata-mata untuk membolehkannya menjadi Presiden yang pada itu belum mencapai umur 40 tahun yang dibenarkan. Beliau meneruskan kekejaman lalu dengan beberapa insiden kemanusiaan seperti peristiwa berdarah Qamisyli pada 2004 dan 2008, peristiwa Hasakah pada 2004 dan peristiwa penjara Soydana. Tragedi 2011 hingga hari ini adalah yang paling trajis di mana telah meragut nyawa ratusan ribu rakyat Syria yang majoritinya adalah Muslim-sunni. Ini disahkan oleh Utusan Khas PBB dan Liga Arab, Lakhdar Brahimi. Malahan kekejaman rejim Bashar al Assad juga telah meranapkan pelbagai kesan sejarah penting Islam seperti Maktabah al Khanji yang dianggap antara perpustakaan tertua dunia yang mempunyai koleksi berharga yang tidak ternilai. Melalui fakta-fakta ini, sudah jelas lagi bersuluh betapa tidak logiknya sebarang pandangan yang menyokong rejim Bashar al Assad atas apa sahaja alasan. Malahan melabelkan rakyat yang menuntut keadilan dengan gelaran pemberontak atau pengganas adalah suatu perkara yang amat dikesalkan.

Selain itu, adalah amat penting juga untuk mengenali Alawi atau Shiah Nusairiah yang pengikutnya menguasai kerajaan Syria. Shiah Nusairiah di Syria ini mempunyai hubungan amat rapat dengan Iran dan Hizbullah. Ini kerana terdapat segelintir umat Islam termasuk di Malaysia yang tidak mempunyai gambaran sebenar malahan memberikan sokongan kepada rejim Bashar al Assad dan menganggap Iran serta Hizbullah sebagai pembela agama dan memberi ancaman kepada Israel. Dilaporkan juga Iran telah membekalkan pelbagai jenis senjata kepada Syria. Ayatullah Ali Khomeini pernah mengeluarkan fatwa bahawa wajib rakyat Iran mempertahankan rejim al Assad. Dalam hal ini, kita perlu merujuk kepada pandangan dan fakta-fakta mengenai shiah Nusairiah ini. Sebenarnya, terlalu ramai ulama muktabar telah terlebih awal memberikan fatwa mengenai kesesatan Syiah Nusairiah. Ibn Taimiyah, Ibnu Kathir, al Zahabi, Sheikh Abdul Aziz Baz dan Sheikh Ali al Sabuni secara jelas memfatwakan shiah nusairiah sebagai sesat. Sheikh Gharib al Sirjani mengatakan bahawa kesesatan shiah Nusairiah ini adalah berasaskan ijma. Oleh itu, sebarang pandangan yang menyokong rejim Bashar al Assad yang juga shiah Nusairiah ini adalah dianggap perkara mungkar dan menyesatkan.

Bagi mengukuhkan pandangan betapa rejim Bashar al Assad ini perlu diperangi dan dijatuhkan, penulis ingin merujuk kepada beberapa pendirian ulama muktabar kontemporari seperti yang dinukilkan di dalam buku ’Krisis Syria dan Mauqif Ulama”. Sheikh Abdul Aziz Baz pada 1982 berfatwa bahawa wajib memberi bantuan kepada umat Islam yang dizalimi oleh rejim Al Assad. Sheikh Yusuf al Qaradhawi dengan tegas menyatakan bahawa wajib bagi rakyat Syria untuk bangkit menentang rejim al Assad malahan menggesa jemaah haji berdoa untuk kehancurannya. Sheikh Ali al sabuni yang baru-baru ini berada di Malaysia dengan tegas menggesa umat Islam untuk melakukan apa sahaja termampu bagi membebaskan rakyat Syria. Ramai lagi ulama tersohor seperti Sheikh Soleh al Luhaidan, Sheikh Muhammad Hasan, Sheikh Aidh al Qarni, Sheikh Muhammad al Irifi, Sheikh Ahmad Qattan dan Sheikh Wahbah al Zuhaili memberikan pandangan yang sama di mana menyeru umat Islam untuk membantu rakyat Syria menjatuhkan rejim Al Assad.

Krisis Syria dan Mauqif Ulama oleh Dr. Zulkifli Al Bakri

Pandangan dan pendirian ulama muktabar mengenai kewajipan membantu rakyat Syria ini disahkan dan disokong oleh Resolusi Muktamar Syria di Istanbul iaitu persidangan para ulama sedunia pada 1-3 Julai 2012. Muktamar ini secara umumnya menegaskan bahawa revolusi rakyat Syria adalah kebangkitan yang hak dan benar dan adalah menjadi kewajipan semua umat Islam untuk membantu rakyat Syria dan menjatuhkan rejim Bashar al Assad. Muktamar ini merayu agar semua negara Islam di bawah pertubuhan OIC serta negara-negara lain untuk memberikan bantuan kemanusiaan termasuk membekalkan persenjataan. Informasi dan maklumat mengenai resolusi muktamar seperti ini dan bukti-bukti kezaliman rejim Bashar al Assad mungkin tidak sampai atau lambat diperolehi oleh umat Islam dan ini menyebabkan ada yang mempersoalkan tindakan rakyat Syria bangun menentang kerajaan Syria. Ini bukanlah sesuatu yang asing kerana rejim Bashar al Asad seringkali cuba untuk menyembunyikan keganasan mereka. Umpamanya telah ramai wartawan yang telah terkorban semasa membuat liputan di Syria seperti Mika Yamamoto, jurnalis Jepun yang sangat aktif melaporkan kebenaran krisis di Syria.

Dunia telah menyaksikan kebangkitan rakyat bermula di Tunisia diikuti Mesir, Libya, Syria dan kemungkinan negara-negara Timur Tengah yang lain. Namun, revolusi di Syria masih dalam proses menuju kemenangan. Malahan persoalan yang lebih besar ialah nasib Syria pasca revolusi. Berbanding dengan revolusi di Tunisia, Mesir dan Libya, krisis di Syria adalah sedikit berlainan kerana ianya melibatkan pelbagai isu geo-politik termasuk permasalahan shiah Nusairiah serta sokongan oleh Iran dan Rusia dan beberapa negara lain. Teori menjatuhkan rejim al Assad sebagai tindakan meningkatkan hegemoni dan penguasaan Israel di Timur Tengah juga adalah satu perkara yang tidak mempunyai asas yang kuat. Pendirian atau mauqif ulama muktabar di seluruh dunia mengenai kewajipan umat Islam untuk membantu rakyat Syria mengesahkan bahawa kebangkitan rakyat Syria adalah sesuatu yang hak dan benar. Kezaliman dan keganasan tidakperikemanusiaan tahap luarbiasa rejim Bashar al Assad adalah tindakan yang tidak boleh sama sekali diterima akal. Rejim Bashar al Assad ini mesti dibawa ke muka pengadilan dan dibicarakan di Mahkamah serta segala keganasan dan kezaliman ini didedahkan kepada dunia supaya tragedi kemanusiaan ini dapat memberi pengajaran kepada semua umat manusia.

Regards
Zulkifli Hasan

Srebrenica, Bosnia and Herzegovina. More than 8000 Muslims were killed here in July 1995.

Conceptualising and Locating the Social Failure of Islamic Finance: Aspirations of Islamic Moral Economy vs the Realities of Islamic Finance

Conceptualising and Locating the Social Failure of Islamic Finance: Aspirations of Islamic Moral Economy vs the Realities of Islamic Finance

Mehmet Asutay *

Abstract

Islamic moral economy emerged in the modern sense in the late 1960s and early 1970s as an attempt to develop an authentic understanding of the Islamic system of economics and develop policies accordingly. As part of this concept, Islamic banks and
financial institutions are considered as the institutional aspects of this moral economy, which can pool their resources together to fi nance real economy activity. However, the transformation of Islamic banking into a commercial banking form since mid-1975 has resulted in unprecentedly successful fi nancial performance, which, however, has been at the expense of the ‘social and economic developmentalist’ aspirations of Islamic moral economy. Therefore Islamic banks and fi nancial institutions are criticised for their social failure. This paper, therefore, aims to explore the social failure of Islamic banks and fi nancial institutions and locate the sources of this failure. In moderating the social failure of Islamic banks and fi nancial institutions, this paper suggests that a third institutional development in the form of non-banking fi nancial institutions, such as Islamic social banking, Islamic microfi nance, an awqaf system, ar-rahn or Islamic pawnbroking, and zakah funds should be created with the objective of serving the social and developmental needs of Muslim societies.

Read Mehmet Asutay: Aspiration and Realities

Regards
Zulkifli Hasan

With my sifu, Dr. Mehmet Asutay, Durham University, UK

Islamic Financial Services Board needs to apply bolder approach

Islamic Financial Services Board needs to apply bolder approach

Mushtak Parker Saudi Gazette Available at: http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20121223146846:

LONDON– The Islamic Financial Services Board (IFSB), the prudential and supervisory standard setting body for the global Islamic financial services industry, celebrates its 10th anniversary in 2013. Today, the IFSB is a far cry from those early days in March 2003 when it started operations at its headquarters in Kuala Lumpur with Prof. Rifaat Abdel Karim at its helm as its inaugural secretary-general.

While his successor, Jaseem Ahmed, a former senior executive at the Asian Development Bank, who took over in April 2011, is trying to stamp his own style and vision on the multilateral organization building on the achievements of the past decade, it is clear that the latter still has several major challenges ahead to help facilitate an orderly and holistic development and integration of the global Islamic financial services industry.

It remains a moot point whether the IFSB is perceived to be constrained by its mandate, which is to introduce prudential and supervisory standards, guidelines and practice notes for the global Islamic finance industry in consultation with various stakeholders to promote its orderly and sound development and thereby contributing to financial stability and economic growth.

But to pursue an agenda relating to prudential and supervisory standards seemingly detached from the regulation, authorization, monitoring and enforcement of Islamic financial institutions (IFIs) in member jurisdictions per se is inexplicable because in today’s globalized world they are inextricably linked to each other.

What the IFSB must not do is to behave as if it is a mere multilateral political organization dabbling in passing with financial sector prudential standard setting matters. Financial sector prudential and supervisory standard setting, as other functions relating to the sector, has to be seen to be above politics, national interest and petty nationalisms.
Otherwise the exercise becomes compromised at the onset and the achievements and progress similarly stunted.

This is where character, political will and a thought provoking focused plan of action come into play. The onus is not only on the senior management but perhaps more importantly also on the Governing Council of the IFSB, which met in Jeddah recently and appointed Abdullah Saoud Al-Thani, Governor of Qatar Central Bank (QCB), and Mohammed Rosli Sabtu, Managing Director of Autoriti Monetari Brunei Darussalam (AMBD), as Chairman and Vice-Chairman of the Council for 2013 respectively.

The IFSB has accomplished a lot, but it needs to use these achievements to consolidate its future strategy with a much more urgent and bolder approach, even at the risk of upsetting some of its members.

Its achievements are in some respects understated because they do not necessarily translate into instant headline grabbing or immediate impact initiatives given the nature of standard setting.

In December, for instance, the Council of the IFSB at its meeting in Jeddah hosted by the Islamic Development Bank (IDB) admitted eight new members into the organization.

This, according to the IFSB, brings the total membership of the Board to 184 members comprising 55 supervisory and regulatory authorities from the banking, capital markets and Islamic insurance (takaful) sectors in 41 jurisdictions, as well as eight international inter-governmental organizations, and 121 market players (financial institutions, professional firms and self-regulatory organizations).

The newly admitted members include the Capital Markets Authority, Kuwait and the National Insurance Commission, Nigeria as Full members; and the Financial Reporting Foundation, Malaysia, Prudential BSN Takaful Berhad, Malaysia, Safran Stratejik Yonetim ve Teknolojik Danismanlik Hizmetleri Ltd. Sti., Turkey, the Central Bank of the Turkish Republic of Northern Cyprus, Standard & Poor’s, Singapore, and the Gulf Bond and Sukuk Association, United Arab Emirates as Observer members.

In fact, the IFSB has managed to do far more to promote the internationalization, the demystification and the market education of Islamic finance among central banks and regulatory authorities, multilateral organizations such as the World Bank, the International Monetary Fund (IMF), the International Finance Corporation (IFC), the Basle Committee, and the International Organization of Securities Commissions (IOSCO), and other institutions in the space of a decade than the industry per se has managed to do in its three or so decades of contemporary existence.

And yet even here there remain huge gaps. For instance many central banks or regulatory authorities from the 56 Organization of Islamic Cooperation (OIC) countries are yet to become members. Some prominent regulatory authorities are merely Observer members as opposed to Full members. These are revealing organizational nuances, which affect the very structure of the Board. There are those who question the current organizational model of the IFSB, which seems to have a perennial resource problem. They would prefer the organization to adopt an equity with concomitant voting rights structure, which could give it more resource stability and therefore operational efficacy.

Similarly, the IFSB could hand hold new markets and entrants to Islamic finance by issuing a definitive Islamic Banking Authorization Standard.

Take the case of the Central Bank of Oman, for instance, which oddly is an Observer member while the Capital Markets Authority of Oman is a Full member of the IFSB. The sultanate, following the promulgation of a Royal Decree No 69/2012 issued on Dec. 6, 2012 by the Omani Ruler, Sultan Qaboos Bin Said, officially introduced Islamic banking into the local market on Dec. 8 by “amending some provisions of the Banking Law issued under Royal Decree No 114/2000” and adding “a new Title Six – Islamic Banking” to the said law.

The Royal Decree No 69 became effective as soon as it was published in the Official Gazette No 993 two days later. This means that banks in Oman, hitherto the only Gulf Cooperation Council (GCC) country not to have introduced Islamic banking in its jurisdiction, can now offer Islamic banking products to customers and businesses subject, of course, to the approval from the CBO.

However, even the IFSB admits that the best way to facilitate Islamic banking in a jurisdiction is through the adoption of a dedicated stand alone Islamic Banking Law which takes into consideration the specificities of Islamic banking principles. Yet key members continue to ignore this because they perceive Islamic banking as a mere niche market segment or others still perceive Islamic banking as a mere product offering for which it would suffice for the risks and marketing to be managed and regulated.

Asked “why has the Central Bank of Oman decided to go down this route by amendments to the existing law instead of trying to adopt a new dedicated Islamic banking law”, Hilal Ali Saud Al-Barwani, Deputy Governor and Vice President, Banking Control and Legal Department, Central Bank of Oman, told the Saudi Gazette that it was “really a question of speeding up the process, so it’s expediency. We believe the conventional banking law covers a number of things. So it was only a question of adopting articles specifically for the Islamic banking sector.” Al-Barwani also suggested that Oman may adopt a dedicated Islamic banking Law in the future as the industry settles down and grows.

The point here is that if the IFSB had an Authorization Standard in place it could have helped its members such as Oman to start off on the right track with its legal framework instead of delaying it to the future. Surely this would contribute as much to market perception, certainty and confidence as would purely prudential and supervision standards whether on risk and liquidity management, insolvency measures for both IFIs and takaful companies, Shariah standards, etc.

In fact, IFSB Secretary General Jaseem Ahmed, at the 9th IFSB Annual Summit in Istanbul in May 2012, alluded to the fact that underdeveloped enabling environments, weaknesses in the risk and liquidity management infrastructures within Islamic financial institutions (IFIs), the lack of greater consistency in Shariah opinions, and constraints to human resource capacity continue to be a cause for concern and a focus of policy action.

On the positive side, for instance on the adoption and implementation of IFSB standards by member countries and organizations, Jaseem Ahmed said the Board is making some progress, albeit slow. Another important sign is the emergence of national roadmaps and strategies for the development of Islamic financial sectors, and for their prudential regulation and supervision.

The IFSB in March 2012 launched a new medium term strategy for the period 2012-2015, the Strategic Performance Plan (SPP) that will focus on: i) strengthening the stability and resilience of Islamic finance through the development of a range of new standards and guiding principles aligned with the changes in the global regulatory environment; ii) broadening the range of cross-sectoral prudential and supervision standards and guiding principles including capital markets and takaful thus supporting the development of new instruments; iii) educating its stakeholder community about its work and standards so as to support the adoption and implementation of these; and iv) the launching of a revised “10-year Framework and Strategies for the Development of the Islamic Financial Services Industry” which was first developed by the IFSB in collaboration with the Islamic Development Bank (IDB) and its research arm, the Islamic Research and Training Institute (IRTI).

“The pursuit of financial stability”, said Jaseem Ahmed, “does not however solely depend on regulatory development and prudential standards. It depends also on collaboration and cooperation mechanisms that help all stakeholders towards achieving the common goals of a sound and sustainable financial services industry.”

Indeed, the IFSB and IOSCO are cooperating on introducing “Disclosure Requirements for Islamic Capital Market Products”. The Secretary General of IOSCO, David Wright, has in the recent past called for greater harmonization in disclosure requirements across jurisdictions where Islamic capital markets products are offered.

Wright stressed that “the recent financial crises highlighted the importance of sound disclosure regimes in mitigating systemic risk and building confidence in the financial markets. Given the tremendous growth of the Islamic finance industry – an increasingly important segment of the global financial markets – it is essential to achieve greater harmonization in disclosure requirements across jurisdictions where Islamic capital market products are offered.”

In response, Jaseem Ahmed, emphasized that promoting cross-border financing and investment through Islamic finance is critical to attaining the depth and scale in Islamic capital markets needed to be competitive. “This will require the adoption of robust regulatory and disclosure practices that give confidence to investors and consumers alike. IFSB hopes that this collaboration with IOSCO will facilitate a process leading to a set of practices that could be harmonized or mutually agreed upon,” he added.

Perhaps the IFSB can be excused for choosing the optimistic theme, “The Future of the Islamic Financial Services Industry: Resilience, Stability and Inclusive Growth”, for its 10th Anniversary Annual Summit which Bank Negara Malaysia, the central bank, has offered to host on May 14-17, 2013 in Kuala Lumpur.

The challenge for 2013 is to match this optimism with a more urgent and bolder operational plan through the adoption of not only the usual suspects of outstanding standards and guidelines but also others which are outside that operational black box – all of which would make the IFSB a more effective and relevant organization serving the global Islamic financial industry.

Regards
Zulkifli Hasan

Brussel, Belgium

Dispelling misperceptions about Islamic finance

Dispelling misperceptions about Islamic finance

By Rushdi Siddiqui Available at: http://www.theedgemalaysia.com/highlights/227766-dispelling-misperceptions-about-islamic-finance.html

IF we were given an opportunity to pitch Islamic finance to US President Barack Obama as a potential item on the agenda for addressing the financial meltdown at the next world leaders’ summit, how would the conversation flow?
He, being a cerebral and poll-conscious president, would probably ask the tough questions, primarily political with public-sensitivity implications. Perhaps, the question and answer session would go like this:
Obama: The US is a secular democracy with separation between church and state by the Constitution. How can faith-based finance work here?

Rushdi: On every US dollar bill, there are the words, ‘In God We Trust’. We in the industry have taken that maxim literally and turned it into rules-based finance. Let’s remove the word ‘Islamic’ and call it what it really is — ‘risk sharing participation finance’. The credit, subprime and eurozone debt crises were a combination of excessive leverage, Mount Everest-sized over-the-counter derivatives, unbridled speculation in toxic asset classes and so on with no real connection to the real economy. That imposed a real systemic risk on the global economy.

Participation banking — as it is called in one of America’s closest allies, Turkey — is about asset-backed financing. Hence, it is a link to the real economy and the amount of money raised is proportionate to the underlying asset. It has been called ‘boring finance’ as it is about leasing, trading and investing. However, that is the vogue now. For example, at the peak of the US subprime crisis, Fortune 500 company GE raised money via an Islamic bond called sukuk.

There is a small but vocal anti-syariah movement in the US and it alleges a link between Islamic finance and terrorism. If allowed in the US, it is a slippery slope to undoing the Constitution.

Where is their evidence of a link? The UK, a close ally of the US in war against terror, has five Financial Services Authority-approved Islamic banks and has been involved in Islamic finance since the early 1980s. And it is still a secular democracy with a robust parliament.

This is about a ‘clash of misperceptions’, not civilisations. It is well known that the longest lines are at the US embassy to get a visa, be it tourist, education or work, and many people have left repressive societies to start new lives in America. They are not interested in bringing the Trojan horse of repressive policies to US shores.

Let’s take what I call the ‘podium test’, whereby we have a conference, under the patronage of the leader, in cosmopolitan Muslim countries with reasonable entry visa policies — say, Kuala Lumpur and Dubai — and home to a variety of conferences. Let’s invite these ‘dedicated’ people to present their evidence and links and let the stakeholders of participation finance rebut, redress and remove these allegations.

So what Muslim country has Islamised its economy and is it exportable to the US and elsewhere?

First, Islamic finance exists in various forms in 11 of the G20 countries, including the US, where a Jewish-owned community bank, Devon Bank, offers Islamic finance products.

Second, the US Treasury, under your predecessor George Bush, had a resident Islamic scholar educating the staff and the day after you were elected in November 2008, there was an Islamic Finance 101 programme at the Treasury in which my colleagues and I participated.
Malaysia, a multi-ethnic and multi-religious country, embarked on Islamic finance in 1983 and now about 20% of its banking is aligned to such principles. The methodical approach is both top-down and bottom-up, supported by successive prime ministers, central bank governors, Securities Commission and industry bodies. Hence, there is a robust regulatory, legal and tax infrastructure with certain needed [initial] subsidies.

However, Malaysia’s 2012 Islamic finance is not wholesale exportable to many countries that still lack the infrastructure. Thus, it will not happen overnight in the US or elsewhere, and if one tries to fast-track it to capture the surplus liquidity of the Gulf Cooperation Council countries, the law of unintended consequences will probably kick in, causing more challenges than providing financial solutions.

In other words, today, participation finance is really a domestic phenomenon, and to export it, five major considerations need to be addressed: syariah, tax, accounting, regulations and standardisation.

Does this mean special and separate rules, legislation and tax need to be written? No, the UK provides a good example of ‘refining’ legislation, like the removal of double stamp duty on Islamic mortgages.

So, Islamic finance seems to be about disinformation mediation [by one group] and inadequate information by your industry?
Yes, in both instances. The most valuable commodity in the world is not oil, gold or even the greenback, but information. Most credible jurisdictions have laws against, say, inside information.

The industry needs to establish a ‘professionally run and well-financed’ Islamic information industry body to dispel myths, warehouse information, undertake global marketing, provide crisis management and so on, and it would be ideal to house it in Washington, DC. This way, you and your successors have immediate access to what Islamic financing is all about.

Regards
Zulkifli Hasan

The Louvre Museum, Paris

Islamic financial system shows inherent resistance to global crises

Islamic financial system shows inherent resistance to global crises

By Khurram BaigPublished: December 17, 2012 Available at: http://tribune.com.pk/story/480449/islamic-financial-system-shows-inherent-resistance-to-global-crises/

Islamic finance is one of the fastest growing segments of the global financial industry. In 2008 the size of the global Islamic banking industry was estimated about $820 billion. Now it is closer to $1.35 trillion according to Global Islamic Finance Report (GIFR), and is expected to cross $1.6 trillion before the end of the current fiscal year.
The Islamic financial industry now comprises 430 Islamic banks and financial institutions and around 191 conventional banks having Islamic banking windows operating in more than 75 countries, according to the GIFR.
Pakistan is also a fast growing country with regards to Islamic finance and growth has been phenomenal. Starting from scratch in 2002, it is now about 8% of the local banking industry.

While Islamic banks play roles similar to conventional banks, fundamental differences exist. The central concept in Islamic banking and finance is justice, which is achieved mainly through the sharing of risk. Stakeholders are supposed to share profits and losses, and charging interest is prohibited.

There are also differences in terms of financial intermediation, the paper notes. While conventional intermediation is largely debt based, and allows for risk transfer, Islamic intermediation, by contrast, is asset based, and based on risk sharing. One key difference between conventional banks and Islamic banks is that the latter’s model does not allow investing in or financing the kind of instruments that have adversely affected their conventional competitors and triggered the global financial crisis. These include toxic assets, derivatives, and conventional financial institution securities.

Analysis done by the IMF suggests that Islamic banks fared differently, if not actually better than conventional banks during the global financial crisis. Factors related to the Islamic banking business model helped contain the adverse impact on their profitability. In particular, smaller investment portfolios, lower leverage, and adherence to Shariah principles—which precluded Islamic banks from financing or investing in the kind of instruments that have adversely affected their conventional competitors — helped contain the impact of the crisis when it hit in 2008.

The study used bank-level data covering 2007−10 for about 120 Islamic banks and conventional banks in eight countries — Bahrain, Jordan, Kuwait, Malaysia, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates. These countries host most of the world’s Islamic banks (more than 80% of the industry, excluding Iran) but also have large conventional banking sectors. The key variables used to assess the impact were the changes in profitability, bank lending, bank assets, and external bank ratings.

While the study showed that Islamic banks were able to better withstand the initial impact of the crisis, the following year (2009), weaknesses in risk management practices in some Islamic banks led to a larger decline in profitability compared to that seen in conventional banks. The weak 2009 performance in some countries was associated with sectoral and name concentration—that is, too great a degree of exposure to any one sector or borrower. In some cases, the problem was made worse by exemptions from concentration limits, highlighting the importance of having a neutral regulatory framework for both types of banks.

Despite the higher profitability of Islamic banks during the pre-global crisis period (2005–07), their average profitability for 2008–09 was similar to that of conventional banks, indicating better cumulative profitability and suggesting that higher pre-crisis profitability was not driven by a strategy of greater risk taking. The analysis also showed that large Islamic banks fared better than small ones, perhaps as a result of better diversification, economies of scale, and stronger reputation.
Islamic banks contributed to financial and economic stability during the crisis, given that their credit and asset growth was at least twice as high as that of conventional banks. The IMF paper attributes this growth to their higher solvency and to the fact that many Islamic banks lent a larger part of their portfolio to the consumer sector, which was less affected by the crisis than other sectors in the countries studied.

However the post-crisis years have also shown where the Islamic banking sector is relatively weak. It lacks as efficient a structure for liquidity management as seen in conventional banking. The IMF report also recommended that the sector needs a stronger supervisory and legal infrastructure, including bank resolution.

The paper also recommended that Islamic banks and supervisors work together to develop the needed human capital, saying expertise in Islamic finance has not kept pace with the industry’s growth.

Regards
Zulkifli Hasan

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