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Thursday, 16 August 2012

Islamic finance body plans scholar accreditation, ethics code



* To focus on Malaysia, then expand globally
* Currently has over 60 members
* Will launch financial literacy test this year
* Accreditation will be points-based system
* Body could reprimand scholars violating code
By Bernardo Vizcaino
DUBAI, Aug 15 (Reuters) - A fledgling industry body of Islamic scholars wants to develop a global code of ethics and a professional development programme for scholars, in order to improve standards in the industry, its president told Reuters.
The plan takes aim at a weakness in Islamic finance which is slowing the industry's growth. Boards of scholars at financial institutions rule on whether instruments and activities obey religious principles, but there is no single, commonly recognised set of qualifications for the scholars.
This has fostered confusion when scholars' rulings contradict each other. And because scholars are paid by the institutions whose products they vet, the industry is open to accusations of conflicts of interest.
The Malaysian-based Association of Sharia Advisers in Islamic Finance (ASAS), set up in April last year, plans this year to launch a test for the financial literacy of scholars, and ask its members to sign up to a code of ethics; if they break the code, they may be reprimanded by ASAS.
Both initiatives will initially apply only to Malaysia but the group aims eventually to extend it around the world, said Malaysian-born ASAS president Aznan Hasan, a scholar who sits on several sharia boards across the globe.
"We want to have a programme that can have an impact on the industry," Hasan said by telephone from Kuala Lumpur.
GUIDANCE
ASAS, which currently has over 60 members, will offer guidance on issues such as how to appoint sharia boards and address potential conflicts of interest, he said.
The financial literacy test will form the basis of an accreditation programme that could start as early as the first quarter of next year, aiming to encourage the professional development of scholars through a points-based system.
This would address concerns that some scholars "may be static in terms of their knowledge", said Hasan. "If we are not careful, someone who claims to be a scholar could give wrong advice."
ASAS members will be able to earn points towards their accreditation by enrolling in training courses offered by regulatory bodies, private providers or ASAS itself.
The body plans to build its membership of scholars on a voluntary basis in the first two years, and then propose that membership becomes compulsory for all scholars in Malaysia from 2015 onwards. Although its initial focus will be Malaysia, it aims eventually to have an international footprint that could encompass all sharia scholars.
"We need to lead by example first," said Hasan, adding that it would be difficult to persuade other countries to join without proof that the system worked.
ASAS will offer a venue for discussion and be proactive in shaping the role of scholars in the industry, Hasan added.
REGULATOR
Malaysia's securities commission is also considering the possibility of developing an accreditation programme for Islamic scholars, but this is only at the exploratory stage and could take no less than three years, a source involved in the discussions told Reuters.
If ASAS's accreditation scheme spreads globally, it could help to create more uniformity and consistency among sharia boards' rulings and in standard-setting for the industry.
Currently, standards set by industry bodies such as the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions are enforced in some countries in full or in part, while others use them as a reference.
"Regulations come in many different ways; some are lenient and some are structured," said Hasan, who among other posts sits on the sharia boards of the Malaysian central bank and of Dar Al Istithmar, the firm which advised Goldman Sachs on its controversial plan, which has still not gone ahead, to issue a $2 billion sukuk.

(Reuter / 15 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Contribution of Zakat to national economy stressed


'Zakat' could contribute to the country's annual development programme (ADP) by alleviating poverty and propelling the nation.

Dr Kabir Hasan, professor of New Orleans University of USA, made the observation during an interview arranged by the Centre for Zakat Management (CZM) in the city recently.

The CZM, initiated by Rahimafrooz Industrial Group, has been working with an Islamic model characterised by institutional management of Zakat for poverty alleviation since 2008. 

"If Zakat fund is collected and managed properly, it can be used to create a pull of funds, which can be used in financing development activities and can replace government expenditures," Dr Kabir Hasan mentioned.

"In Bangladesh, Zakat funds could have contributed up to 21 per cent (Tk 30,683 million) of ADP in 1983-1984 and up to 43 per cent (Tk 220,000 million) in 2004-2005," according to Prof Hasan. 

"In the developing countries such as Bangladesh, foreign aid from donors contributes a significant portion of the development budget. If Zakat funds are properly managed, the funds could replace foreign aid and therefore significantly reduce the debt burden," said the development management researcher.

Replying to a query, he said an Islamic approach to poverty alleviation would ideally involve a holistic approach including a set of anti-poverty measures such as increasing income level with pro-poor programmes, achieving an equitable distribution of income and providing equal opportunities for all social segments.

About the role of state in Zakat collection and disbursement, Prof Hasan said although in early Islamic states, Zakat funds were collected and managed by the state, Zakat management has gone through historical challenges after the extinction of early Islamic states. 

After the colonial era, a few Muslim countries such as Yemen, Saudi Arabia, Libya, Sudan, Pakistan and Malaysia have opted for mandatory Zakat management through government, he said, adding other countries such as Bangladesh, Egypt, Jordan, Kuwait, Iran, Bahrain and Iraq have formed specialised state institutions but participation of public is made voluntary.

He, however, stressed the need for designing Islamic Micro-Finance Institution by incorporating the two basic and traditional institution of Islam-the Awqaf and the Zakat.


(Financial Express / 16 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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