Sharia standard misinterpreted as exclusiveness

Provocative statements are commonplace in the world of politics, academia, business and finance. They serve a ‘perception of purpose', from distraction to direction and denial to dissatisfaction.

Put differently, such comments are viewed as ‘info-tainment' to stand out in a competitive market environment.

At the recently concluded Islamic finance Euromoney event in London, a comment caught the attention of many people in Islamic finance industry. If it was uttered by a person who didn't have such a high profile in the Islamic finance space, it probably would not have gotten media attention. It is well known that public figures are often misquoted, accidentally or otherwise, and usually the error is corrected thereafter. 

QUERY: Does it imply that high-profile people in Islamic finance need to be careful of what is uttered to the media, as there are consequences to not only their employer and the brand, but also the credibility and reach of this embryonic industry?

The comment

"A conventional bank, with the exception of multilateral development banks like the World Bank and the Asian Development Bank, should not be allowed to issue sukuk," said Badlisyah Abdul Gani, chief executive of CIMB Islamic, the Islamic unit of CIMB Group, Malaysia's second biggest bank.

Let's assume Gani was misquoted. However, to date, no correction has been issued.

Let's also assume that Gani was correctly quoted. So, what are the implications?

• Why prohibit such banks from issuing sukuk? Is it to ensure the proceeds are deployed in a Sharia-compliant manner, hence, ‘policing the proceeds?' However, money is typically fungible, as once proceeds get mixed with existing funds, it becomes indistinguishable. For example, when HSBC Middle East raised $500 million (Dh1.83 billion) via sukuk last year, it was welcomed, but when Goldman Sachs does it ($2 billion), the message is not the same.

It should be noted that Qatar's Central Bank has also chimed into the conventional banks and sukuk saga, whereby such banks are prohibited in investing in sukuk in Qatar. Is the rationale to reduce the ‘leakage' of compliant money that lands in conventional banks?

The issue comes down to Sharia compliance of the transaction (consensus of most in the industry) versus an outright blanket prohibition against conventional banks issuing sukuk (micro-minority view).

In the news article, one of the leading Sharia scholars, Dr Mohammad Al Gari, said: "The fact that these sukuks are issued by Goldman Sachs or by another western bank really makes no difference whatsoever as far as judgement of Sharia is concerned.

"An institution has no religion and therefore cannot be judged on religious grounds. Our judgement is always on the structure of the transaction, and whether it is permissible or not and had the necessary Sharia requirements."

• What about leakage, where Islamic banks place money on Murabaha basis with conventional banks? Where do the Islamic banks think such money is placed by conventional banks? It's well known that conventional banks have provided know-how on compliant short-term liq-uidity and hedges for the longer term.
   
• Islamic finance has worked hard to shatter the myth of exclusiveness, only for Muslims. It is all about inclusiveness, and such comments leading toward exclusiveness are counter-productive and contrary to the spirit of the industry and its aspirations.
   
• These comments are expected from the anti-Sharia movement, which wants such banks to terminate their presence in Islamic finance. Such talk may help with league table standing or pleasing shareholders in the short term, but will not assist the industry for larger market share.
   
• What about Muslims, like myself, residing in the United States, India, Australia, and others, why add another obstacle for us to overcome? Islamic finance in Muslim minority countries is doubly important because in addition to serving the financial needs of the Muslim community, it represents Muslims as responsible and enfranchised members of the society. In fact, Islamic finance is one of the best forms of da'wa, in the sense of presenting Islam in terms that people can understand and respect.

The "common word" mentioned in the Quranic verse concerning da'wa may be interpreted today as "finance" because money and finance are the most widely understood language of today's global society.

Conclusion

Shaikh Yousuf Talal Delorenzo, a leading Sharia scholar based in Dubai, provides a fitting conclusion. He said, "The industry cannot fail to recognise that it is a part, a small part, of a larger system and that it does not operate in a vacuum. Moreover, it was only when larger, global financial entities became involved that Islamic finance really began to progress. Islamic finance ‘arrived' on the international financial radarscope when international bankers and lawyers became involved in a major way. Their many contributions have been key to the industry's development, and it is hard to imagine the state of the industry today without their participation and cooperation.'

Let's hope the correction will be issued soon.

The writer is Global Head, Islamic Finance and OIC Countries, Thomson Reuters. Opinion expressed here is the writer's own and does not reflect that of his own organisation or that of Gulf News.