ISFIRE August 2019 Issue by aatazazfaisal

London Dubai (DIFC) Kuala Lumpur Formed in 1998 and established for over 20 years Intermediary services & systems solutions to connect the global Islamic ﬁnancial market responsibly DD&Co Limited Sharia’a Compliant Markets Asset Commodity Facilitation

DDGI Limited

ETHOS AFP™

Direct Investments & Strategic Partnerships

Award Winning Automated Trade and Post Trade Services Platform

Supporting Clients’ Sharia’a and Business Focused Requirements across Treasury, Capital Markets, Asset Management, Retail Banking & Insurance Products Responsible Asset & Commodity Inventory 24/7 Global Client Coverage

Full Straight Through Processing with Real Time Documentation Risk Mitigation, Governance & Financial Control Capability Facilitator of the Islamic Dealing Adaptor powered by Reﬁnitiv

Optimum Input Eﬃciency, Customised Dashboards

www.ddcap.com Observer member of:

Islamic Platinum Business Account Only available for businesses with an annual turn-over of R5 million - R60 million

Designed to help add the most value to your business while meeting your banking needs the Islamic way.

Dedicated Business Manager

24/7 Business Desk

Slow Domestic & International Lounge Access

Same Cheque number for easy transition

eBucks for Business

Continue earning a Shariah compliant indicative monthly profit share with the linked Islamic Business Savings Pocket

Visit www.fnb.co.za/islamicbanking or download the app. A division of FirstRand Bank Limited. An Authorised Financial Services and Credit Provider (NCRCP20).

NOTE FROM THE

EDITOR

IN CHIEF

Women empowerment is in vogue. There are a lot of women empowerment movements going around, focusing on women rights to equal opportunities, and gender equity and equality. This upward stream is a direct result of emphasis upon this extremely important aspect by the UN in its Sustainable Development Goals (SDGs). This issue of ISFIRE presents a perspective on women empowerment in the context of the 2nd WOMANi Awards held this summer in Dubai, which honoured and celebrated women for succeeding in an otherwise male-dominated sector of business and finance. Cambridge IFA’s WOMANi Awards have emerged as a prestigious felicitation and recognition programme. Earlier this year, the 4th Global Good Governance Awards (3G Awards) were held in Jakarta, hosted by the Ministry of Tourism Indonesia. It was a colourful cultural event attended by more than 200 guests from around the world. We have included a report on the awards ceremony for the readers to visit and relive the memories. We have a special treat for the professionals in the Islamic financial industry, as we have an exclusive interview with Dr. Nabil Ghalleb, the founding CEO and Chairman of Zitouna Tamkeen, the first and sole Islamic microfinance institute in Tunisia. Dr. Ghalleb talks about how and why he set up the institute and how is it promoting the Islamic finance industry in Tunisia. We also have some regular features, such as Prof. Humayon Dar’s Pause for Thought and Standardisation of Notation in Islamic Economics, Banking & Finance, with a new Cambridge Note on Wa’ad. We are delighted to include a short and light interview with an award-winning professional, Dr. Hylmun Izhar, Senior Economist IRTI; as well as articles on fintech, and employee needs in the contemporary Islamic banking world. We sincerely hope that you would continue to enjoy the insights presented by WOMANi winners in their interviews to ISFIRE, while also opening doors to the new technological advancements in blockchain and fintech, that could practically change the world as we know it.

Happy Reading!

Dr. Sofiza Azmi Editor-in-Chief

ISSN 2049-1905

An official publication of Cambridge Institute of Islamic Finance

FOUNDER Professor Humayon Dar EDITOR-IN-CHIEF Dr. Sofiza Azmi EDITORIAL ASSOCIATE Tabinda Hussain INTERNATIONAL EDITORIAL BOARD CHAIRMAN Stella Cox DDCAP Professor Mehmet Asutay Durham University Professor Dr. Mehmet Bulut Istanbul Sabahattin Zaim University, Turkey Dato’ Dr. Asyraf Wajdi Dusuki Islamic Finance Expert Professor Joseph Falzon University of Malta Dr. Mian Farooq Haq State Bank of Pakistan Professor Kabir Hassan University of New Orleans Dr. Hylmun Izhar Islamic Development Bank Dr. Rizwan Malik Islamic Finance Expert Moinuddin Malim Alternative International Management Services Dr. Aishath Muneeza INCEIF Dr. Asmadi Mohamed Naim Universiti Utara Malaysia Professor Muhamad Rahimi Osman Universiti Teknologi MARA M. Saleem Ahmed Ranjha Wan Miana Rural Development Programme Dr. Irum Saba Institute of Business Administration, Karachi Dr. Mughees Shaukat College of Banking and Financial Studies, Muscat Dr. Usamah Ahmed Uthman King Fahd University of Petroleum & Minerals ADVERTISEMENTS, COMMERCIAL AND SUBSCRIPTION ENQUIRIES Faisal Mehmood E: fmehmood@cambridge-ifa.net T: +44 (0) 207 078 7297 PUBLISHED BY Cambridge IFA, United Kingdom

On behalf of Cambridge Institute of Islamic Finance www.cambridge-iif.com

T: +44 (0) 207 078 7297 E: info@cambridge-ifa.net W: www.cambridge-ifa.net

TABLE OF

CONTENTS TALKING POINTS 32 SMART CONTRACTS: ISLAMIC JURISPRUDENCE

STANDPOINT MIAN NAZIR

ISFIRE REVIEW

20 PURPOSEFUL LEADERSHIP & SUSTAINABILITY –

CAMBRIDGE LECTURE

TAN SRI ABDUL WAHID OMAR

TECHNICAL NOTE 82 STANDARDISATION OF NOTATION IN ISLAMIC

ECONOMICS, BANKING & FINANCE CAMBRIDGE PROJECT

ISFIRE PERSONALITY

77 DR. HYLMUN IZHAR SENIOR ECONOMIST, ISLAMIC RESEARCH & TRAINING NSTITUTE, ISLAMIC DEVELOPMENT BANK GROUP 78 ISFIRE PERSONALITIES 2012 – 2019

PAUSE FOR THOUGHT

18 REGULATING SHARI’A: IS IT GOOD OR BAD? PROF. HUMAYON DAR

PERSPECTIVES 66 WOMEN EMPOWERMENT; WHY IS IT IMPORTANT?

ISFIRE COVER STORY

10 AN EXCLUSIVE INTERVIEW WITH DR. NABIL GHALLEB CHAIRMAN AND FOUNDING CEO ZITOUNA TAMKEEN

ISFIRE REPORT

40 4TH GLOBAL GOOD GOVERNANCE AWARDS 2019 CELEBRATING EXCELLENCE IN GOVERNANCE AND SUSTAINABILITY

52 2ND WOMANi AWARDS 2019

TOP 300 MOST INFLUENTIAL WOMEN IN ISLAMIC BUSINESS AND FINANCE NAMED

POINT OF VIEW

48 ISLAMIC FINANCE 5.0 IN THE INDUSTRIAL

REVOLUTION 4.0

DR. HYLMUN IZHAR 74 EMPLOYEE NEEDS: A NEW CHALLENGE FOR

ISLAMIC BANKS?

KHALFAN ABDULLAH

WOMANi INTERVIEW 58 RATIH RACHMAWATY 60 MAYA MARISSA MALEK 62 ANITA MENON 64 FITRI HARTATI

This publication is provided for information purposes only and should not be treated as financial, legal or policy advice in relation to Islamic banking and finance in general or to any Islamic financial institution in particular. The reader should not act on the basis of the information contained in this publication without having obtained individual, expert advice. In this respect, publishers, editors, contributors, sponsors and other supporters of the publication do not assume responsibility for any damage resulting from decisions made by the reader on the bases of the information contained herein.

ISFIRE COVER STORY

AN EXCLUSIVE INTERVIEW WITH

DR. NABIL GHALLEB CHAIRMAN & FOUNDING CEO ZITOUNA TAMKEEN You are the founding CEO of Zitouna Tamkeen, the first and sole Islamic microfinance institution in Tunisia. Can you give a brief overview of Zitouna Tamkeen — the mission and goals of the organizations? The idea to establish Zitouna Tamkeen was the product of the successful experiences of the Islamic Development Bank (IsDB) in the Economic Empowerment (EE) field. These experiences influenced me and made me determined to draw upon the already developed programmes to model the idea in an institutional framework with accumulated expertise to become a reference point that can be developed and replicated in other IsDB member countries. It was also intended to be a strong tool in the multilateral’s repertoire to get people employed, fight poverty and achieve sustainable development. Zitouna Tamkeen was founded, therefore, with the goal of promoting the financial and economic inclusion of Tunisia’s youth and disadvantaged populations. Through an innovative approach we are committed to offer financial and non-financial services to promote the development of projects offering major socio-economic impact, especially in the marginalized regions of Tunisia. Our EE approach is focused on value chain financing. The objective is to scan for high potential value chains in terms of job creation and to calibrate the intervention points to reach the greatest number of beneficiaries via the financing of EE projects. Since the beginning, Zitouna Tamkeen has set ambitious targets for EE projects, which include sustainable development, progressive coverage of regions through fixed and mobile branches, interventions in promising sectors, and entrepreneurship capacity building programmes. Zitouna Tamkeen’s mission is to be a partner in the economic integration of deprived populations through Islamic microfinance, promoting private initiative sand supporting selfoperating projects. The ambitious vision of Zitouna Tamkeen is to become a major player in the Islamic microfinance sector at both national and international levels.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

Besides the IsDB, which is the main sponsor of the idea; the founders of Zitouna Tamkeen are Zitouna Bank (the largest Islamic bank in Tunisia), Zitouna Takaful, Poulina Group Holding and Delice Group Holding (both ranked among the top 5 largest business groups in Tunisia), the Tunisian Sovereign Wealth Fund, and Moroccan Jaida Fund (owned by the Moroccan Sovereign Fund, the French Sovereign Fund, the French Development Agency AFD, the German Development Agency KFW and the Moroccan Postal Bank). Zitouna Tamkeen has taken giant strides and quickly positioned itself in the microfinance sector in Tunisia, gaining national and international acclaim despite its young age. Just one year after commencing its activities, the institution has ventured to double the objectives it announced at inception in terms of the volume of financing, number of branches and the number of beneficiaries, given the huge demand for its products and services. Today, a little more than two years after operations began, the institution has succeeded in financing more than 12,000 income-generating projects. These have led to the provision or sustainability of more than 35,000 direct and indirect jobs through a network of 19 branches where most of them are in the hinterland and least developed regions, three regional master branches and two mobile ones. The mobile branches provide access to the outlying and difficult regions. It is noteworthy that the institution attaches considerable attention to women empowerment. This has been translated into 40% of the its financing going to women, a proportion that will increase to more than half by the year 2021. The institutions interventions cover all productive sectors without exception and places marked emphasis on the farming sector, agro-allied industries and services, various commercial activities and small industries. This blends with the comparative advantages of the Tunisian economy and the map of the country’s economic fabric. The institution has offered a package of products that have been designed in accordance with the needs of the beneficiaries and/or the target regions. Zitouna Tamkeen also

W W W. I S F I R E . N E T

ISFIRE COVER STORY

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

ISFIRE COVER STORY entered into partnerships with hundreds of suppliers from various fields and negotiated with them in the context of framework contracts to give preferential prices to customers that could reach up to 20% of what is on offer in the market. This is what gives the institution significant competitive advantage over its competitors.

become confident in their capacities and potentials. The EE methodology enables the vulnerable categories and the unemployed youth the opportunity to participate effectively in value-added economic projects and to obtain the resources and infrastructure necessary to move, produce, market, and obtain the necessary financial resources.

This effort is a part of an overall institutional strategy aiming to build up a network of 40 branches, five mobile ones and five regional master branches in order to economically empower more than 80,000 beneficiaries to create and/or sustain more than 300,000 jobs. The overall financing portfolio is expected to be around 600 million dinars over the next five years to secure a market share varying between 15% and 20%.

EE is support and accompaniment until independence in management becomes possible and appropriate economic decisions can be taken. It also covers access to the minimum necessary social services. In another aspect, EE is reliance on self – employment and private initiatives, just as it is the realisation of this difficult balance between social and economic performance. EE is all of the foregoing or at least some of them.

Zitouna Tamkeen is widely known as an Economic Empowerment institution rather than a microfinance institution. What is Economic Empowerment and to what extend is it different from Microfinance? ‘Empowerment’ is a term that has been embraced by a diverse range of institutions, from the World Bank to Oxfam to many more radical NGOs, but few of these share common definitions. According to the World Bank, empowerment is the expansion of assets and capabilities of poor people to participate in, negotiate with, influence, control and hold accountable institutions that affect their lives. Another definition states that economic empowerment (EE) is the process through which those who are currently disadvantaged achieve equal rights, resources and power. Most definitions suggest, therefore, that empowerment is the acquisition of authority or power in decision-making process and the use of resources. As per EE, it is an innovative idea to maximise developmental impact. EE is the movement from a relief, humanitarian and aid approach to support as well as development approach, seeing the targeted people as key partners in development who have latent capacities that should be discovered while working to change their mentalities so that they can

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

It is important to note that the financing portfolio of Zitouna Tamkeen is divided into two parts: individual financing portfolio such as the one known in the sector and the portfolio for financing EE projects which, according to the five-year plan, is expected to grow to represent the bulk of the institution’s overall portfolio. In terms of services, Zitouna Tamkeen offers a package of financial and non-financial services, single handedly or with the assistance of its partners. The Institution mostly proposes the project idea since it is the only active institution in the sector which has a specialised department in project engineering (the only one of its kind compared with conventional competitors), out of belief in the importance of regeneration of project ideas. It brings together the beneficiaries in sustainable structured projects and offers the necessary financing alongside accompanying services and support, not only through a group of business officers but also seeking assistance from a group of experts and technicians that are engaged depending on the need and nature of the project. The department of project engineering defends the beneficiaries’ interest in almost everything. It finds investment opportunities; develops the opportunity in the form of business plans; builds important smart partnerships for the success of the project; negotiates

W W W. I S F I R E . N E T

ISFIRE COVER STORY with the suppliers and opens the market, whether local or international; designs new forms of guarantees, and proceeds to offer the beneficiaries real investment opportunities. These projects normally begin with pilot phase and would later develop gradually.

Does youth economic empowerment help in strengthening democratic transitions? Give an example or talk about the projects you are undertaking in Tunisia. The Tunisian’s revolution and the so-called Arab Spring are an important reminder of why unemployment, more importantly, youth unemployment should be at the forefront of Arab world’s growth agenda over the next decade and even longer. We have seen how in several countries the weight of the crisis has fallen disproportionately on the young people, leaving a legacy of failed hopes, anger and ultimately mistrust in the values of our society. With a large proportion of young people not having any defined role in society, there is a high risk of social cohesion and of mistrust in public institutions being undermined. Youth unemployment could be not just a threat to authoritarian regimes but also to democracies. In fact, youth unemployment is associated with political violence and armed conflict in developing countries. GDP growth, inequality and inflation are determinants of political instability and unemployment. There is a positive effect of inequality on political violence. Tensions among youth because of inequalities can lead to the outbreak of conflict. In general, countries with good economic outcomes have a lower risk of armed conflict outbreak. The effect of democratic institutions is weak, democracy does not necessarily imply stability. To avoid instability and violence, the focus should be on monitoring economic opportunities for young people, and particularly on providing employment or educational opportunities for youth in periods of economic decline. I’m the President of a young NGO called Tamkeen for Development. Two years ago, our NGO launched a United Nations Democracy Fund - funded project in Tunisia. The project skillfully links EE and political participation for youthat-risk in poverty-prone areas of the country. In fact, the project aims to integrate youth in the country’s social fabric and democratic transition by equipping them to participate in their regions’ economic and political life. A group of young men and women are empowered through the project’s economic inclusion scheme, with the underlying principle that once youth are given the opportunity to become economically independent, they will gradually gain the confidence to proactively engage in civil and political life. The project selected 1,200 youths living in one of the least developed zones of Tunisia for training in soft skills, project management, participative democracy, and entrepreneurship. Of these, 200 youths received additional technical training in cattle breeding, after which they were given financial support and market opportunities to launch their own income generating activity. In another innovative approach, the project is managed through a youth-led steering committee, allowing them to exercise leadership and launch public W W W. I S F I R E . N E T

initiatives where they can put into practice the foundations of democracy. So far, the main achievements of our project are: (i) spontaneous creation of 13 Civil Society Entities managed 100% by our youth population including 8 NGOs and 3 GDAs (Agricultural Development Groups); (ii) Involvement of a group of young people in Municipal elections held in 2018 as independent observers and/or candidates; (iii) 60% of our sample participated in the municipal elections against a participation rate of 30% on national level; (iv) More than 40% of our sample has exercised their voting rights for the first time in their lives. This is an illustration of how EE helps in strenghtening democratic transitions.

Any plan to duplicate your experience at an international level? Early performance indicators of our approach are very promising, and the model is attracting the interest of local and international partners. This is why we are establishing the International Center for Economic Empowerment (ICEE),which is a consulting services company offering advisory services to build and develop the EE business projects and institutions worldwide. It will contribute to equip NGOs; banks and microfinance institutions with EE business methodologies and strengthen their corporate and human capital capacities. The focus will be on producing customised development programme proposals for global clients interested in achieving sustainable development goals. Leading technical assistance, training and advisory services will be at the forefront of the offer. So far, we have started transferring our knowledge and technical know how to three African countries in collaboration with international donors and local partners.

As a thought leader in microfinance, what do you perceive is the future of Islamic microfinance and what will it look like say 5 or 10 years from now? Islamic microfinance represents the confluence of two rapidly growing industries: microfinance and Islamic finance. It has the potential to not only respond to unmet demand, but also to address some weaknesses of conventional system in alleviating poverty and achieving positive economic impact. It is true that Islamic microfinance is still in its infancy and has yet to reach scale as Islamic microfinance industry accounts for less than 1% of the global microfinance outreach. However, I expect it will continue to grow at double digit figures to finally emerge from a market niche to a rapidly growing industry worldwide within 5 to 10 years due to the following reasons: •

Microfinance in general and Islamic microfinance in particular remain important tools in tackling poverty, reducing financial exclusion and promoting social inclusion. The key role of microfinance in these areas was first recognised in the United Nations Millennium Development Goals (MDGs) then confirmed in the United Nations Sustainable Development Goals (SDGs). Since Islamic microfinance is said to emphasise more on ethical, moral and social factors to promote equality and fairness for the prosperity of the society; one can view it as offering a better financing tool compared to the conventional microfinance system and therefore it is more in line with SDGs. |

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

ISFIRE COVER STORY equal opportunities for all members of society as positive measures to improve the life of the poor. Moreover, Islamic microfinance has the potential to increase the overall market share of Islamic banking and finance by bringing untapped populations into the formal financial services sector. However, fundamental challenges need to be considered before Islamic microfinance sector could continue its rapid growth and impactfully embark on a journey of participating in achieving SDGs, namely: (i) Modern, attractive, flexible and easily adaptable regulation for the various types of microfinance investment vehicles along with a friendly tax regime; (ii) More aggressive involvement from development donors and Islamic financial institutions particularly banks in the Islamic microfinance sector; (iii) Extensive use of technology and innovation; (iv) Innovation in terms of products delivery and business models; (v) Wider outreach; (vi) Better organisational efficiency; (vii) Better governance and increased stakeholder responsibility; (viii) Market data collection and standardisation; (ix) Increase diversity of the sector’s funding sources; and (x) Investment in human capital and talent development. •

•

The current state of many Muslim countries provides Islamic microfinance institution (IMFIs) without a choice but to continue their best to fight poverty and serve the poor. IMFIs are not only working in an economically or politically demanding environment, i.e. high poverty or unemployment rate, but also providing services in hostile environment caused by prolong armed conflicts or recurring natural disasters. In fact, with an estimated 650 million Muslims living on less than US$2 a day, 89 million Muslims need urgent humanitarian relief. With 36 armed conflicts out of 50 are happening in Muslim countries, 60% of refugees in the world are concentrated in Muslim world, 20% to 40% of poor population cite religious reasons for not seeking conventional microfinance; the need to bring together faith and finance is clear and obvious. Islamic microfinance fits into the asset-based economic paradigm and equity objective of Islamic moral economy as well as fulfilling all other social expectations.

Sustainability has gone mainstream now. In part, the pressure to embrace sustainability has been catalysed by the desire for a sustainable future. What does sustainability mean to you as a leader? Why is sustainability becoming an important component of strategic thinking for leaders of today?

At the country level the role of Islamic microfinance is gradually gaining momentum, especially in countries where microfinance sector is near maturity such as Bangladesh, Indonesia and Sudan. Here, IMFIs are seen to improve lives and income level of the poor, and at the same time contribute positively to employment creation in the country.

As a CEO of an EE institution, sustainability could be also translated into the 17 SDGs adopted by the United Nations, which include amongst other things:

Severe criticisms have been addressed to Islamic banks and other prominent Islamic financial institutions for their ‘failure’ to serve the 650 million poor in the Muslim countries. Therefore, it is expected that Islamic banks will invest more in the Islamic microfinance sector as it is often held up by industry practitioners and policymakers as the shining example of the social and participatory nature of Islamic finance. It is also said to be at the heart of Islamic finance as it addresses one of the fundamental roles of financial intermediaries demanded by Shari’a - income growth, functional distribution of income and promoting

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

For me, sustainability is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. We must simply consider the future when it comes to making our decisions about the present. Sustainability is also the ‘’duty of care’’ regarding how we operate. Companies should always consider the three Ps of the triple bottom line while attempting to lead a successful and sustainable business: People, Planet and Profit. Seen from another angel, sustainability is about freeing people from the fear of uncertainty.

• • • • •

•

The end of poverty and hunger Better standards of education and healthcare To achieve gender equality Sustainable economic growth while promoting jobs and stronger economies All of the above and more while tackling the effects of climate change, pollution and other environmental factors that can harm and do harm people’s health, livelihoods and lives. Sustainability to include health of the land, air and sea

Sustainability is important because after all our businesses can only be as strong and healthy as the communities that we proudly serve. In a free enterprise, the community is not just another stakeholder in the business but in fact the very purpose of its existence. W W W. I S F I R E . N E T

ISFIRE COVER STORY What is the key to sustainability for Islamic microfinance institutions the likes of Zitouna Tamkeen?

As CEO, how do you balance the need to challenge staff but not overwhelm them?

Islamic microfinance institutions likewise Zitouna Tamkeen are usually small and relatively young corporations where the sustainability concept is not so deeply embedded in their corporate DNA. Therefore, I believe that the CEO’s role is most important in ensuring corporate sustainability. Corporate sustainability can be achieved by implementing the concept of triple bottom line, i.e. people, planet and profit. CEOs play a pivotal role in clarifying and motivating their teams to adopt it as a strategic concept. A CEO is also the person to impress upon the top management team the importance of social, environmental and ethical aspect of corporate governance.

As a CEO, I have to ensure that my employees feel challenged with their jobs, but not overwhelmed. To achieve this goal; creating a clean, well-maintained, and organised working environment where they can do their work and feel comfortable is a must. Practically speaking, the following leadership keys are essential:

According to a survey conducted by Accenture and UN Global Compact, 93% of CEOs view sustainability as critical to their company’s success. And yet, there is scant evidence that it has been implemented extensively at most companies. I believe this gap exists because most CEOs do not recognise the leadership role they personally need to play to embed it deep and wide in their organisations. Why is that? By and large, it’s because for most employees, the issue is still not considered relevant to the business, and they do not make a connection between sustainability and the company’s mission, or to their own day-to-day jobs. So, unless employees – at every level – see CEO leadership, they are not going to engage and drive change. But that does not mean that if the CEO doesn’t provide active and visible leadership, nothing can get done. It just doesn’t get as far or far enough.

W W W. I S F I R E . N E T

Delegate wisely - I have learned to effectively delegate both the responsibility for completing assignments and the authority required to get things done. Controlling every little thing that employees do is a big mistake. When I delegate work to employees, I multiply the amount of work I can accomplish while I develop my employees’ confidence, leadership and work skills. Set goals - Every employee needs goals to strive for. Goals ensure that they are working towards the overall organisational goals. I set specific and measurable goals with my employees, then regularly monitor their progress toward achieving them. Communicate - I make every effort to get employees the information they need to do their jobs quickly and efficiently. Make time for employees - Above all, leadership is a people job. When an employee needs to talk with me – whatever the reason may be – I make sure that I set aside the time to do so and focus on the person standing in front of me.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

ISFIRE COVER STORY Don’t take it all too seriously - Without a doubt, running a company is a serious business. However, I don’t miss any opportunity to make Zitouna Tamkeen a fun place to work in, because of which we end up with a more loyal and energised workforce.

corner. These are the things you need to be looking for in the leaders you choose to work with. If you aren’t convinced that a prospective manager or leader will do these things for you, then my advice is to run, and run fast.

How do you empower your people to bring their ideas forward?

What habits have you included in your daily routine to strengthen your leadership skills?

Our slogan at Zitouna Tamkeen is

Being an effective, inspiring, and well-respected leader for your company is not easy. Therefore, leaders should on a daily basis work hard to strengthen their leadership skills. For myself, I try to include some habits in my daily routine to improve my leadership skills and style.

‘‘

You are never too young to lead and never too old to learn. Being an example is not a way of influencing others, it is the only way. Lead by example. Einstein said:

Part of building an empowering environment is dependent on the leader’s ability to run interference on behalf of the team. The leader needs to make sure people are safe doing their jobs and bringing their ideas forward. To make sure this happens in Zitouna Tamkeen; ongoing discussions of the needs, opportunities, tasks, obstacles, projects, what is working and what is not working are absolutely critical to the development and maintenance of a “safe” working environment. As a CEO, I have to also make sure that my people are empowered to make decisions, share information and try new things.

Based on my experience, there are five things successful leaders do to build environments that empower people. First is to give power to those who have demonstrated the capacity to handle the responsibility. Second is to create a favourable environment in which people are encouraged to grow their knowledge, skills and expertise. Third is not to second-guess others’ decisions and ideas unless it’s absolutely necessary. This only undermines their confidence and keeps them from sharing future ideas with you. Fourth is to give people discretion and autonomy over their tasks and resources. Lastly is to recognise, reward and encourage employees often and openly when they put in extra efforts.

If you could rewind the clock to when you first took on a leadership role, what advice would you give yourself about being an effective leader? My advice is be mindful about the individual leader or manager you choose to work for. Based on my experience, and hearing from leaders I’ve worked with, the person you choose to work for is a critical leadership decision. While you may possess strong leadership attributes yourself, they will either be amplified by a great leader, or suppressed by a weak or mediocre leader. Great leaders will unleash your potential. They will actively look for ways to give you exposure to other senior leaders in the company. They will coach you, give you the tough feedback when you need it, and they will always be in your

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

‘‘

As a leader I need to show, not just tell. I must set the tone and my employees will follow it. Communicate effectively. Effective communication is imperative, both in the office and in life. I make sure I am heard and understood, but I also know the importance of listening. Be a mentor to others. Establishing myself as a leader means I’m willing to help other people become leaders too. Make tough decisions. Leaders are often the ones that can move forward with making tough decisions that others are afraid to make. Making tough decisions is one of the most important things I can do. Make integrity a cornerstone. Integrity is the quality of being whole or undivided. Integrity for me is always doing the right thing, even when no one is looking. Integrity is when my actions are congruent with my values. Share your enthusiasm. I don’t miss any opportunity to share my enthusiasm with the staff. People want to be associated with enthusiastic people because enthusiasm truly is contagious. It creates an energy and excitement that dissolves adversity and brightens up life. Lead Courageously. Being a leader is about doing. It’s about getting things done. Courage (contrary to popular belief) is not ‘not being afraid.’ Courage is being afraid and doing it anyway. A lack of courage allows fear to stop all action, all doing, all getting things done. Leaders who do not have courage, are not leaders at all.

W W W. I S F I R E . N E T

ISFIRE COVER STORY

At the end, what is one piece of advice you would give to an aspiring leader? If I have one piece of advice to give to an aspiring leader, I would say listen to your inner voice no matter how loud external noises are. Let your fear know your strengths and try to find your superpower that will allow you to do something youâ&#x20AC;&#x2122;re really proud of, that you can point to as your greatest accomplishment. W W W. I S F I R E . N E T

Be passionate about what you do, which means you have to care about succeeding. You need the courage to initiate, the commitment to do the hard-yards, and the tenacity to see things through in the face of obstacles.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E C O V E R S T O RY

PAUSE FOR THOUGHT

pa se

THOUGHT PROF. HUMAYON DAR

REGULATING SHARIâ&#x20AC;&#x2122;A: IS IT GOOD OR BAD? 18

I S F I R E , AU G U S T 2 0 1 9

PAU S E F O R T H O U G H T

W W W. I S F I R E . N E T

t is absolutely imperative to disallow any kind of Islamic financial business outside the regulatory net to protect the industry from reputation loss. There have been many scandals around Islamic finance. Starting from the scandal of the so-called Islamic money changers in Egypt, Shari’a gold scandal in Indonesia and the most recently hundreds of million dollars of fraud in India in the name of Islamic finance, unregulated or loosely regulated Islamic financial businesses have only inflicted harm. India, being a very large country, is prone to Ponzi schemes. It is, therefore, tempting even for a Muslim to defraud Muslims in the name of religion. The secular government in India does not want to regulate Shari’a and it is consequently losing credibility to run an Islamic financial business in the country. Although the UK has so far opted not to intervene in Shari’a matters related with Islamic banking and finance, the recognition of Islamic banking and finance as a regulated form of business by the financial regulators have provided the required certainty about it. Consequently, Islamic banking and finance continues to attract attention in the country. In many Muslim-majority countries, the governments have also shied away from playing a role in Shari’a governance. It is only recent that some governments have decided to introduce Shari’a Governance Frameworks (SGFs) to introduce discipline to Shari’a assurance relevant to Islamic financial operations and businesses. In the absence of Islamic financial regulations in a country, no ‘aalim or someone who attempts to leverage their association with a scholar or seminary should ever be trusted to start any financial business without getting regulatory permissions. Needless to say, no one else should also be allowed to do any regulated activity without proper permissions. The need for a tight control of financial businesses run by ‘ulama or their close associates is even more paramount as general public is easily influenced by a religious sentiment. The case of unregulated Mudaraba business in Pakistan by a Mufti and defrauding thousands of investors is an example of the regulators turning a blind eye to malpractices in the name of Islamic finance. The end result was loss of billions of rupees of the innocent general public who trusted the ‘aalim. It also raised questions on the credibility of otherwise very tightlyregulated and well-run Mudaraba sector in the country.

W W W. I S F I R E . N E T

PAUSE FOR THOUGHT

It is also true that any wrong-doing by an ‘aalim or Shari’a scholar is scrutinised too brutally by the market players, which in a way is unfair. This, however, allows stakeholders in Islamic banking and finance to preserve sanctity of Shari’a and its torch-bearers. There are some Shari’a advisory firms owned by scholars. This has in the past given rise to some issues concerning conflict of interest. With an increasing focus on Shari’a governance and adoption of Shari’a Governance Frameworks by regulators, the threat of malpractices in the Shari’a advisory businesses owned by scholars will be minimised. Having said that, there are some success stories of ‘ulama or Shari’a scholars pursuing their commercial interests. One such example is described in my forthcoming book, How to Succeed in Islamic Banking and Finance. Dr. Mohd Daud Bakar, founder of Amanie Group of Companies and recently appointed as president of International Islamic University Malaysia, pioneered what he termed as Shari’a entrepreneurship. Many other businesses owned by Shari’a scholars, although successful in their own right, may not necessarily be fully transparent. It is also true that most of the widely respected Shari’a scholars refrain from setting up their own businesses. It is only the tier-2 Shari’a scholars who have struggled in their businesses and hence are prone to failure. Their failure poses a risk to Islamic banking and finance industry and its credibility. In a number of Muslim-majority countries, Shari’a is regulated for a variety of reasons. The most paramount of such reasons is political in nature. Privatisation of fatwa in Islamic banking and finance (through independent Shari’a advisory boards set up by Islamic banks) has worked to an extent but the market and regulators have fast realised that keeping it further in private domain is not going to help. Therefore, following the tradition set by Malaysia by way of developing a comprehensive Shari’a Governance Framework, an increasing number of regulators are now adopting rules and regulations to regulate Shari’a matters related with Islamic financial institutions and transactions. It will certainly help to curb the tendency of some of the players to unilaterally proclaim them Shari’a-compliant or Shari’a repugnant when it suits them. The recent Dana Gas is an excellent example of the latter.

I S F I R E , AU G U S T 2 0 1 9

PAU S E F O R T H O U G H T

ISFIRE REVIEW

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

W W W. I S F I R E . N E T

ISFIRE REVIEW

CAMBRIDGE LECTURE ON SUSTAINABILITY PURPOSEFUL LEADERSHIP AND SUSTAINABILITY BY TAN SRI ABDUL WAHID OMAR

CHAIRMAN OF THE BOARD OF DIRECTORS, UNIVERSITI KEBANGSAAN MALAYSIA (UKM)

he Cambridge Institute of Islamic Finance (Cambridge-IIF) recently held its inaugural Cambridge Lecture on Sustainability on July 12, 2019 at Clare College, University of Cambridge. The lecture on ‘Purposeful Leadership and Sustainability’ was delivered by Tan Sri Abdul Wahid Omar, Chairman of the Board of Directors, Universiti Kebangsaan Malaysia (UKM). Well known as a versatile corporate leader in Malaysia, Tan Sri Abdul Wahid Omar have led the helms of four main organisations in the areas of infrastructure development, telecommunications, financial services and investment management. He had held the post of president and chief executive officer of Maybank, chief executive officer of Kumpulan Telekom Malaysia Berhad, managing director/chief executive officer of UEM Group Bhd, vice executive chairman of PLUS Expressways Bhd and chairman of the Association of Banks in Malaysia. From June 2013 to August 2016, he was appointed Senator and Minister in the Prime Minister’s Department for economic planning before being appointed chairman of Kumpulan Permodalan Nasional Bhd (PNB), the largest fund management company in Malaysia; a post he held until June this year. Tan Sri Abdul Wahid is also a Trustee of the World Wide Fund for Nature (WWF) Malaysia since March 2019.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

Cambridge-IIF is an independent research centre, specialising in the financial sectors of the countries wherein Islamic banking and finance is a significant activity. Leveraging upon the academic resources the city of Cambridge offers, CambridgeIIF is well-positioned to undertake research projects to study the global phenomenon of Islamic banking and finance. Cambridge-IIF aims at conducting policy-oriented research to further spur growth in Islamic banking and finance, with a special focus on the Sustainable Development Goals (SDGs). As part of its activities, Cambridge-IIF plans to host a series of lectures each year with specific themes.

The below is the excerpt of the lecture given by Tan Sri Abdul Wahid Omar. Let me begin by thanking the Cambridge Institute of Islamic Finance for giving me the honour to deliver the inaugural lecture on sustainability at this prestigious University of Cambridge. I must say I was initially undecided on how best to deliver this lecture. However, after consultation with the hosts, I thought that perhaps the best way to talk about Purposeful Leadership is by sharing with you my personal journey and the lessons learnt, eight thoughts on organisational sustainability and, Islamic finance and sustainability.

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

I was born as the ninth of eleven children in the southern state of Johor, Malaysia. Life was tough then. Imagine a family of eleven in a small living space. But we were blessed to have determined parents and support from extended family members; uncles and aunties who supported us financially. We were given good education as the means to get the family out of poverty. When I was young, I was told accountants make a lot of money. That was when I decided to choose accountancy as my profession; arguably the most versatile profession in the world. As an accountant, my ambition was to be a Chief Financial Officer (CFO) of a large public listed company (PLC). That ambition was realised when I was appointed as the CFO of Telekom Malaysia Berhad (TM); one of the top four PLCs in Malaysia in 2001. But I got more than what I bargained for. I was fortunate to have been given the opportunity to lead three major organisations as CEO, i.e. the UEM Group involved in infrastructure development, TM in telecommunications, and Malayan Banking Berhad (Maybank) in banking. This was followed by a term of three years serving as a Senator and Minister, before returning to the corporate sector as Group Chairman of Permodalan Nasional Berhad (PNB) in funds management. For the purpose of this lecture, please allow me to focus on my tenure at UEM Group, TM and Maybank.

W W W. I S F I R E . N E T

ISFIRE REVIEW

Purposeful Leadership 1: Turning around the UEM Group In September 2001, Malaysia’s sovereign wealth fund Khazanah Nasional Berhad (Khazanah), through a special purpose vehicle Syarikat Danasaham Sdn. Bhd. (Danasaham), undertook the takeover of conglomerate United Engineers (M) Berhad (UEM) for RM5 billion (almost GBP1 billion) as part of the effort to remove a major corporate governance ‘overhang’ in Malaysia. Such ‘overhang’ has been affecting market sentiments since UEM’s controversial acquisition of Renong Berhad shares in September 1999. That acquisition caused the Kuala Lumpur Composite Index (KLCI) to decline by some 20% within 3 days. The then Prime Minister’s Special Adviser Tan Sri Nor Mohamed Yakcop was tasked to find someone to spearhead the turnaround of UEM Group. I was identified as one of the candidates to helm UEM Group. I figured out three reasons why I should say yes to such an opportunity. First, I was very familiar with the UEM/Renong Group as they were my client when I was at a local investment bank, Bumiputra Merchant Bankers Berhad. Second, I was experienced in corporate transactions, restructuring and M&As; which I regard as one of my core competencies. And third, I was only 37 years old and felt that if I were to fail, I could always go back to being a CFO in another organisation. Following an intense interview by the UEM Board, I was offered the CEO job and joined UEM Group as its MD/CEO in October 2001. I was reminded that this was not just a job but a purpose; a mission if you like, to address corporate governance issues that have been plaguing the Malaysian corporate sector and help restore confidence in the Malaysian capital market. There were many good reasons why the government, through Khazanah, had to initiate such a bold move. First, the UEM Group owned a number of strategic national infrastructure concessions and assets such as the North South Expressway/Projek Lebuhraya Utara Selatan (PLUS), the MalaysiaSingapore Second Link (Linkedua) and the Light Rail Transit (LRT) systems. Second, the UEM Group had total group debts of some RM30 billion and some banks had very large exposure to the Group. Should the Group fail, some of the banks would suffer considerable losses. And third, the UEM Group had some 24,000 employees and a collapse of the Group would result in significant job losses. The purpose was then very clear to me - turning UEM Group around was not just a task but a cause for us to pursue.

W W W. I S F I R E . N E T

Being my first CEO job, I still remember the nervousness and awkward feeling of having to chair the first UEM Group management meeting. UEM/ Renong Group was a large conglomerate with some eleven public listed companies under its wings, and a thirty-seven year-old “freshie” being the boss to many senior CEOs of subsidiaries and associated companies, was indeed a big feat. But my fellow management colleagues were professional and respected the chair, and they were also hoping that I would be able to steer the Group out of troubled waters after two prior failed attempts of takeover by Khazanah. The first step towards addressing the predicaments of the UEM Group was to unlock the value of its highway concessions led by PLUS. So, with the support of the management team, the shareholder Khazanah, the Government, the bankers and the investing community; we reviewed the toll concession to a more reasonable level (from 5% pa to 3.3% pa) but made the increase automatic every 3 years, restructured the debts of PLUS and thereafter undertook the initial public offering (IPO) and listing of PLUS Expressways shares on Bursa Malaysia in July 2002. This was followed by disposal of non-core assets in order to reduce the Group’s debt to a more manageable level. While I focused my efforts on corporate matters, my fellow management colleagues continued their efforts to improve operational efficiency and profitability. After two and a half years, we managed to halve the Group’s debts to a more sustainable level of RM16 billion with the bulk of them in the form of project financing. The UEM Group was back on profitable track with an annual profit of RM500 million and revalued net assets of RM10 billion. Khazanah not only achieved its main objectives but also doubled the value of its investments within three years.

Purposeful Leadership 2: Creating a Regional Telecommunications Company Having completed my task at UEM Group I returned to TM as CEO on July 1, 2004, as part of the larger transformation of Government Linked Companies (GLCs). The mandate given to me was to transform TM into a regional telecommunications company with particular emphasis on mobile communications. The experience of turning around UEM Group and having been the CFO of TM before made me feel relatively comfortable to take on the CEO task. The mandate was clear; the people and the business were familiar to me. TM had its origin as a government department that was corporatised and subsequently listed on the then Kuala Lumpur Stock Exchange (KLSE) in 1990.

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

W W W. I S F I R E . N E T

ISFIRE REVIEW Although by then TM had been listed for more than 14 years, its corporate culture was still not as competitive as one would expect of a large public listed telecommunications company. An all-round transformation was needed. The purpose was to turn TM into a competitive regional telecommunications company; the Malaysian flag bearer across Asia. Organisationally, we streamlined management structure, brought in new talents to complement the existing technical staff and strengthened the performance management system balanced scorecard. Culturally, we removed the traditional morning and afternoon tea breaks, normally associated with the public sector and implemented a five-day week with extended working hours, normally associated with the private sector. Many people thought removing tea breaks was an impossible task back then but the staff and Union officials were very receptive as they appreciated the need for cultural change and the benefits it will bring to TM and its people. This proved the point that when there is a clear purpose, you can expect to get an all-round support. We improved customer service and revamped our outlets, Kedai Telekom, into a more customercentric network of outlets called TM Points backed by better trained staff, more efficient processes, upgraded IT systems, competitive products and a more pleasant environment. Business wise, we expanded our mobile operations into Singapore and Indonesia and strengthened our presence in Cambodia and Sri Lanka. After eighteen months, we realised that while we have made significant progress overall with improved financial performance and higher contribution from our international operations, our domestic operations were not doing that great. The traditional fixed line business was growing much slower than anticipated due to migration to mobile communications. At the same time, Celcom the domestic mobile communications subsidiary of TM, despite registering higher revenue and profit, was losing market share to rivals Maxis and DiGi. We understood that one cannot succeed as a regional champion if one’s home base is weak. Realising this worrying trend, the TM Board and management formulated and executed a holistic performance improvement programme that enabled TM to grow its data business and Celcom to regain market share. The fundamental improvements in customer service, distribution channels, network quality, business expansion and financial performance were reinforced by a global rebranding of TM into a competitive, private sector driven regional communications company. Having addressed the fundamentals of the business and as part of the efforts to enhance shareholder value, it was decided that the TM Group would be better off being demerged into two separate listed entities. TM International (now known as Axiata Group) with Celcom and other regional mobile communications business under W W W. I S F I R E . N E T

its wings were successfully demerged and listed on Bursa Malaysia in April 2008. That leaves TM being repositioned as the National High-Speed Broadband (HSBB) champion spearheading the national HSBB deployment in Public Private Partnership with the Government of Malaysia. The demerger “unleashed” Axiata Group to grow further across Asia.

Purposeful Leadership 3: Humanising Financial Services I was in the midst of planning for the TM demerger exercise in May 2007 when I received a proposition from the then Chairman of TM’s competitor Maxis Communications, Tan Sri Megat Zaharuddin, who was also a board member of Maybank. The initial plan was for me to join Maybank on June 1, 2008 with a one-month break and one-month handover from the then retiring CEO. As it turned out later, Tan Sri Amirsham was appointed as a Minister in the Prime Minister’s Department in charge of the Economic Planning Unit (EPU) in March 2008. That necessitated me to join Maybank one month earlier than scheduled on May 1, 2008. In the three months prior to my arrival, Maybank had finalised three major acquisitions; An Binh Bank in Vietnam, Bank International Indonesia (BII) and MCB Bank in Pakistan. However, many investors did not appreciate the valuation and decided to sell their Maybank shares. I had to face three major challenges in the first few months at Maybank. First was to follow through on the three major acquisitions costing some RM11 billion and to raise the necessary equity and debt capital required to fund the acquisitions. Second was to deal with the global financial crisis that was unfolding with the collapse of Lehman Brothers, among others, in September 2008. And third was to improve the financial performance of Maybank. Although Maybank was the largest bank in Malaysia, it was growing by only 5% pa between 2003 and 2008 while its competitors such as Public Bank, CIMB and RHB were growing by some 20% pa in terms of assets and profits. If nothing was done and if the trend was to continue, Maybank could have been overtaken by both CIMB and Public Bank in terms of profit within a matter of two years (i.e. by 2010). In fact, the investment and media community had already anticipated that happening when Maybank’s market capitalisation dropped below that of Public Bank’s and CIMB’s in March 2009. The acquisition of BII was particularly complex with many twists and turns. I recall that Maybank Board met twenty-four times in my first year in office, mostly to deal with the BII acquisition issues. After vigorous renegotiation, Maybank managed to complete the BII acquisition at RM1 billion lower |

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

ISFIRE REVIEW than the original price. BII is now an integral part of Maybank’s regional presence and strategy. While the corporate finance team was busy completing the three acquisitions, the rest of the management and staff members were busy implementing the performance improvement programme called LEAP30 - a series of 30 initiatives identified to improve Maybank’s performance and restore its market leadership. After being put on a “burning platform”, Maybankers collectively resolved not to allow Maybank to be relegated to number three in the market. The team worked very hard and after about eighteen months, their efforts paid off. Assets and deposits grew faster, customer service enhanced, asset quality improved and profit after tax bounced back to a record RM3.8 billion for the financial year 2010. Maybank was back as the number one bank in Malaysia and the most valuable company listed on Bursa Malaysia. Whilst the team, the board and shareholders were happy with the outcome; we were concerned about its sustainability. Maybankers were working very long hours due to the need to work around the existing processes and organisational structure; some were already experiencing professional fatigue. Personally, more than half of the time, I would still be in the office beyond midnight. We knew this was not sustainable without addressing the organisational structure and revisiting the mission. We then gathered the top 1,000 managers and leaders of Maybank at a “Tiger Summit” in Putrajaya and agreed to adopt a new mission or purpose for Maybank of Humanising Financial Services. This mission of Humanising Financial Services means: to provide people with convenient access to financing; on fair terms and pricing; advising customers based on their needs and; being at the heart of the community. This was not just a rallying call but a clear purpose or reason for being for the 40,000 Maybankers in Malaysia and across Asia. Organisationally, we created a new “House of Maybank” with three business pillars - Community Financial Services, Global Wholesale Banking, and Insurance & Takaful; with Islamic Financial Services and International Operations straddling across the three business pillars. With the new mission and new “house”, Maybank continued to extend its leadership not only as the number one bank in Malaysia but also as one of the top regional banking groups with presence across all ten ASEAN countries.

Building a Global Leader in Islamic Finance One of the dilemmas facing me and the other Muslim Maybankers was how to mitigate riba or usury element in our personal income. One

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

suggestion that surfaced was to work on a strategy that will result in the majority of Maybank’s financing business being Shari’a-compliant. This became the purpose for me and my colleagues; to turn Maybank in a global leader in Islamic finance. We then came up with the “Islamic First” strategy where Maybank customers will automatically be offered Shari’a-compliant products whenever they wish to open an account, or seek financing to purchase a house, a car, or to fund their business. Should they wish to opt for a conventional product, then Maybank will offer that too. The analogy adopted was that of a supermarket. If one were to go to the Tesco supermarket at Brompton Road, London, one will find a small halal meat section and the rest of the supermarket is not necessarily halal. However, if one were to go to the Tesco supermarket in Malaysia, one will find a small pork and liquor section and the rest of the supermarket is halal. This strategy enabled Maybank Islamic to grow faster such that with total assets of RM225 billion as on December 31, 2018. Maybank Islamic is now the largest Islamic bank in Malaysia (three times larger than the pioneer Bank Islam Malaysia Berhad) and the fifth largest Islamic bank in the world.

Lessons learnt So, what are the lessons learnt? Please allow me to focus on three areas: First is corporate leadership and management. Be clear on your mandate. Perform a full diagnosis of the company. Establish the strengths, weaknesses, opportunities and threats. Match the tasks required with the management talent internally before bringing in reinforcements to fill the gap. Revisit the vision and mission to ensure relevance. Articulate a clear purpose or reason for being. Formulate strategies and action plans together with the management team and syndicate them with all stakeholders including the board, shareholders, employees, regulators and business partners, where relevant. Communicate your plans with all levels of employees, and update them regularly. Set clear and measurable short term and long-term targets with clear timelines and accountability. Implement balanced scorecard/performance management system. Align the interest of the management with that of shareholders. Share the rewards not just with the management colleagues but with all performing employees. Second is the management principles; always focus on the fundamentals. Address the core issues of customer service, product innovation, competitive/optimal pricing, effective delivery channels and profitable market shares. Be clear on

W W W. I S F I R E . N E T

ISFIRE REVIEW the costs and benefits of every venture, product, initiative or plan. Beyond the four quadrants of Corporate Responsibility and Sustaiity (i.e Workplace, Marketplace, Community and the Environment), for public listed companies, the bottom line is about shareholder value creation (i.e. more profit, higher dividends and better share price in the medium to long term). Don’t worry about short term market fluctuation. Don’t over spin. Once you have achieved the fundamental improvements, then you can complement it with branding or rebranding as the case may be. Form without substance will not get you anywhere. But when you combine substance with form, you will go a long way. This applies to personal branding too. Third is the personal leadership skills and attributes. A good leader must have a clear purpose in life; be articulate, authentic, engaging, a visionary, and have unquestionable integrity. You don’t have to be the typical “loud” corporate leader to be effective. In fact, it can be counterproductive. Gone are the days when the CEO just needs to tell people what to do. In large organisations, CEOs are now expected to be more hands on and provide appropriate guidance on how things can be done. Be professional, honest, sincere and truthful to your board, management colleagues and employees. Do not hesitate to admit your mistakes and apologize, and learn from them. We are human beings after all. Focus on the job at hand and do not worry about your next career move. Your reputation will precede you.

Eight Thoughts on Organisational Sustainability I have shared with you how, based on my personal experience, purposeful leadership has enabled the three organisations I have led as CEO to be successful. In the Global Leadership Forecast 2018; DDI, The Conference Board and EY found that purposeful organisations (where leaders bring the stated purpose to life through behaviours) perform 42% better than the market. The challenge, however, is how to ensure such performance is sustainable for the organisation beyond the tenure of a particular leader. This brings me to the second part of my lecture on some of my thoughts on organisational sustainability. There are many aspects of leadership and succession that I can touch on. But perhaps I can confine them to eight. First is the need to select the right leaders for our respective organisations. Many people have been asking, what does it take to be a good and sustainable leader? According to me, beyond working hard and working smart, there are three prerequisites to becoming a good and sustainable

W W W. I S F I R E . N E T

leader: unquestionable integrity; competency; and humility. Integrity is about “doing the right thing even when no one is watching”. A competent leader with unquestionable integrity and who works very hard will enjoy a reputation that will precede him. Competency is about having the necessary knowledge and skills to do the job well. Whilst humility is about treating people with mutual respect, about staying grounded to our roots and about being cognisant that we all serve a greater purpose in life rather than our self-interest. Humility is also about knowing that you don’t know everything and that you need a team in order to succeed. Second is the need to put into place a proper succession planning and talent review process to cover key positions. Not just for the CEO and CEO-

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

ISFIRE REVIEW 1 positions but also for CEO-2 and even CEO-3 positions for large organisations. For each position, identify 3 potential candidates, their state of readiness (whether they are ready now or within 2, 3 or 5 years) and what is the intervention required to prepare them to succeed the incumbent. For such succession planning efforts to be successful, it needs to be driven from the top i.e. by the board and the management alike. The best practice is for the management to conduct a talent review session twice a year. Third is the need to strike a right balance between internal talent and external hires. I personally believe in the importance of nurturing our internal talent or ‘grow your own timber’. This is important to provide the employees with good career progression opportunities. However, it is also important to bring in external talent from time to time to refresh the organisation and bring in external perspectives. My hypothesis is that all things being equal, one in every four or five senior positions should be filled externally. That means 75%-80% of the positions should be filled by internal promotions. Fourth is the need for rejuvenation. Whilst long serving CEOs provide stability to the organisation, there is also the risk of the leader and his organisation slipping into complacency. I believe there is enough empirical evidence to suggest the performance of many companies whose CEOs have been at the helm for more than 10 years would not be as good as the CEO’s performance in the first 10 years. Therefore, I subscribe to the belief that as a rule of thumb, no one should be in the same role for more than ten years, whether as a head of department or a CEO. If he or she is good, then give him or her a bigger role or give him/her the opportunity to lead a bigger organisation. I am therefore in favour of imposing time limits on the tenure of CEOs and board members. This will instill greater discipline on the CEOs to identify and prepare his successor. Of course, there are exceptions to the rule but they need to be appropriately justified. Fifth is the need for diversity. I always believe in diversity as a source of strength for any organisation. Diversity in terms of skills, gender, ethnicity, age and even nationality for multinational organisations. Organisations that embrace diversity tend to perform better and more sustainably. I am encouraged that most public listed companies have heeded the call for greater gender diversity at board level. In the Malaysian context, we now have women as the chairperson of important institutions such as Bank Negara Malaysia, PNB and Bursa Malaysia; proving that there is no glass ceiling for women in Malaysia. For public listed companies, the time has come for such diversity to be broadened further to cover ethnic and age diversity not just at the board level but also at the management level. Speaking of diversity, some organisations get very defensive when we highlight the lack of diversity in their organisations. They would immediately claim everything is based on merit. This brings me to the sixth point, the need for us to be conscious about the “AffinityFavouritism-Cronyism-Prejudice Continuum”. Well, we are all human beings and it is only natural for us to have affinity towards people from the same school, same university, same profession, same State, same clan, same ethnicity, same religion, and same nationality. But if we do not contain our affinity, it can easily become favouritism. And if you don’t control it further, it will become cronyism. Eventually, it may even result in being prejudice. I have worked in an organisation where a large number of CEOs in the Group were from the same

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

W W W. I S F I R E . N E T

ISFIRE REVIEW school. I also came across a Kuala Lumpur based company where a significantly large proportion of the senior management members were from the same state. In such a situation, you may be depriving your organisation of quality talent to propel your organisation forward. At the same time, you may also be depriving the deserving candidates the opportunity to excel in their career. So, it is useful for us to be conscious of the diversity in our organisation (or department) and ensure we do not practice favouritism or cronyism. Seventh is giving young people the opportunity to lead. I was fortunate to be given the opportunity to be the CEO of UEM Group when I was 37 years old. Datoâ&#x20AC;&#x2122; Abdul Rahman Ahmad, the current CEO of PNB, was 32 when he was appointed as CEO of MRCB. Likewise, Tan Sri Mohd Bakke Mohd Salleh, the newly appointed Chairman of Felda, was 35 when he was appointed as CEO of a property company. Datoâ&#x20AC;&#x2122; Shahril Ridza Ridzuan, the current CEO of Khazanah Nasional, was 32 when he was appointed as CEO of MRCB. Renowned corporate leader Tan Sri AzmanYahya, was 30 when he was made CEO of an investment bank Amanah Merchant Bank. Yet many of us now regard executives in their 30s and 40s as being too young to be CEOs. I have even come across some board members opposing the appointment of someone as CEO for being too young. That CEO was 50 years old! The time has come for us to renew our commitment to nurture future leaders and have the courage to give some talented young managers, with the prerequisites of being a good leader of course, the opportunity to lead an organisation as CEO. The eighth point is the need to develop quality leaders in sufficient quantity. Many organisations complain about how their managers and executives are being poached by competitors and other organisations. I tend to take a more liberal view on this. Surely when your organisation is the market leader, you can expect other organisations to regard the people you have trained as being good and talented and will provide them with a ready pool of talent to poach from. So, instead of complaining, what if you were to hire and train more people so that you will still have enough talent even after half of the people you have trained left you after say ten years? These people whom you have trained will be your ambassadors and reference points in the future.

Islamic Finance and Sustainability Over the past thirty years, I have been fortunate to have been exposed to Islamic finance. From being involved in arranging the first Islamic bonds or sukuk issued by Shell MDS in 1990, to the introduction of Islamic factoring by Amanah Factors

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

ISFIRE REVIEW and development of the ‘Islamic first’ strategy at Maybank. I hope to broaden and deepen my knowledge in Islamic finance during my upcoming tenure as a Visiting Fellow at the Oxford Centre for Islamic Studies.

without compromising on shareholder returns. These outcomes are similar to the objectives of Environmental, Social and Corporate Governance (ESG) framework, Sustainable, Responsible Impact Investing (SRI) and ethical finance frameworks.

As a prelude to my fellowship, I did a quick poll among some renowned Islamic finance practitioners on what are the first things that come to their minds when I mentioned the word “Sustainability”. The answers were varied but some common themes that emerged include justice, benevolence, wellbeing, ESG, Maqasid al Shari’a, the role of human beings in protecting the world and environment we live in, a balanced ecosystem, sustaining a productive and healthy ecosystem for the earth’s plants and creatures to support the well-being of humans sustainably, doing economic and social activities that do good and are not harmful in the long term, using resources responsibly taking into account the needs of future generations.

Speaking of Islamic finance and sustainability within the context of people’s wellbeing and inclusivity, one organisation that comes to mind is PNB. Established in 1978, PNB’s purpose was to address the socio-economic imbalance facing the majority Bumiputera community who in 1970 collectively own only 2.3% of equity in the corporate sector. The idea was to mobilise funds from the community via a mutual fund to be invested professionally into the equities market. The concept was subsequently broadened to include all Malaysians. PNB now manages some RM300 billion mobilised from 14 million-unit holders.

For me personally, Islamic finance in its truest form is indeed sustainable finance. It is supported by a legitimate transaction, formalised via a legitimate contract or ‘akad’, not speculative, and is not harmful to mankind, society nor the environment. I am heartened that such thinking is being embraced globally with central banks playing their role in promoting Islamic finance as sustainable finance. For example, Malaysia’s central bank, Bank Negara Malaysia, and the Islamic financial institutions have been working on Value Based Intermediation (VBI) since 2018 with the issuance of three guidance documents namely;

The Implementation Guide for VBI, which provides guidance on practical value-based banking practices. It also outlines the phases of implementation, key implementation challenges and some pragmatic solutions; The VBI Financing and Investment Impact Assessment Framework, which facilitates the implementation of an impact-based risk management system for assessing the

financing and investment activities of Islamic financial institutions in line with their respective

VBI commitments; and

The VBI Scorecard, which provides an overview that covers purposes, key components of assessment and measurement methodology.

The application of VBI practices will contribute towards better facilitation for entrepreneurs, community wellbeing, sustainable environment and inclusive economic growth

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

I had the privilege of being appointed as the third Chairman of PNB on August 1, 2016 with the mandate to enhance the corporate performance of PNB. By November 2016, PNB’s President and CEO Dato’ Abdul Rahman Ahmad and I unveiled PNB Strategic Plan 2017-2022 named Strive-15 aimed at building PNB to be a distinctive world class investment house. Fifteen initiatives were rolled out under three strategic pillars of enhancing sustainable returns, effective funds management and driving operational excellence. With rigorous execution of the various initiatives by the PNB team, we were able to achieve significant outcomes within the first year of implementation in 2017. These include, inter alia, improved financial performance with 16.8% increase in 2017 net income to RM17.7 billion; Transformation of strategic companies resulting in RM39.5 billion increase in market capitalisation. This represents total shareholder returns of 26.0%, double the total KLCI returns of 13.2% for 2017; successful migration to a new IT system which enabled PNB / ASNB to launch its online portal; and recognition of investment in PNB managed mutual funds as “Harus” or permissible by the Selangor and Penang State Fatwa Committees in 2017, in line with the national edict issued in 2008.

Contributing towards the Education sector It has been eight months since I assumed the Chairmanship of the National University of Malaysia (UKM). I must say it has been very enlightening to be involved in the education sector. On my part, I hope to be able to add value, among others, in the following three ways:

To bring private sector’s perspective into the University in enhancing its performance and governance as well as strengthening the organisation structure and human capital development;

W W W. I S F I R E . N E T

ISFIRE REVIEW 2. To assist in efforts to enhance the University’s financial sustainability via increasing private and international students’ enrolment, expansion of

University’s core competency (such as healthcare services) and

the

commercialisation of real estate and other assets;

3. To enhance industry-academia collaboration, among others: •

through strengthening our various faculties with the appointment of industry practitioners and corporate leaders as lecturers, fellows and adjunct professors;

•

increased contributions from the private sector in the form of endowment,

research grants and commercialisation of research findings;

•

enhancing graduate employability

through curriculum development, industrial attachments and leadership development.

W W W. I S F I R E . N E T

Back to the theme of Purposeful Leadership and Sustainability, I believe it is important for us to instill sustainability, purpose, and leadership values in our people from a young age. This means starting from parenting at home to early education in schools and later at the institutes of higher learning. When such universal values are ingrained in our people and society, the outcome will be more pronounced and sustainable.

Conclusion Let me close by expressing my gratitude to Dr. Humayon Dar, Dr. Sofiza Azmi and the Cambridge Institute of Islamic Finance for inviting me to deliver this lecture. Coming from a poor household, I was fortunate to have been given a good education at a boarding school MRSM Seremban and awarded a scholarship by the Bumiputera empowerment agency MARA to pursue professional accountancy qualification (ACCA) in the United Kingdom. My ambition was to be the CFO of a large organisation, but I ended up with more than what I asked for. I am grateful to God Almighty for His blessings, and to my parents for raising me and instilling the universal values in me. I am grateful to my country Malaysia for the opportunity made possible by the then New Economic Policy; a policy with twin objectives of eradicating poverty irrespective of race and eliminating the identification of race with any particular economic activity. A policy with the purpose of providing equitable growth and opportunity for the people. This is what sustainability is all about; not only caring for the environment, but being responsible for the people too.

I S F I R E , AU G U S T 2 0 1 9

ISFIRE REVIEW

TALKING POINTS

SMART CONTRACTS:

ISLAMIC JURISPRUDENCE STANDPOINT MIAN NAZIR CHIEF EXECUTIVE OFFICER, DAR AL SHARIA

nnovation and technological advancement have been one of the significant factors that have disrupted almost every aspect of human life. Innovation in technology has had an amazing impact in improving the standards of living of humanity. Amongst the most significant benefits of technology include reducing distance, real-time communication, information storage, processing and transmission, accurate methods of diagnosis, efficiency, economise the cost of production, transportation, consumption, incredible convenience and comfort. Until a few decades ago, prior to initial successful attempt to integrate Shari’a nominate contracts (i.e. putting principles and theories of Islamic law of contracts in practice) into the mainstream economy through Islamic banking and finance, technological disruptions would not have perturbed Islamic jurists more than any informed users or beneficiaries of ever-changing trends in technology.

Outlining the Narrative on Smart Contracts The stake of principles and theories of Islamic law of contracts in the advent of technology has never been so relevant as in our time and will continue to be more relevant in the near and far future. The theories of Islamic law of contracts laid down centuries ago – have been successfully put into practice in commercial, trade and finance cycles through Islamic banking and finance industry – are threatened to embrace a

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

compatibility challenge from the looming concept of digital and smart contracts regimes. In smart contract context, the basic question is of alignment of the principles and theories of Islamic law of contracts with the technology-driven artificial intelligent concepts and methods of negotiation, formation and performance of contracts. More precisely, one has to have clarity on ‘what is a smart contract’ in a modern context and to what extent a smart contract concept conforms to the principles and theories of Islamic law of contracts. The objective of this effort is to know more about the nature and form of smart contracts, look for the similarities within the classic principles and theories of Islamic law of contracts and differences that distinguish them from Shari’a nominate contracts. This is important so that the opinion of the Islamic jurists can be solicited at an early stage to preempt the appropriate, albeit indispensable, positioning of smart contracts in Islamic banking and finance industry. After identifying the nature and form of smart contracts and the extent of their alignment with Shari’a nominate contracts, we will assess certain imminent outcomes of smart contracts; which, in our opinion, may lead to either deviation, exception, tacit acceptance or overlooking certain forms of contracts that would otherwise not have been permissible under Shari’a.

W W W. I S F I R E . N E T

TALKING POINTS Smart Contracts – Definition and Analysis For a clearer view of the subject, a comparison between the definition of smart contract and contract in Islamic jurisprudence would be more relevant, to begin with. The most accurate definitions of the smart contract are as follows:

“computer code that, upon the occurrence of a specified condition or conditions, is capable of running automatically according to pre-specified functions. the code can be stored and processed on a distributed ledger and would write any resulting change into the distributed ledger.1” “computer protocol [or code] that can automatically monitor, execute and enforce a contract.2” “computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract.3” It is evident from the above definitions that the matching of predefined rule-sets or conditions will result in the automatic execution and performance of a contract. The main focus of the definitions is on how the contract will come into existence. The concept of smart contracts has combined the three most important stages of a contract in one definition: (i) contract negotiation, (ii) execution of the contract (matching the offer and acceptance); and (iii) performance (i.e. the outcome or effect of contract). Since the very objective of smart contracts is to achieve maximum efficiency, certainty, and self-reliance in the above mentioned three stages of a contract; the description of smart contracts appears to have ensured the same. Technically, the smart contract is not a form of contract per se but a description of the phases or process of a fully consummated contract as compared to a traditional definition of a contract in law, which defines the contract as:

“an agreement between two or more parties creating an obligation that is enforceable or otherwise recognisable at law.4” Smart Contract Alliance of Chamber of Digital Commerce, September 2008 Publication

2 https://www.freshfields.com/en-gb/out-thinking/campaign/digital/ fintech/whats-in/whats-in-a-smart-contract/

Wikipedia - a common definition to highlight that there is no big difference between the technical definition and understanding of an informed individual 3

W W W. I S F I R E . N E T

Black’s Law Dictionary

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

TALKING POINTS From the outset, the comparison between the definition of smart contract and the legal definition of the contract would lead to the conclusion that the concept of smart contracts is more than a definition. In fact, it has combined the second and third stages of contract that is the execution of the contract and the performance of the contract (i.e. transferring or allocating the very object of the contract). Under the classic definition of contract, the contracting parties, post entering into contract; have to rely on the good faith and actual performance of the contracting parties in order to acquire the benefits (athar al aqd) of the contract or in the event of failure on the part of a contracting party (or both) seeking assistance of a competent court or authority for the enforcement and performance of the contract. However, in a smart contract regime such situation is a rare phenomenon as the smart contract contemplates an automatic and automated negotiation, verification, execution and performance of the contract (including the subject matter and transfer of mutual considerations and counter values (athar al aqd)) in a fully autonomous, remote and automated public or private distributed ledger5. In essence, subject to all other legal requirements of a contract are complied with under the applicable law, a smart contract is a complete end-to-end contract rather than an agreement of the parties which is yet to be performed in respect of its subject matter or mutual considerations (athar al aqd). From the perspective of Islamic law of contract, a contract is defined as:

“concurrence of an offer from one contracting party with the acceptance of the other in a manner that affects the subject matter of contract.6” The above definition of contract closely resembles that of the most commonly used definitions amongst the early scholars and jurists (including authors of Majallah al-Ahkam al-Adliyyah7) and heavily relied upon by contemporary scholars8 except that the latter refers to concurrence of an offer from one contracting party with the acceptance of the other in a legal manner in order to affect the subject matter of the contract. However, the additional qualifications in the definitions do not change the meaning or definition much, as each Shari’a nominate contract is subject to an extensive regime of eligibility criteria including permissibility from a Shari’a-compliance perspective.

A unique distinction between the definition of contract in Islamic law of contract and contract under law is the fact that Islamic jurists have unanimously decreed, to the extent of sale contract and all contracts involving exchange of mutual considerations/counter values, that offer and acceptance must be in past tense so as to connote absolute intention of the parties, in respect of the sale contract or another Shari’a nominate contract mentioned above, at the relevant time in respect of the subject matter. The opinions of the contemporary jurists suggest that a present tense for offer and acceptance should also suffice9. However, the definition of a contract in the law allows present, past and future tenses for offer and acceptance. In smart contracts the three phases of contracts (negotiation, formation (execution) and performance) will be in a sequence without time-gap or simultaneously, thereby, ensuring completion of the contract process in its entirety. In this regard, the smart contract is closer to the concept of contract in Islamic jurisprudence, particularly, in respect of spot contracts for identified assets.

Smart Contract and the Islamic Law of Contract Surprisingly, albeit pleasant, the description of a smart contract concurs with Islamic jurisprudence on the certainty of the absolute concurrence of offer and acceptance between the contracting parties on a subject matter at the time of entering into a contract. However, the concept of smart contracts as it stands today poses a number of challenges to the Islamic law of contract. In the following paragraphs, we will analyse smart contracts in a classic Islamic law of contract context, covering the three elements of a contract: (a)

Parties to a contract (sqidaan)

(b)

Offer and acceptance (sigha)

(c)

Subject matter (mahall al aqd)

The discussion will focus on the essential requirements under each heading in Islamic law of contract and ascertain the alignment of the same with smart contracts. One more important aspect of this study is to know the effects of remoteness and automation (or artificial intelligence) in negotiation, formation and performance of a contract from an Islamic law of contract perspective. To some extent, the subject will also touch upon for scholarly discussion, one-way or two-way delegation (or agency) by contracting parties to

Distributed Ledger means ‘computer software that employs a shared data base architecture to maintain multiple, identical copies of auditable, up-to-date, distributed digital record of transactions or data’ (definition by: Chamber of Digital Commerce)

Murshid al-Hayran, Cairo 1933, art. 186, p. 27 – Qudri Pasha

Majallah al-Ahkam al-Adliyyah, Istanbul 1930

Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan

Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 pp. 34-35 - Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

W W W. I S F I R E . N E T

TALKING POINTS an artificially intelligent platform for negotiation, formation and performance of contract in the context of a juridical or legal person (a concept recognised for the modern corporate, statutory and legal entities).

will be the main contract and the smart contract (computer code) merely organises, facilitates and assures performance aspect of the contract such as exchange of the subject matter of the contract (the object of the contract).

The concept of the smart contract is currently supported by a technology called “blockchain”, which is a specific type of distributed ledger technology that organises data into blocks that are chained together chronologically by cryptographic hash function and confirmed by a consensus mechanism10.

From an Islamic law of contract perspective, on the whole (subject to the discussion in the following paragraphs) this approach is acceptable. However, certain sensitivities in respect of certain Shari’a nominate contract will have to be taken into account. These include at par consideration and spot settlement requirement in currency exchange contract etc. or prohibition on delaying both considerations in a contract of sale of an identified asset (currency or commodities that are subject to at par consideration and spot settlement rule in Islamic law of contract).

The more appropriate description of smart contract is ‘it is a form of conditional “if then” statement written in computer codes11 which are prewritten software programmes that automate performance of each parties’ obligation in an “if then” statement’12. Those familiar with the technology confirm that “computer codes can only tolerate precise conditional instructions “if then”, as such, there is no flexibility for the parties to incorporate terms that has one meaning at the time of execution and can be interpreted differently during the performance stage”13. Contrary to smart contracts, traditional contracts and contracts in Islamic jurisprudence cover a wide range of terms and conditions such as representation, warranties, covenants, force majeure, restitutions, remedies for breach, options (inherent options such as option to rescind the contract, (khiyar alru’yah) in Islamic law of contract and other contractual options recognised in Islamic law of contract). Accordingly, realising the challenges, the Chamber of Digital Commerce is suggesting that there could be two models of smart contracts: external and internal model.

Smart Contract Alliance of Chamber of Digital Commerce, September 2008 Publication 10

Smart Contract Alliance of Chamber of Digital Commerce, September 2008 Publication, Kevin T. McCarthy, For the Defense, March 2018 11

Kevin T. McCarthy, For the Defense, March 2018 (ex. The block of coding states “if Company B delivers 500 widgets to Company A by December 1, 2017, at 5:00 pm ESD, then Company A delivers U$D 10,000 to Company B.”) 12

Smart Contract Alliance of Chamber of Digital Commerce, September 2008 Publication

Ibid

In external model (contract written in different languages – traditional written contract and computer codes), the computer codes do not form the entirety of the parties’ legal agreement, but merely automates the performance of some of its terms14. This model contemplates the parties may have a traditional legal contract and the performance is automated through a smart contract regime. The external model suggests a hybrid approach, which can accommodate certain contractual and boilerplate provisions in the contract that is outside the computer code. The conventional contract

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

TALKING POINTS In an internal model (the code as the main contract), this model contemplates two types of smart contracts: 1. The computer code encompasses the entire agreement between the parties and supersedes other clauses written in natural language. Everything behind the computer code merely explains the terms15. 2. The computer code could form only the legally binding contract (rather than the entirety of the contract) and would supersede other clauses written in natural language. In this model, the contract may still utilise a natural language in a conventional contract for non-operational clauses. The computer code of this model is an integral part of the agreement and not a translation of its terms16. From an Islamic law of contract perspective (subject to the discussion in the following paragraphs), assuming all requirements of a valid contract are complied with the internal model, under (i) above, may entail certain difficulties such as excluding the inspection option (khiyar al-ru’yah), which is an inherent right in sale by description17.

Smart Contract Compatibility Assessment In light of the above two possible models of smart contracts as of now, the analysis of a smart contract in light of the Islamic law of contract would possibly entail the following discussion.

Parties to a contract The discussion under this topic will include eligibility (ahliyyah-al-ada) of the parties; (i) at the time of negotiation and formation of the contract – in smart contract concept, particularly under the Internal model in general; and (ii) at the time of performance of the contract in particular. In both internal and external models of smart contracts, ascertaining or ensuring the eligibility (ahliyyah-al-ada) would be a challenge, more particularly, when a series of contracts and subsequent performance of the contracts would be on (or through) artificially intelligent platforms. The Islamic jurists have to consider the application of the eligibility criteria in a typical smart contract scenario based on the two models of smart contracts. When a computer code (pre-written software programme) operates independent of the parties involvement in predefined conditions or scenarios, a party to contract (or both of them) may not satisfy the eligibility criteria or rule-sets under a relevant school of Islamic jurisprudence; hence affecting the validity of the contract. More clearly, one of the parties in contract or both may not have eligibility (ahliyyah-al-ada) at the time the contract is being negotiated, formed and performed. The question is “does it affect the underlying contract from an Islamic jurisprudence perspective?” Needless to mention, the basis for eligibility (ahliyyah-al-ada) is the intellect (prudence) and consent (or discretion)18. There are various factors that affect the prudence and consent, which is a condition precedent for parties’ eligibility to enter into a contract in respect of a valid contract or a condition subsequent in respect of a suspended (Maukuf) contract. In the context, the scholarly discussion about complete and incomplete eligibility (ahliyyah-alada) would be very relevant for determining the validity of the relevant smart contract. This is more so, when considering the following two aspects of the smart contracts; (i) artificially intelligent platform, which organises smart contract, as an agent or delegate of the contracting parties; and (ii) eligibility of a platform as a juridical or legal person.

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

W W W. I S F I R E . N E T

TALKING POINTS In respect of the agency or delegation, it would be important to understand the requirements of Islamic law of contract for agency to a natural, legal or juridical person. Like all other contracts, the agent should also satisfy the criteria of complete eligibility. A person (natural, juridical or legal) should have complete eligibility to enter into a contract for itself and others19. The artificially intelligent platform for smart contracts may not fulfil the requirements of a juridical or legal person as we see that all contracts by a juridical or legal person are executed by a natural person or persons with complete eligibility (ahliyyah-al-ada) and the owner of the juridical or legal person is either natural person or a body corporate representing a natural person or persons (in certain unique cases like public trust, body corporate owned by government or entities established for public benefits)20. The blockchain technology that supports the smart contract regime exists on a network of computers with nodes and users typically based all over the world. Particularly, in a public blockchain, ascertaining the ownership of the artificially intelligent platform for a person (natural, juridical or legal) would be a challenge, and has yet to be addressed. Assuming that the blockchain platform does not have any owner, which is most likely the case; the ability of the platform to negotiate, execute and perform the contracts21 for and on behalf of the contracting parties would be questionable, therefore, affecting the underlying contracts. In the context, it would be important to consider and determine the basis and requirement for an artificially intelligent mind (electronic mind22, minds or electronic agents) representing parties from Islamic law of contract perspective. In view of the above, is Islamic law of contract ready to consider and accept the artificially intelligent mind to represent the natural, juridical and legal parties for the purpose of negotiating, executing and performance of a contract on the blockchain or an artificially intelligent platform? It would also be pertinent to have a look at the resolution of International Fiqh Academy (IFA) concerning the formation of a contract through electronic equipment or sale through an exchange of offer and acceptance over the electronic mode of communication. The IFA resolution23 was issued three decades ago, considering a limited scope, extent, use and simplicity of available information technology at that time. E-commerce was almost non-existence or had a one-way interaction, such as the current form of electronic ticketing/electronic purchase. The resolution does not take into account or seem to have addressed one-way or two-way no real-time human interaction for negotiation, formation and performance of a sale contract. Furthermore, the resolution does not appear to have the foresight of the role of artificial intelligence or artificially intelligent remote platform acting as an electronic mind or agent representing the parties. 15

Ibid

Hadith Abu Hurayrah and Ibn Abbas (mAbpwt)

Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan

Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 164

Particularly, the formation of the subsequent contract and performance under a master arrangement such as master sale contract or Ijara contract which are most commonly used in the Islamic and banking industry

A terminology coined by Chamber of Digital Commerce

Resolution No. 52 (3/6), The execution of contracts through modern means of communication.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

TALKING POINTS Offer and Acceptance (Sigha) Under the internal model of smart contracts, offer and acceptance will always be precise and definite and thus meeting the requirements of Islamic law of contract24. However, certain classical concepts of Islamic law of contract such as exchange of offer and acceptance during the session of contract (majlis al aqd), practical definition of thr session of contract, end of the session of contract, etc. need a thorough consideration of Islamic jurists. On the other hand, smart contracts contemplate the concept of evergreen offer and acceptance and flexible session of contract. It is possible that immediately before or simultaneously at the time of automatic execution, formation and performance of the contract the essential requirements, in respect of the three elements of contract, are no longer satisfied or complied with, thereby, affecting the validity of the underlying contract from Islamic law of contract perspective. As mentioned above, most likely the computer code will use present tense for offer and acceptance or in an “if then” statement, followed by an immediate performance at the relevant time will affirm the execution and performance of a contract immediately which also seems to satisfy the Islamic law of contract requirement25. However, certain concepts such as exchange of offer and acceptance within a contract session without any time-gap in accordance with Shafi’i School of Jurisprudence26, and the existence of the offer until acceptance, rejection or lapse of the time27 for the offer in accordance with the majority of scholars28 could not be accommodated in smart contract regime. Under smart contracts, the assumption is that until acceptance by the other party, the offer can be amended. However, once it is accepted, the party cannot have the option to rescind the contract using the inherent option of the session of the contract29 or the contractual option of the session of contract in accordance with Hanfi and Malki School of Jurisprudence. On the whole, if all other requirements of eligibility (ahliyyahal-ada) are complied with, the notion of meeting of minds of the contracting parties can be satisfied in a smart contract. One challenge that we have discreetly alluded to in this discussion is the storage of offer and acceptance on an artificially intelligent platform or blockchain for future

transactions. Since computer codes for smart contracts contemplate “if then” statement, which is conditional or contingent set of terms. Scholars have to evaluate the same for the purpose of the eligibility of the same as formats for offer and acceptance in the Islamic law of contract. Are these computer codes conditional offer and acceptance; in which case the discussion among the jurists about whether to treat such conditional offer and acceptance as a mutual promise from the respective parties on the same subject matter or two different conditional promises resulting in an automatic contract if the conditions are satisfied?30 If scholars’ inclination is towards the latter, there would be a forward contract element that needs to be considered. Forward contracts are classified as impermissible contracts under the Islamic law of contract. Considering the automatic formation and performance of smart contract in respect of the first transaction, which is going to be spot in terms of execution and performance regardless of the language of the offer and acceptance (in past, present, or future tenses), the sale will be valid as the same will be construed as sale by mutual performance and conduct.31 On the other hand, if the smart contract entails formation and performance of a series of sale and purchase contract between the contracting parties in future on preset conditions, the same would certainly fall under a binding forward sale, which is an invalid contract.32

Subject Matter The discussion under this topic is based on the assumption that the subject matter is permissible under the rule-sets of Islamic law of contract. Accordingly, for the sale of specified assets (excluding istisna’ and salam contracts), the Islamic law of contract requires that: 1. the subject matter should be in existence, ascertained and available at the time of exchange of offer and acceptance. The mere possibility of subject matter capable of being made available or ascertained at the time of exchange of offer and acceptance is not sufficient33. 2. existence of the subject matter in the condition, specification and description as per the offer and acceptance at the time of the contract is formed and performed34.

The statement confirms the matching of offer and acceptance but does not take in to account the scholars’ view on form of offer and acceptance (i.e. written or oral offer and acceptance)

Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 35 - Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan p. 243

Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan p. 248

Limited time offer concept taken from Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 52-53 Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan p. 248 29 In accordance with Shafi’i and Hanbali Schools of Jurisprudence (Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 63) 27 28

Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 77

Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 67 Fiqh al Buyu, Mohammed Taqi Al Usmani, vol. 1 p. 103

Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan pp. 292-294 Ibid 35 Al Madkhal Le Dirasat al Fiqh al Islami by Dr. Hussein Hamed Hassan p. 312 33 34

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

W W W. I S F I R E . N E T

TALKING POINTS In essence, these two conditions necessitate that the seller should have actual possession of the subject matter and is ready to deliver the possession of the subject matter to the buyer at the time of exchange of offer and acceptance. An online sale and purchase contract (prevailing e-commerce) or smart contract in future, would also entail a sale or a legally binding contract on any subject matter, which may not be owned and/or in possession of the offeree (the contracting party) at the time of the contract is formed and/or performed under either of the smart contract models. Alternatively, in e-commerce and a smart contract concept (contract or sale through artificially intelligent platform) regime would certainly be either sale by performance or conduct or sale by description. In the latter case, the sale should be with option of inspection (khiyar al-ru’yah) in accordance with the majority of scholars and an invalid sale in accordance with Shafi’i School of Jurisprudence35. Accordingly, smart contracts would certainly result in parties compromising on certain entitlements, which the Islamic law of contract secures for them as an inherent right.

Conclusion and the Way Forward Following a brief analysis of the subject, it would be appropriate to highlight the followings: •

Smart contract framework, both external and internal models, can easily be implemented in Islamic banking and finance industry for contract management, administration, tracking and reporting performance and record-keeping in respect of all Shari’a nominate contracts. The smart contract would guarantee a greater level of Shari’acompliance, record keeping and efficient contract management as every entry on the public distributed ledger is time-stamped, permanently stored and cannot be altered. This is the most promising and effective use of smart contracts and related technology. Perhaps, the external model of a smart contract regime would be more useful for this purpose as the same involves less complication from Islamic law of contract perspective.

•

In terms of contract negotiation, execution, formation and performance; the smart contract and related technology can comfortably be used for the following Shari’a nominate contracts: unilateral, voluntary commitment, promises, contracts for security, collateral, suretyship, custody, bailment, wills, guarantees and service or maintenance contracts. These contracts do not involve the transfer of ownership in the underlying subject matter or exchange of counter values between the contracting parties as such are simple and straight forward.

•

Contracts involving exchange of mutual considerations (counter values), transfer of ownership and investments (such as all sale, trust, agency, service, settlement and investment contracts) would not be free of some of the challenges highlighted above. Perhaps, a full-scale framework would be required to map the smart contract into the Islamic law of contract. Over the last few decades,

W W W. I S F I R E . N E T

the Islamic jurisprudence has seen a drive towards consensus and narrowing the scope of interpretations and juristic inferences by agreeing on one acceptable opinion or interpretation (albeit minority opinion). This is more so in Islamic banking and finance industry in the form of AAOIFI Standards and general resolutions of International Fiqh Academy. Nevertheless, the scope and extent of interpretations and inferences across various recognised schools of jurisprudence and scholars would continue to remain relevant and may exist and flourish in various jurisdictions. Maintaining an inclusive approach (as compared to a narrow uniform view on the subject) that accommodates a juristic opinion or interpretation under a particular school of jurisprudence will be preferable to keep the legacy of continuous development and improvement in Islamic jurisprudence in different times and circumstances. The initial assessment suggests that the smart contract concept (embodying internal model) is yet to establish its compatibility with Islamic law of contracts even on generally accepted theories and principles of Islamic law of contract. For example, the contract under personal law (marriage, divorce, maintenance and nursing contracts) would require more studies to determine their alignment with the smart contract concept under the internal model. One important aspect highlighted above is the adoption of smart contracts may lead to the likelihood of acceptance of conditional, contingent and forward contracts, thereby, changing the long-standing position of Islamic law of contract on forward, conditional and contingent contracts. Another related question for the scholars would be the Islamic law of contract position on automatic execution and performance of contracts (contracts which involve an exchange of counter values or considerations). As mentioned above, Islamic jurisprudence has to assess and properly identify the raison d’être for accepting electronic minds or electronic agents representing the contracting parties, more particularly, in the context of an orphan public distributed ledger (blockchain or artificially intelligent platforms). The innovation in technology (which has no frontiers whatsoever) and the processes (which usually follows the technology) are the main drivers of economic development of which Islamic banking and finance industry is an integral part, at least in this part of the world. In an ever-changing hightech environment affecting the economy, it is imperative to preempt the impact of technology and devise the alignment solutions within the limits set for the Shari’a nominate contracts in Islamic law of contract. The most imminent requirement is assessing and ascertaining the nature and function of the smart contract, the role of the electronic minds or agents, and artificially intelligent platform in negotiating, forming, executing and performing the contracts from a Shari’a-compliance perspective. Considering the importance of the topic, Islamic jurists and technical experts should takeup some of the issues highlighted above as a matter of priority on a proactive basis.

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

ISFIRE REPORT

CELEBRATING EXCELLENCE IN GOVERNANCE AND SUSTAINABILITY

overnance, in its etymology, represents practices that govern or direct a group of people, an organisation or a country; thus, it entails the decision-making process and the implementation therein. The term governance can apply to corporate, international, national, local governance, or to the interactions between alternative sectors of society. Good governance has become the buzzword of this decade. Traditionally, it has been used to refer to public sector organisations and institutions, however, it now also covers private businesses as well as the social sector. Ideally, good governance is participatory, conspicuous and liable. Good governance at all levels is essential to economic progress, political constancy, and security. As part of its social responsibility initiatives and to further promote good governance practices world over, Cambridge IFA is spearheading a global initiative to promote best practices in governance and sustainability. One of the initiatives undertaken is the Global Good Governance Awards or 3G Awards, which is organised annually. The 3G Awards celebrates individuals, governments, public and private institutions and NGOs that demonstrate making governance and sustainability a strategic priority of their organisations. As a premier awards programme, 3G Awards highlight excellence in good governance and commitment to social welfare in 3 major streams: Government & Politics, Corporate Sector and Social Sector & Philanthropy. The 3G Awards promote good governance and commitment to social welfare by: â&#x20AC;˘ Recognising leadership efforts of individuals, governments, corporations and NGOs in practicing good governance principles in their functioning; â&#x20AC;˘ Recognising implementation of innovative practices, programmes and projects that promote the cause of good governance, transparency, sustainability, and social responsibility; and â&#x20AC;˘ Enthusing governments, corporates and NGOs in focusing on good governance and social responsibility practices.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

W W W. I S F I R E . N E T

ISFIRE REPORT Since its debut in 2016, over 150 awards have been presented to exceptional individuals and institutions drawn from more than 25 countries in different continents. These include public sector individuals and organisations, businesses from the airlines industry, tourism, financial services, manufacturing, education and energy; and social sector organisations serving different causes in health, women empowerment and children welfare. The inaugural 3G Awards ceremony was held in the historical city of Istanbul, Turkey in 2016, followed by Dubai in 2017 and Kuala Lumpur, Malaysia in 2018.The 3G Awards 2019 ceremony was hosted by the Ministry of Tourism Indonesia and was attended by more than 200 guests and participating organisations from over 18 countries. Guests of honours included the Prime Minister of Djibouti, His Excellency Abdoulkader Kamil Mohamed, Mr. Christophe Bahuet, Country Director of the United Nations Development Programme (UNDP) Indonesia and Professor Humayon Dar, Founder of the 3G Awards and Chairman of Cambridge IFA.

In her welcoming address, Dr. Sofiza Azmi, CEO of Cambridge IFA said that there is no “one-size-fits all” meaning to good governance but pointed out that one key theme that stands out amongst the various definitions of good governance is ‘sustainability’. “The interrelationship between good governance and sustainability is central to long term success be it public sector programmes, corporate profitability or social sector programmes. In essence, good governance and sustainability is about better managing assets and resources with the objective of making them more inclusive, transparent and participatory,” she explained. However, she cautioned that the integration of good governance and sustainability is still a far cry but emphasised that the need for good governance and sustainability is now being increasingly felt in every sector of social and economic activity across the world. She further said that “It has compelled many governments, corporations, NGOs and non-profit organisations to recognise and attach tremendous importance to good governance in discharging their day-to-day activities.” This year, the 3G Awards Committee reviewed over 200 nominations from both organisations and individuals from the public sector, corporate sector, and social sector and philanthropy. The award nominees went through a rigorous W W W. I S F I R E . N E T

process of selection, and winners are selected based on the 3G score card developed by Cambridge IFA, which consists of 5 pillars: Transparency, Social Responsibility, Sustainability, Impact and Innovation.

This year the award winners came from about 15 countries. The top 3G Leadership Award in Government & Politics 2019 was bestowed to the President of Djibouti, Ismail Omar Guelleh. The Award was received by the Djibouti Prime Minister, His Excellency Abdoulkader Kamil Mohamed. The Government of Djibouti under the leadership of President Ismail Omar Guelleh has succeeded in attracting an increasing amount of foreign direct investments, thanks to the ease of doing business in the country. It is due to the efforts of the President and his government that Djibouti has been successfully playing the role of a bridge between the Middle East and the wider African region, especially in the neighbouring troubled areas of Somalia and South Sudan. As a result of the role of the government, the approach of the central bank, and the personal patronage of the President; Djibouti stands tall amongst the African nations in promoting good practices in business and finance

Out of the 35 awards presented during a glittering awards ceremony, Indonesia bagged 7; including the 3G Excellence in Sustainable Tourism – Leadership Role, a new award category |

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

ISFIRE REPORT introduced this year. His Excellency Arief Yahya, the Minister of Tourism Indonesia, was named as the recipient of this award in recognition of the bold and innovative steps taken under his able leadership to develop and promote sustainable tourism as well as ecotourism in Indonesia. The 3G Awards Committee applauded the vision and steadfast commitment His Excellency Arief Yahya has made in developing actionable standards for sustainable destination development and management. Under his strong leadership, the Sustainable Tourism Destination Standard for Indonesia has achieved ‘GSTC-Recognized’ status, which affirms the country’s commitment to promote sustainable tourism products and services, thus positioning Indonesia as a regional hub for sustainable tourism practices.

Other winners from Indonesia include PT Trakindo Utama, BTPN Syariah, Badan Wakaf Indonesia (BWI), BAZNAS (Badan Amil Zakat Nasional) and PT Bhimasena . BTPN Syariah bagged two awards: the 3G Financial Inclusion Innovation and the 3G Customer Care. The 3G Excellence is Sustainable Practices was presented to PT Trakindo Utama, the 3G Best Public Sector Programme (Financial Inclusion) Award was awarded to Badan Wakaf Indonesia (BWI) and the 3G SDGs Champion Award went to Badan Amil Zakat Nasional (BAZNAS).

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

This year PT Bhimasena Power Indonesia was awarded the 3G Environmental Responsibility Award 2019 (Corporate Sector) for its Central Java Coal Fired Power Plant (CJ CFPP) 2x1000 MW. This award category recognises an organisation’s efforts to incorporate the concept of environmental protection into its business operations and in imparting the best environmental responsibility practices. Its Community Empowerment Program (CEP) implementation reflects the company’s strong commitment and efforts to empower surrounding community, bringing positive impact of CJ CFPP project development in environmental, social & economic aspects. According to Mr. Yasuhiro Koide, President Director of PT Bhimasena Power Indonesia, “A high standard of social mitigation program with comprehensive CSR program are implemented through good governance program, transparent, accountable, documented and participative to empower the local community to gain and generate a variety of potential to grow as well as promoting close partnership and trust with our local community”. Last year, the company bagged the 3G Social Empowerment Award at the 3G Awards ceremony in Kuala Lumpur, Malaysia.

Although this year’s 3G Awards winners were diverse, the number of winners from the social sector was impressive as shown in Table 1. The 3G Leadership Award for Social Sector & Philanthropy 2019 was awarded to Mr. Suliman Noor Mohamed who is a well-respected South African business tycoon and philanthropist. His philanthropic donations have covered small places of worship to large educational establishments. Currently, he serves as the President of World Memon Organisation (WMO), an international body representing the ethnic Memon communities from around the world. WMO has funded, initiated or managed a wide range of philanthropic projects – schools, hospitals, community centres, orphanages, and scholarships & bursaries – in Africa, Asia, Europe and America.

W W W. I S F I R E . N E T

ISFIRE REPORT

Table 1: Winners from the Social Sector and Philanthropy 3G Leadership Award for Social Sector & Philanthropy 2019 3G Service Excellence Award 2019 3G Environmental Responsibility Award 2019 3G Education & Literacy Programme Award 2019

Suliman Noor Mohamed Friends of Cancer Patients Malaysian Nature Society (MNS) Maybank Foundation

3G Children Welfare Award 2019

Afzaal Memorial Thalassemia Foundation (AMTF)

3G SDGs Champion Award 2019

BAZNAS (Badan Amil Zakat Nasional)

3G Women Empowerment Award 2019

Amanah Ikhtiar Malaysia (AIM)

3G Financial Inclusion Award 2019

Amanah Ikhtiar Malaysia (AIM) Amana Ikhtiar Malaysia (AIM) bagged two awards - 3G Women Empowerment Award 2019 and 3G Financial Inclusion Award 2019. As the first Islamic microfinance institution in Malaysia, AIM offers microcredit to poor and low-income households without the need for collateral or guarantors. AIM’s Chairman, Datuk Junaidah Kiting said: “Women empowerment is the key to strengthen their participation in decision-making. There is no better tool for national development than empowering women. When women participate in the economy, everyone benefits.”

Friends of Cancer Patients (FOCP) was once again awarded the 3G Service Excellence Award for three year in the row. This award recognises a non-profit organisation that has demonstrated an exceptional ability in service excellence and is dedicated to continuously striving to exceed customer expectations, deliver industry leading standards of service and is creative and innovative around customer experience. FOCP was established to help alleviate the financial and emotional burden that cancer often imposes on cancer patients and their families and to raise awareness about the six early detectable forms of the disease; breast cancer, cervical cancer, prostate cancer, skin cancer, testicular cancer and colorectal cancer. Since winning this award in 2017, FOCP has continued strongly in their efforts to alleviate the sufferings of cancer patients and their families by offering financial, psychological and moral support through fund-raising activities and free treatment. It has led several community initiatives and organised forums to heighten people’s awareness about the risks of cancer. W W W. I S F I R E . N E T

In the corporate sector, the 3G Leadership Award for Corporate Sector 2019 was presented to Meinhardt Group, one of the most respected engineering companies in the world and the largest independent engineering consultancy in Asia. Headquartered in Singapore, Meinhardt has become synonymous with trust, innovation and engineering excellence around the world for over 60 years. Receiving the award on behalf of Meinhardt Group was Mr. Omar Shahzad, Group CEP. |

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

ISFIRE REPORT The Group was also named the recipient of the 3G Creativity & Innovation Award 2019. “We are delighted that CambridgeIFA, one of the largest financial intelligence consultancies in the Islamic world, has conferred upon us two awards that recognise our leadership in the corporate sector as well as innovation and creativity. The awards are an affirmation of Meinhardt’s hallmark traits of trust, innovation and engineering excellence, which are recognised in the Middle East and the world over,” said Mr. Omar Shahzad.

Program for Conservation and Energy Efficiency (Tarsheed) and 3G Most Innovative Environmental Education Award 2019 for the Kahraama Awareness Park. Kahramaa’s President Eng. Essa Bin Hilal Al Kuwari said: “Our international recognition reflects that we are going in right direction and our technological advancement embedded with our continued efforts to adopt innovative ideas.”

The 3G Leadership Award for Corporate Sector 2019 (Individual) was presented to Dr. R. Seetharaman (Group CEO, Doha Bank). Commenting on his win, Dr. R Seetharaman said “I am proud to receive this leadership award. Leaders globally are focused on realigning business model in accordance with structural changes in environment, building strong corporate image, sustaining growth, grooming people for global environment, leveraging technology, giving back to society and managing stakeholder expectations.” Doha Bank also received the 3G Financial Services Award for the second year in a row.

Another two financial institutions that was honoured during the awards ceremony were Bank Islam Brunei Darussalam (BIBD) and BTPN Syariah. BIBD was the recipient of two awards - BIBD SEED Programme won the 3G Women Empowerment Award 2019 (Corporate Sector), while BIBD Connects won the 3G Best Community Development Initiative 2019. BTPN Syariah was awarded the 3G Financial Inclusion Innovation Award 2019 and 3G Customer Care Award 2019. BTPN Syariah is the only bank in Indonesia that focuses on serving productive underprivileged families - also known as the “unbankable” for having neither financial records nor legal documentation, and the Bank’s infrastructure has been built to ensure that the products and services are able to effectively serve this segment.

The Qatar General Electricity and Water Corporation or Kahraama took home 2 awards - 3G Best Public Sector Programme (Sustainability) Award 2019 for its National

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

W W W. I S F I R E . N E T

ISFIRE REPORT Bangchak Corporation, a Thai energy company , took home the 3G CSR Award for the second time in a row, and also bagged the 3G Best Green Initiative Award 2019 through its Bangchak Initiative and Innovation Center (BiiC). Another Thai-based company that was celebrated at the 4th 3G Awards ceremony was PTT Exploration and Production Public Company Limited (PTTEP), a leading Asian petroleum exploration and production company, who was named the recipient of the 3G Best CSR Campaign 2019. “A strong commitment to creating positive impact in marine biodiversity and ecosystem services is the key mission of PTTEP as a national petroleum exploration and production company. Winning the 3G Best CSR Campaign Award 2019 reflects our efforts have been acknowledged as contributing to sustainable value creation for our stakeholders and in the community we operate. PTTEP is committed to creating value for society through sharing its best practices and its model as a company with strong corporate governance.” - Mr. Phongsthorn Thavisin, President and Chief Executive Officer, PTT Exploration and Production Public Company Limited.

The 3G Education Award 2019 went to Oasis Bursary Programme, an initiative of Oasis Crescent based in South Africa. Adam Ebrahim, CEO of Oasis said: “ As a business that has been actively involved in addressing the educational needs faced by our country, Oasis has prioritised its investment in this critical area. Our backing of education has been far-reaching and the company is deeply involved in projects that span from foundational development through to post graduate learning. Benefitting from this funding are students on the Oasis Bursary Programme, who also benefit from the peer mentoring, support and practical work exposure and experience gained upon graduation.”

Another winner from South Africa was Kwantu Private Game Reserve whom received the 3G Responsible Wildlife Tourism Award 2019. Kwantu Private Game Reserve is an award winning 5 star game reserve situated at 85km from Port Elizabeth, near the famous Garden Route of South Africa. Another notable winner was Dubai Electricity and Water Authority (DEWA), which bagged two awards – 3G Excellence in Corporate Governance Award 2019 and 3G Best Corporate Governance Reporting Award 2019. This win signifies the vision of Sheikh Mohamed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and the Ruler of Dubai, who aims at making Dubai a global centre of excellence for governance in government departments, while facilitating the corporate sector to grow their businesses in a socially responsible manner. Ayala Land is the largest property developer in the Philippines was named the winner of the 3G Environmental Sustainability Award 2019 for the organisation’s efforts to incorporate the concept of environmental protection into its business operations and in imparting the best environmental responsibility practices.

Over the last four years, 3G Awards have been instrumental in highlighting the good governance in the educational sector as well. The University of Education, Lahore won the 3G Capacity Building Award 2019 whilst 3G Excellence in Higher Education Award was presented to COMSATS University Islamabad, Pakistan. W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

ISFIRE REPORT Malaysia is one country that has consistently bagged multiple awards in the past four years. This reflects upon the success of the country in implementing a good governance agenda, in public sector organisations, educational institutions, charitable sector and the private businesses. One of the remarkable success stories is Accounting Research Institute (ARI) at the Universiti Teknologi MARA, which has over the years undertaken impressive research projects to promote transparency and good accounting practices in public and private sector organisations.

Its work on Islamic finance criminology has earned it numerous awards and accolades. This year ARI won the 3G Research Excellence Award 2019. As for the 3G Sustainability of Performance Award, the Awards Committee decided in favour of Sunway Group, Malaysia. The Committee was highly impressed with the Groupâ&#x20AC;&#x2122;s sustainability policy and practices as part of its business culture and core values. In tandem with its commitment towards embracing sustainability throughout all its businesses, Sunway Group has incorporated sustainable business practices into its core strategic and operational activities and achieved positive growth through #sunwayforgood sustainability and social responsibility initiatives, that is creating value for the people, while conserving the planet and making a considerable profit. Apart from celebrations, the 3G Awards ceremonies provide ample opportunities for networking and getting connected with the leading players in the good governance regime. Leading figures from various parts of the world appreciated the opportunity to network, familiarise with the best practices in corporate social responsibility, and learn from each other.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

W W W. I S F I R E . N E T

ISFIRE REPORT

Our esteemed guests gracing the award ceremony with their presence

Participants and guests interacting before the awards ceremony

The proud winners of the night with their trophies

An Indonesian singer presenting her cultural diversity through musical creativity

Traditional Indonesian dance with colourful celebration of diversity and ethnicity

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

POINT OF VIEW

ISLAMIC FINANCE 5.0 IN THE INDUSTRIAL REVOLUTION 4.0

Dr. Hylmun Izhar

Senior Economist, IRTI IsDB Group

espite having undergone ‘a four-stage evolution’, composed of the early years (1975-1991); the era of globalization (1991-2001); the post-9/11 period; and an era after the 2008 recession, the Islamic financial services industry is still perceived to have failed to deliver on its promises of fairness, equity, and inclusion. As such, this has been due to the industrialisation along with its inevitable commercialisation along the way. Rightly so, the contemporary age of Islamic financial engineering, that has been characterised by a greater reliance on plugging ‘classical Islamic financial contracts’ into an Anglo-Saxon banking model and a conventional securitization technique in Sukuk issuance, has made Islamic finance appear to be no different from its conventional counterpart. Such an era, which commenced in the mid-nineties has been considerably exacerbated by the introduction of the following. First, the wa’ad technique (especially double wa’ad) applied to Islamic financial contracts. The white paper by Deutsche Bank in 2007 was perhaps the first documented articulation on the use of double wa’ad in contemporary Islamic financial engineering. Second, the deployment of a commodity Murabaha through the use of tawarruq for both liquidity management and personal financing purposes. Third, the operationalisation of the concept of beneficial ownership and the extension

I S F I R E , AU G U S T 2 0 1 9

POINT OF VIEW

of the khulta (mixture) principle to the field of commercial transactions, of which Islamic capital market through sukuk issuance has undoubtedly been the great beneficiary of the implementation of such concepts. These three components have altered the profile or body of Islamic financial contracts resulting in the financialization of the entire Islamic financial services industry. In the process, one of the unpreventable outcomes is a ‘shift’ in the natural domain of the contract; from initially being classified as a benevolent contract to now being a commercial contract. One example is the kafalah contract upon which a fee is now permissible. This is possible since, in contemporary practice, kafalah has essentially been moulded into ‘shirkatul wujuh’ using the principle of tab’iyyah or subordination. Financialization, as Palley (2007) contends, is a process whereby financial markets and financial institutions gain greater influence over economic policy and economic outcomes leading to a supreme superiority of the financial sector over the real sector. The consequential impacts of this process would be, an elevated significance of the financial sector relative to the real sector; income transfer from the real sector to the financial sector; increase income inequality; and propagation of debt creation instead of wealth creation.

W W W. I S F I R E . N E T

POINT OF VIEW

Having said the above, it has become clear that under the existing commercial institutional set-up, reducing inequalities and being more inclusive has never been the ultimate ‘natural’ objective of Islamic financial institutions; hence, it may not necessarily be attainable. Nowadays, where the innovations are characterised by the use of Artificial Intelligence (AI), FinTech, and Internet of Things (IoT), or collectively known as the Fourth Industrial Revolution, Islamic finance being in its 5th phase of development is encountered with situations where such innovations are creating substantial displacements in industry and employment in major economies around the globe. It is imperative; therefore, that Islamic finance has no other choice but to change. Furthermore, there is also a genuine demand and opportunity to redirect innovations towards services and products that create more economic opportunities, jobs and financial inclusion for those who have been on the sidelines of the Islamic finance revolution. Coincidentally, we are witnessing the propagation of Environmental, Social and Governance (ESG) discourse; which refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business combined with the proliferation of the immense potential of Islamic Social Finance. The terminology ‘Islamic Social Finance’ itself was only prominently introduced in 2014 by the Islamic Research and Training Institute through its Islamic Social Finance Report.

W W W. I S F I R E . N E T

A change in the look and direction of the industry is needed. Malaysia’s recent movement of Value-Based Intermediation in Islamic finance can be considered evidence of such change. Another one is the issuance of Khazanah Sustainable and Responsible Investment (SRI) sukuk. Waqf linked sukuk is another breakthrough championed by the Ministry of Finance Indonesia in partnership with Badan Wakaf Indonesia (BWI) and Bank Indonesia. It is becoming apparent that the drivers of change are no longer driven by an entirely profit geared motive, rather they are emphasising upon creating social and environmental impact. In other words, it is an admission that the deviations caused by the operation of Islamic finance in relation to the expected or aspired paradigmatic knowledge, theory and institutional emergence have to be corrected. One way to do that is through the introduction of ESG, Impact Investing, and Islamic Social Finance. More importantly, in the wake of the industrial revolution 4.0 that is somewhat synonymous with the use of technology and digitalization; we could perhaps hope it would pave the way for Islamic finance to be more appealing for not only its inclusivity but also the ubiquity of its fundamental principles as an ethical, socially responsible, and fair system of finance for not only the Muslims but other communities as well.

I S F I R E , AU G U S T 2 0 1 9

POINT OF VIEW

TALKING POINTS

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

W W W. I S F I R E . N E T

TALKING POINTS

WOULD YOU LIKE TO PROMOTE YOUR BUSINESS IN

ISFIRE? CONTACT US

FOR ADVERTISEMENT CONTACT fmehmood@edbizconsulting.com W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

TA L K I N G P O I N T S

ISFIRE REPORT

Top 300 Most Influential Women in Islamic Business and Finance Named at the 2nd WOMANi 2019 Awards Ceremony

Empowerment of women is the talk of this decade which includes a focus on their education, status in society, career prospects and respect. There are a lot of women empowerment movements going around the globe, ranging from fighting for rights to equal opportunities; with women empowerment and gender equity and equality in rage following increased focus on it as part of the Sustainable Development Goals (SDG#5). Although, a lot of women are being recognised around the world for their talents and contributions, the portion of women in certain male-dominated sectors is still meagre. Banking and finance is one such domain, and Islamic banking and finance (IBF) even more so. Cambridge IFA, a UK-based financial intelligence house, has been promoting the cause of gender equality in Islamic banking and finance and women empowerment since 2011, highlighting and promoting the role of women in IBF through its WOMANi programme. This year Cambridge IFA hosted the second Women in Islamic Business and Finance (WOMANi) Awards ceremony and gala dinner in the vibrant city of Dubai, UAE.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

WOMANi is a part of the women empowerment programme by Cambridge IFA to highlight enormously important roles that exceptionally talented women are playing in Islamic business and finance. â&#x20AC;&#x153;Our WOMANi Programme is a small contribution to the global movement to make the world an equitable place to live in,â&#x20AC;? said Dr. Sofiza Azmi, CEO of Cambridge IFA. She added that one of the aims of the programme was to redress gender imbalance, by showcasing the achievements of women in the sector and identifying new role models. Last year, a list of 100 most influential women in Islamic business and finance, WOMANi100, was published by Cambridge IFA. This year the list was expanded to include 300 women who are playing a leading role in and contributing to the development of the global Islamic financial industry. WOMANi attempts to compile a list of 1,000 leading women in Islamic banking and finance in the next 5 years. Its ultimate goal is to develop at least 1 million women into leadership roles in government, business, and social sector & philanthropy in the world as part of the global Islamic economy.

W W W. I S F I R E . N E T

ISFIRE REPORT

In compiling the WOMANi300 list this year, Cambridge IFA did extensive research and survey of market opinions, and conducted extensive and sophisticated processing of available data, before coming up with a conclusive list of the 300 most influential women in Islamic business and finance world over. They were selected on the basis of their influence, inspirational characters and proven leadership qualities in their own company and in the wider scale. These assessments were carried out using a methodology based on three factors: Professional leadership, Advocacy and Industry-wide recognition. Prof. Humayon Dar, founder of WOMANi, was the Chief Guest on the occasion. A large number of successful and influential women in Islamic finance participated from the UK, Europe, Kazakhstan, Spain, the Middle East, South America, Maldives, Malaysia, Morocco, Pakistan, Indonesia and China. At this glittering event, WOMANi recipients were celebrated and given recognition for their continued efforts to promote the Islamic business and finance industry in this contemporary world. Besides the Islamic finance sector, a number of women

W W W. I S F I R E . N E T

were included from Islamic non-financial businesses, but primary focus was on IBF and its different sub-sectors, i.e., banking, asset management, academia, Shari’a advisory and other ancillary services. The night also saw the launch of the inaugural WOMANi Report 2019, featuring the top 300 most influential women in Islamic business and finance. The report was published by Cambridge IFA and supported by DDCAP Group, Noor Bank and Abu Dhabi National Takaful. In her welcoming remarks, Dr. Sofiza Azmi said, “In the past decade, we have seen a growing band of women professionals breaking down barriers and promoting increasingly important roles in Islamic banking and finance. These exceptionally talented and inspiring leaders have not only set the pace to occupy leadership positions but have been playing a prominent role in the overall development of the industry. As inspirational role models they have become drivers of change that have inspired a whole new generation of female talent.” She added that “these powerful and influential women are leading change, breaking barriers and creating new possibilities in the world of Islamic business and finance.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

ISFIRE REPORT Stella Cox CBE, Patron-in-Chief of WOMANi and Managing Director of DDCAP; addressed more than 170 guests in attendance at the awards ceremony and gala dinner. “Not only does WOMANi elevates and raise awareness of the significance of women working across the Islamic financial spectrum globally, it also serves to connect us to each other,” said Stella Cox in her Special Address. She further highlighted the important role of WOMANi in reweighing gender balance in the Islamic financial industry and the wider global financial market place. In congratulating the women for their achievements and prominent role in the overall development of the industry, she urged that women must continue to be vocal and visible to enable that rebalancing to continue and to further accelerate. Stella Cox headed the WOMANi list in 2017 and 2018 as the Most Influential Woman in Islamic Business and Finance. This year she has voluntarily excluded herself from the list to accept her new role as Patron-in-Chief of WOMANi. Her contributions to the development of IBF world over are numerous, both professionally and on the advocacy front. Having worked within the Islamic financial marketplace for more than three decades, she has played a pivotal role in Islamic liquidity management and in championing IBF within the industry and beyond.

the Middle East, a new generation of women leaders is making waves in Islamic finance. Sayyida Dr. Rawan Ahmed Al Said, who is the first and only female CEO in a public listed company in Oman, paved the way for the participation of women in leadership roles.

Prof. Humayon Dar presented the WOMANi300 certificates to the top women in the WOMANi300 list, whilst WOMANi trophies were presented to the top 50 iconic women in Islamic business and finance. This year’s WOMANi award was presented to Datuk Noripah Kamso, who was named as the Most Influential Woman in Islamic Business and Finance 2019. An international figure in the global Islamic finance industry, Datuk Noripah has a solid and comprehensive 29 years’ experience across businesses in the investment banking and asset management. She is currently serving as the Chairman of Bank Rakyat, Malaysia and aims to establish it as Malaysia’s first Sustainable Bank. Prof. Dr. Normah Omar, Director of Accounting Research Institute at UiTM, ranked No.2 on the WOMANi300; followed by Professor Dr. Engku Rabiah Adawiah Ali at No.3, Dr. Hurriya El Islamic at No. 4, and Professor Dr. Rusni Hassan at No.5. The WOMANi Special Award 2019 was presented to Datin Maznah Mahbob, Partner, Finance & Investments at Strategic Swiss Partners AG, for her long-standing contributions to the global Islamic finance industry. She is ranked at No.22 on the WOMANi300 2019. Although the Top 20 was dominated by leading Malaysian women, several key women leaders in the UK, Middle East, South America, Europe and Indonesia have rose to rank this year. These include Maureen Badjoeri, CEO of Trustbank Amanah at No.5; Sayyida Dr. Rawan Ahmed Al Said, CEO Takaful Oman SOAG at No. 8; Dr. Dian Masyita, Associate Professor at Padjadjaran University at No.9; Nida Khan, Doctoral Researcher at University of Luxembourg, at No.12; and Umera Ali, Partner & Head of Islamic Finance at DWF at No. 14. Being the only woman from South America who has joined the list of most influential women in Islamic business and finance, Maureen Badjoeri is leading the transformation of Trustbank Amanah, with a disruptive vision for the Islamic banking through Fintech and a focus on financial inclusion. In

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

W W W. I S F I R E . N E T

ISFIRE REPORT

Other notable women who made to the list of Top 50 Most Influential Women in Islamic Business and Finance 2019 were Professor Dr. Meryem Duygun, Professor of Banking and Finance at Nottingham University Business School, at No. 21; Hajara Adeola, Managing Director of Lotus Capital, at No. 23; Zaineb Sefiani, Founder Carrera Learning, at No. 27; Dr. Nerma Saracevic, Director of Regional Centre Zenica at Wiener Asiguranje, at No. 32; Latifa Al Zaabi, General Manager of Siraj Finance, at No. 47, Farah Arakji, Chief Financial Officer at Abu Dhabi National Takaful, at No. 50; and Hind Al Attar, Head of Human Resources at Noor Bank, at No.50. From the African region, Hajara Adeola is a prime example of women leadership in Islamic finance in the region. She has been instrumental in the promotion of Islamic finance in Nigeria. She has been an adviser and arranger for corporate, state and sovereign sukuk issued in Nigeria. Under her leadership, Lotus Capital issued the first private corporate sukuk in 2009, the first sub-national sukuk in 2013 and advised the Federal Government in their first and second sukuk in 2017 and 2018, respectively. In 2012, Lotus Capital collaborated with the Nigerian Stock Exchange to develop and establish an Islamic Index - NSE Lotus Islamic Index. The WOMANi Special Award 2019 was presented to Datin Maznah Mahbob, Partner, Finance & Investments at Strategic Swiss Partners AG, for her long-standing contributions to the global Islamic finance industry. She is ranked at No.22 on the WOMANi300 2019 list. A well-known figure in Islamic asset management, she earned fame during her tenure with AmBank

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

ISFIRE REPORT Group where she was the CEO and CIO of AmInvest, fund management arm of the Group. She managed more than US$9 billion in investments, including Islamic funds and portfolios, for which her team won a number of awards, including the prestigious Global Islamic Finance Awards (GIFA). Her investment and finance expertise spans more than 35 years. After leaving AmInvest, Datin Maznah Mahbob is spearheading the international Waqf Ilmiyah Project to be established in Liechtenstein as a social finance instrument, pushing the boundaries of waqf beyond physical and financial assets to include intellectual assets. During the event, the recipient of the DDCAP-CIFLP Bursary was announced by Cassim Docrat, Director of DDCAP (DIFC) Limited. Angelia Chin-Sharpe, CEO and Country Head for Malaysia and Brunei at BNP Paribas Asset Management, was awarded this prestigious scholarship. She is ranked No.14 on the WOMANi300. In his speech, Cassim Docrat explained that the DDCAP-CIFLP Bursary is a partnership between DDCAP and Cambridge IFA to support the attendance of one of this year’s WOMANi list achievers at the 2019 Cambridge Islamic Finance Leadership Programme. Commenting on the WOMANi Programme, Professor Humayon Dar stressed that Cambridge IFA’s WOMANi Programme aims at empowering women at different levels in different regions across a range of professions. “Each and every woman featured in the WOMANi inaugural report is a story of hard work, dedication, multi-taking, professionalism perseverance, and success,” he said. “Grooming the next generation of woman leaders with relevant skill sets to meet these changes in the business environment is vital for the future of Islamic banking and finance. For this reason, we have developed other programmes like Cambridge Islamic Finance Leadership Programme, which aims to fast-track and groom the next generation of C-suite executives and leaders,” added Professor Humayon Dar.

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

W W W. I S F I R E . N E T

ISFIRE REPORT

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E R E P O RT

WOMANi INTERVIEW

INTERVIEW WITH

RATIH RACHMAWATY CEO, BTPN Syariah

WOMANi Ranking – 06 ALTHOUGH PROGRESS ON GENDER EQUALITY HAS BEEN MADE IN SOME AREAS, THE POTENTIAL OF WOMEN TO ENGAGE IN, CONTRIBUTE TO AND BENEFIT FROM SUSTAINABLE DEVELOPMENT AS LEADERS, PARTICIPANTS AND AGENTS OF CHANGE HAS NOT BEEN FULLY REALISED. WHAT IS BTPN SYARIAH’S ROLE TOWARDS THIS END? BTPN plays a very significant role in promoting gender equality as capacity building is part of our priority, both for our customers and for the employees. For productive underprivileged women customers, our financing product is designed to nurture four key behaviours: courage to do business, discipline, hardwork, and solidarity. Possessing these characteristics, our customers are empowered to manage their household’s finances while creating a better quality life for their families and the next generations. Our financing product also has a membership system, with shared responsibility for all members within each community group. The group selects a community leader for each instalment cycle and the leadership role is passed on amongst members, thus allowing members to practice their leadership skills. As for the employees, all of our Community Officers are women – they are the front liners in facilitating and assisting the productive underprivileged customers in the field. Their task is not only to finance the distribution, but also to encourage the customers to pursue their hopes and dreams. The Community Officers are trained to demonstrate honesty, politeness, and discipline. By taking up these roles, we also encourage the Community Officer to develop their own potential as well.

UNDOUBTEDLY, SUPPORTING WOMEN ENTREPRENEURS IS VITAL FOR ECONOMIC GROWTH. HOWEVER, IN INDONESIA, WOMEN ENTREPRENEURS STILL FACE SIGNIFICANT CHALLENGES IN OBTAINING ACCESS TO CREDIT. HOW IS BTPN SYARIAH ADDRESSING THIS ISSUE? We have a dedicated team working exclusively on opening access to credit for women from productive underprivileged background. Since the beginning of our operation, we have been persistent in our efforts to empower the unbanked communities across Indonesia. Currently, BTPN Syariah is serving 3.5 million customers, all of whom are women. We operate in 23 provinces, out of which 10 provinces, as recorded by the

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

W W W. I S F I R E . N E T

WOMANi INTERVIEW government, have the largest population of poor productive communities in Indonesia.

YOU HAVE RECENTLY BEEN NAMED AS THE 6TH MOST INFLUENTIAL WOMAN IN ISLAMIC BUSINESS AND FINANCE GLOBALLY BY CAMBRIDGE IFA, UK. CONGRATULATIONS ON THIS HUGE ACHIEVEMENT. WHAT ARE, FROM YOUR PERSPECTIVE, THE BIGGEST CHALLENGES FOR WOMEN IN LEADERSHIP ROLES? Taking up a leadership role has its consequences. The challenges will arise if women don’t anticipate them early enough. These consequences or challenges may occur in various forms – gender bias, family sensitivity, societal perceptions of working women, and many more. Once we have the willingness to accept these challenges and embrace them instead of denying them, we have the power to leverage on our personal qualities to tackle these challenges.

WHAT ADVICE DO YOU HAVE FOR WOMEN AIMING FOR LEADERSHIP POSITIONS? Focus on your passion. God has given you talents, while your passion drives you to use your talents repeatedly and consistently, all the while strengthening them. Passion creates a burning desire to serve wholeheartedly, thus,

leading you with determination, persistence and endurance during the hard times. Choose your team wisely. Base your choice on EQ (emotional quotient) instead of IQ (intelligence quotient), and avoid the tendency to choose a team that is “similar to us”. Instead engage professionals with different strengths, and assure that your team carry a shared mission and hold the same life values. Always make time to learn and grow. There is no magic in building a business; one has to go through the process of ups and downs, the success as well as the failure. You can only grow only if you learn from that process. It can be better understood using the mountain climber’s principle: be humble when you rise (because you are stronger when you bend your body down as you walk up the mountain), and confident when you are down (because it is easier to walk down the hill with your body leaning back). Lastly, disrupt yourselves otherwise someone else will.

WHAT DO WOMEN LEADERS BRING THAT IS UNIQUE? Women tend to lead from the heart. It is natural for women to show caring and empathy, thus human connections comes quite naturally in an environment led by women.

Ratih Rachmawaty accompanied by BTPN Syariah’s Community Officer while visiting a customer in Tangerang, who produces aromatheraphy candles

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

WOMANi INTERVIEW

INTERVIEW WITH

MAYA MARISSA MALEK Managing Director, Amanie Advisors LLC WOMANi Ranking – 07

YOU STARTED YOUR CAREER IN ISLAMIC FINANCE IN MALAYSIA WORKING FOR AMANIE ADVISORS MALAYSIA AS THE FIRST WOMAN CONSULTANT IN 2007. HOW HAS WORKING WITH AMANIE ADVISORS DEVELOPED YOUR CAREER AND HELPED YOU LEARN AND GROW? WHAT HAS BEEN YOUR MOST CAREER-DEFINING MOMENT THAT YOU ARE PROUD OF? I am blessed to have started my career in Islamic finance working with Amanie Advisors, Malaysia in 2007 and then moved to Amanie Advisors Global Office, Dubai in 2014. Amanie Advisors was founded and is led by my mentor, Datuk Dr. Mohd Daud Bakar, a renowned global Shari’a scholar and corporate figure. Coming from a legal background, and now having more than 20 years of experience in corporate legal and Islamic financial matters, working in Amanie was a step-up and a platform for me to contribute to the quest of strengthening the Islamic finance industry. I have initiated atypical Islamic financial entreprises, and was entrusted with leading our global Shari’a advisory business. I have personally headed landmark projects such as the development of Islamic banking framework for the Central Bank of Afghanistan, development of the first ever Shari’a standards on gold in collaboration with AAOIFI and the World Gold Council, issuance of the first corporate Sukuk out of Oman working on the first ever corporate Sukuk out of Oman and first Sukuk out of Kazakhstan, setting up of various Islamic windows in non-Muslim countries, and advising the world’s largest gold ETF. I have found these ventures to be fulfilling, which has ignited my passion even more. I am also an external consultant and a subject-matter expert on Shari’a for the IFC, World Bank Group.

IN SHARI’A ADVISORY, AN AREA WHERE THE PRESENCE OF WOMEN IS SCARE, YOU HAVE MADE YOUR MARK. WHAT CHALLENGES DID YOU FACE AND HOW HAS THE INDUSTRY CHANGED SINCE? Drawing strength from all these great encounters that I have had the blessings to experience, I stay abreast of the latest happenings in the industry, reflect that in my work and be more cognizant of the demands from the non-traditional markets in the quest to uplift the industry. The raison d’etre in my work is to create awareness to as many parties outside the Islamic financial space as possible. Since Islamic finance is for everyone and not just for Muslims, there

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

W W W. I S F I R E . N E T

WOMANi INTERVIEW is no limit to expand its reach beyond predominant Muslim countries and markets. Solid Islamic solutions that can address the concerns of newcomers into Islamic finance is paramount and to add to this, the solution must not only be Shari’a-compliant but also commercially viable and workable. We need to have in depth knowledge of what is on the ground in these new markets and a solid knowledge of Shari’a in order to match solutions with various aspects so as to reinforce the sustainability of Islamic finance in the market and be a real alternative to conventional finance throughout the value chain in the near future.

THE ROLE OF WOMEN IN ISLAMIC FINANCE HAS GAINED PROMINENCE IN RECENT YEARS. MALAYSIAN WOMEN ARE OCCUPYING LEADERSHIP POSITIONS AND PLAYING A DOMINANT ROLE IN THE INDUSTRY. WHY IN YOUR VIEW ARE COUNTRIES LIKE MALAYSIA LEADING IN THE GENDER LEADERSHIP SPACE? Women’s inclusion and participation in Islamic finance and its sister sectors is part of a wider effort on women empowerment in the workplace. Women are playing many roles now – they are investors, philanthropists, entrepreneurs, senior executives, Shari’a scholars, techies, professionals and many more. Also let’s not forget they are wives, mothers, daughters and sisters. In Islamic finance, the cause for lack of women representation may be more inadvertent rather than deliberate. In addition to talent shortage, this area may not be that attractive or ideal for female role models to venture into. In countries like Malaysia, Indonesia and the UAE; professional women are being given a more balanced gender footing to be entrusted with top management positions and be involved in Islamic finance and Shari’a advisory boards. However, it is worth noting that despite quite a big number of women professionals occupying middle-management positions, the number seems to dwindle further up the corporate ladder. Link this with Shari’a advisory practice as a whole, with no visible career path to the top rungs in Islamic financial institutions, women in Islamic finance are again facing a huge sturdy wall in their career paths.

world. Despite the positive outlook for the industry as a whole, the one challenge that has always been consistent and plaguing the industry is scarcity of talents. Even more so in Shari’a advisory. Although there are many women leaders in different industries, when it comes to Islamic finance, women are clearly under-represented. To develop and empower the female leaders of tomorrow, CEOs and senior leaders should integrate gender diversity as a core part of the organisation’s strategic objective and ensure organisation-wide communication and engagement. Applying best practices in retaining talent, ensuring fairness and equal opportunities, removing any conscious or unconscious bias, and promoting role models are the key tools.

WHAT ADVICE DO YOU HAVE FOR WOMEN AIMING FOR LEADERSHIP POSITIONS? I subscribe to the view that we need more and more leaders who can drive change on all levels of human relationships, not just in the realms of technology and science, but more importantly, to evolve conscience. This is an important role that women can participate in and contribute to. For the untapped women leaders in Islamic finance, there is no easy way to succeed. Women should not have to bow down to mainstream perception and expectation. Instead be creative in managing and balancing various responsibilities, ready to accept challenges and take everything in their stride in a positive manner without compromising on the unique attributes, including their quiet strength. It is also important for women to support each other in their endeavours. One of my aims is to empower more and more women to enter this line of work, and showing them that we can do it and do it well, if not better.

YOU HAVE RECENTLY BEEN NAMED AS THE 7TH MOST INFLUENTIAL WOMAN IN ISLAMIC BUSINESS AND FINANCE GLOBALLY BY CAMBRIDGE IFA, UK CONGRATULATIONS ON THIS HUGE ACHIEVEMENT. IN YOUR OPINION, WHAT IS THE BIGGEST OBSTACLE TO WOMEN’S CAREER PROGRESSION ESPECIALLY IN LEADERSHIP ROLES? Thank you. Whatever that I have achieved thus far is the blessings of the Almighty, the support from a great team at Amanie and the unyielding backing from my family. Whether we admit it or not, we are living in a disrupted

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

WOMANi INTERVIEW

INTERVIEW WITH

ANITA MENON Chief Risk Officer Prudential BSN Takaful WOMANi Ranking â&#x20AC;&#x201C; 30

You have recently been named as one of the Top 50 Most Influential Women in Islamic Business and Finance globally by Cambridge IFA, UK. Congratulations on this achievement. What do you think has led to your success in this traditionally male dominated industry? Thank you very much. I come from Malaysia where women have been in leadership roles in the field of Islamic Finance for quite a while and hence it is no longer the exception. Having said that the percentage of women business leaders in this sector is still relatively low. When I started my career at KPMG and eventually became the Head of FRM and Head of Islamic Finance for KPMG Consulting in Malaysia and part of KPMGâ&#x20AC;&#x2122;s Global Islamic Finance and Investments Group, I never felt that there were any barriers to my progression. I was passionate about my work and enjoyed the opportunity to drive the development of the IF industry, resulting in the licensing of Islamic financial institutions as well as towards capacity building and thought leadership. Having a can-do spirit, being passionate about what I do, challenging myself and stepping out of my comfort zone as well as having good leaders whom I emulated have all contributed to where I am today.

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

Can you share with our readers some of the milestones in your leadership journey? What has shaped you? One of my first major milestones in my working career was when I started off in the port industry which was very male dominated industry at that time. Being able to successfully manage one of the largest shipping lines as an account manager and to earn their respect was something, I am still proud of. The next highlight was the time spent at KPMG where I joined as Senior Consultant and become a partner in a fairly short time. I had a good leader and the trust that was given to me shaped me to take on more responsibilities. Managing clients professionally allowed me to win their respect and taking their feedback in my stride made me more resilient. Taking on the role at Prudential BSN Takaful was the next milestone which allowed me to work directly in the industry and to contribute to the end customers whose lives we touch through the work we do. I have realised that people and teamwork are the keys to the success of any organisation. Being resilient and professional, not being afraid to ask questions and W W W. I S F I R E . N E T

WOMANi INTERVIEW

having the ability to analyse information, paying attention to detail and challenging the status quo have all served me well in the different phases of my career.

What was your support system like as your career advanced? Did you have a particular role model? I have been fortunate to have a support system although it was a constant juggling act between delivering at work and being a hands-on mother, as I wanted to be present for all the significant moments in my childrenâ&#x20AC;&#x2122;s day. My mother is my role model. She taught me and my siblings about the values of working hard, and having integrity at all times. She was fiercely independent and instilled in me a sense of responsibility and the need to show up and be counted. As such, I have never had qualms about rolling up my sleeves whenever it was needed.

How do you make sure that you are always growing and learning in your career? I believe it is vital to consistently develop new skills and knowledge to move forward. My move to Prudential BSN Takaful, taking up this role after being a partner at KPMG made me step out from my comfort zone, challenging myself to a greater level. Last year, I signed up for a CIMA CFO programme to enhance my professional qualification in leadership, people and business. I read a lot and enjoy speaking to people from different industries and backgrounds, as you learn something by listening to their experiences.

What do women leaders bring that is unique? There is enough research out there that reaffirms the fact that diversity produces better results. Women are generally able to take a balanced view, are adept at multi-tasking and tend to take a more collaborative approach to leadership. Women are also able to temper tough management decisions with empathy and these qualities are useful to have in any leader. There will be times when tough decisions need to be made and a consultative approach will not work, but ensuring that you constantly engage with your team and maintain open and transparent communication helps in managing expectations.

What advice would you give women looking to move into positions of leadership? Women should not be afraid to take charge and volunteer to lead whenever opportunity arises. Constantly engage with your teams; build relationships with them and practice objectivity. At the same time, women should not see it as their entitlement to be considered for roles because of their gender; instead be proactive, assertive and professional. Women should commit to mentoring and supporting other women as well as men who are aspiring for leadership roles; and be passionate about what you do. I firmly believe that women can have a voice without having to thump tables or behave with aggression. Ultimately, the aim is for women to be promoted on merit and for their skills and experiences and not to fulfil some quota. Lastly, I was recently inspired by the Japanese term of Ikigai â&#x20AC;&#x201C; be true to your personal values and beliefs, stay grounded and that will take you far in your career even though the road may seem long and winding at times. W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

WOMANi INTERVIEW

INTERVIEW WITH

FITRI HARTATI

SE, AAIJ, AIIS, AAAK, QIP, CPLHI President Director of Capital Life Syariah WOMANi Ranking – 36

CAPITAL LIFE SYARIAH WAS ESTABLISHED IN 2017. AS A NEW SHARI’A LIFE INSURANCE COMPANY IN INDONESIA, HOW DOES CAPITAL LIFE SYARIAH UNIQUELY POSITION ITSELF AMONG OTHER PLAYERS IN THE MARKET? It hasn’t been easy for us to reach where we are today. The main challenge that we face, which is true for other players as well, is the availability of qualified and competent human resources in the Shari’a life insurance industry in particular. In addition, people also need to have an open mindset as Islamic finance is not a religion and hence, one do not need to profess a religion in order to practise Islamic finance. The Shari’a principles in which Islamic finance is based upon upholds the principles of ethics and transparency and it can be applied to all people regardless of their religious background. Having said this, innovation of Islamic products is undoubtedly one of the key factors driving the growth of the financial industry. Some strategies that are owned by PT Capital Life Syariah to continue and compete with other Shari’a life insurance companies are, creating marketable and acceptable innovative products and our flexibility to take on opportunities to expand our business.

WHAT IS THE OUTLOOK FOR SHARI’A INSURANCE PENETRATION, AND WHAT ROLE IS CAPITAL LIFE SYARIAH PLAYING TO IMPROVE IT? The penetration rate of Shari’a insurance products in Indonesia is still very low, standing at 2.51%, according to the records of the Indonesian Association of Shariah Insurance (AASI). This underdeveloped market that has not only the largest Muslim population in the world but also a growing young population; makes it one of the fastest growing life insurance markets in the world. However, the lack of public awareness and understanding of Shari’a financial services is among the causes of the low penetration of Shari’a insurance in Indonesia. Seeing

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

W W W. I S F I R E . N E T

WOMANi INTERVIEW

the current prospect, Capital Life Syariah has embarked on education and literacy programmes aimed at increasing awareness and greater understanding of the importance of Shari’a insurance amongst the general public.

YOU HAVE RECENTLY BEEN NAMED AS THE 36TH MOST INFLUENTIAL WOMAN IN ISLAMIC BUSINESS AND FINANCE GLOBALLY BY CAMBRIDGE IFA, UK. CONGRATULATIONS ON THIS HUGE ACHIEVEMENT. WHAT ARE, FROM YOUR PERSPECTIVE, THE BIGGEST CHALLENGES FOR WOMEN IN LEADERSHIP ROLES? First of all, I would like to thank Cambridge IFA for this recognition. I am truly humbled and honoured to be named as one of the most influential women in Islamic business and finance. I personally think that women have many opportunities to be a leader and can flourish in leadership roles. But one of the biggest challenges is the lack of professional development opportunities for women. In order to implement more effective leadership development, organisations must first acknowledge the key factors inhibiting women’s career progression. For example, competing priorities often limit the opportunities women have to develop into leaders within their organisation. Secondly, women are often faced with the “moral” dilemma of whether to work or stay at home with their children and that these “choices” are incredibly constrained. Due to these internal challenges, women are viewed as secondclass citizens. So far, there is still a perception in Islamic culture that a man is always a leader. Therefore, for women to be considered and trusted as leaders the support from Islamic institutions is especially necessary to create awareness.

that I can give my best to my personal and professional life. However, I still believe that multitasking is necessary.

WHAT DO WOMEN LEADERS BRING THAT IS UNIQUE? For me, personally, being a woman leader is not easy and entails sacrifices. Knowledge, professionalism, leadership skills, time and experience are essentials. I am proud to be a woman, a leader, and also a mother for my child. A woman can do anything that she sets her mind on, believe it! We aim to make the company a family, by supporting, helping and caring for each other. As a leader, I have always instilled a passion for progress and growth, being humble and cooperative. We should always try new things, and take every opportunity to improve, as it is solely for the advancement of my employees and the company. It’s all about how we practice emotional intelligence as a complement to intelligence itself.

AS A WORKING PROFESSIONAL AND CEO, HOW DO YOU ACHIEVE BALANCE BETWEEN YOUR PROFESSIONAL AND PERSONAL LIFE? As a career woman with an active family life, the key to finding a balance between work demands as a CEO and family demands is setting priorities. For this, I have maintained two rules. First is prioritising work intelligently. I prioritise my daily work. There may be twenty tasks on my daily list, but I focus on the important ones. After everything else is done, I continue on other tasks at hand. Second is maintaining quality time with my family. I focus on my work during office hours. When at home, I spend quality time with my family. Unless it’s urgent, as much as possible, I don’t check office e-mails or office chat groups at home. I also always make sure to have enough “me time” so W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

WO M A N i I N T E RV I E W

PERSPECTIVES

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

W W W. I S F I R E . N E T

PERSPECTIVES

WOMEN EMPOWERMENT; WHY IS IT IMPORTANT? Women empowerment in its very essence is the undertaking by women to create and recreate their own purpose, regardless of the circumstances. Today, women are faced with a lack of respect for their participation in the society, as well as undermined in their abilities, knowledge and intellect. Women receive less education, less salary, and less responsibilities as opposed to their counterparts.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

Empowering women places the decision-making torch in their hands enabling them to light up all the spheres of life, to ensure long-term sustainability of the status of women in society. Education plays an important role in arming women with the knowledge, skills and confidence required to participate in the development process of communities. It also helps in eliminating poverty, and improving the health and well-being among generations. Every human being has a right to freely choose and make decisions to better one’s life. Women empowerment is doing just that. It is giving women control over their own lives, returning their sense of self-worth, while giving them access to resources and opportunities as a right, and in return creating a more tolerable and entitled society. Glass ceilings exist not only in the corporate world but in the very minute of places; but as women we have to realise that it is not a reflection of our values as a person, nor of our capabilities as a professional. Breaking the glass ceilings should not even be an achievement; it has to be a right.

Women constitute nearly half of the world population, but their participation in the world economy is meagre. In the wider scope of things, bringing women into the mainstream and their role in decision making at all levels is vital in maintaining a sustainable global development, and significantly improving the quality of life for individuals. As Kofi Annan says, “There is no tool for development more effective than the empowerment of women” and we agree. Empowering women in no way means undermining the value or the abilities of men; in fact, it promotes diversity, as every gender and every individual brings new ideas and different skills to the table, be it at home or in the office. Empowering women is not only about increasing their share in the business and corporate sectors, but respecting the choices made by each and every woman, in homes and beyond. True empowerment is allowing women and every individual to make choices without being discriminated against, having rights as human beings, and entitlement to a better life.

“There is no tool for development more effective than the empowerment of women”

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

W W W. I S F I R E . N E T

PERSPECTIVES

What does Women Empowerment mean to you? Hamdi Farah Senior Officer Finance at Dubai Holding

As more women lead the world in different industries and regions, there are still parts of the world that are lagging behind in empowering the female gender to fulfil their potential. Women empowerment on a primary level means ensuring women feel safe in their own environment, have access to education and the knowledge they would like to attain as well as gain the financial freedom they need to make their own decisions and live life the way they want. Safety, financial freedom and access to education, in my humble opinion; are the basic components needed to empower women to empower themselves. On a secondary level, female empowerment means having laws in place to ensure women no longer have to make sacrifices as the direct result of social gender discrimination. These include having ample or flexible maternity and paternity leaves; increasing the presence and voice of organisations and groups that advocate against social issues that catalyst gender prejudice; and having strong regulatory measures that champion women’s equal rights and protection.

Namira Samir

Researcher at the National Team for the Acceleration of Poverty Reduction (TNP2K) As someone who aspires to make the voices of women heard and acknowledged, I believe that we still experience public misconceptions about what empowered women and women empowerment purport to be. People tend to associate an empowered woman with overly ambitious, ready-to-conquer-the-world kind of a person; someone who would not listen to other’s opinion but her own. Women empowerment is neither about power nor selfabsorption. It is about having the right to do things the way they want and to take opportunities that are presented to them with zero limitation and without prejudice. It is about being able to fulfil their fundamental needs and not suffering from any of the three dimensions of deprivation (health, education, and living standards). Also, women empowerment is about being able to use the power acquired without forgetting the presence of men as human beings that deserve as much rights as them. Empowering women requires devotion and boundless efforts. To stay silence is a disgrace of our ability to speak up about what’s in our mind. Only when we as women trust our guts and start taking the leap would we achieve eternal women empowerment. W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

Anita Menon

Chief Risk Officer, Prudential BSN Takaful Women’s empowerment is the hallmark of a developed society and to me is the ability for women to make decisions and act for themselves without having the shackles of limitations placed by society. It is about women having equal access to education and employment and to have the ability to move around freely without fear. The Takaful industry being no exception to this, enabling women to take on leadership roles to contribute to its development. This will allow women to be respected for their competencies and capabilities, working side by side with men, to be comfortable in their own skin and management style. It is also just as much about respecting women who make the decision to stay at home and be full time home makers, but it should be as a result of a women’s own choice and not because she is expected to be the nurturer and the person to hang up her career aspirations when she becomes a parent. It is when all women come together that women are truly empowered.

Jennifer Ng Abdullah Head, Islamic Wealth Management at Alliance Islamic Bank Bhd

Today, being a woman demands one to excel in all that they do — be it at work or at home, which can be physically, mentally and emotionally exhausting. Women generally are constantly judged on how well they cope with work and family by the people around them. Women empowerment for me is sending the message to all women that not being the best in everything or every time is ok. It is ok that you are not a supermom or that you missed your child’s PTA meeting because you just had to be at work. It’s ok that you missed an important discussion in the office because you are unwell and all you want to do is to lie in bed. Women empowerment is about giving women the prerogative to decide what is best for them instead of always looking after the interest of others before themselves or having to think if they will be criticised for their actions or decisions. Women empowerment is allowing women to be free to decide what makes them happy, be it going beyond their means to complete a task or taking that well deserved break they always wanted.

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

W W W. I S F I R E . N E T

PERSPECTIVES

Joann Enriquez

CEO at Investment Account Platform The typical notion of women empowerment is to empower women to be equal to men. This indirectly acknowledges the inequality of women. Where is the disparity? Perhaps in the pay scale and opportunities or in perception and expectations? I have a different perspective: Women are not equal to men. Women have the capacity, the ability, and a sense of responsibilities that men can never have and vice versa. On the biological standpoint of childbearing and nurturing alone; the discussion concludes. Emotions, physical abilities, biological structure, genetics, and all propensities based on these makes it a feat to say women are equal to men. I can also argue that perhaps the demise of the society is because we forget the uniqueness of a woman — the power she holds and the responsibilities she must bear. We perhaps get lost in the debacle of thinking women are equal to men and recklessly believe that roles can be freely reversed without much consideration. The unique beauty and capacity of a woman of any age and race cannot be questioned and is obvious to every human being. It has forever been revered in mythologies, holy books, oral and written traditions. Every child who has a mother, sister, aunt or a female friend can attest to this innate reality. Women empowerment is about giving women the opportunity to shine and showcase their talents and therefore, allowed to give back to society.

Rosmini Mohamad VP/Head, HR Shared Services, Group Human Resource at Malaysia Development Bank Berhad

Empowerment has often been deliberated as an authority granted to an individual or a group to make the right decision in various acts and to overcome challenges. It is also associated with trust element in people’s capability to drive initiative. Regardless of gender or place, either at work or home, people must be empowered to a certain degree to strengthen their leadership and ultimately be able to achieve their targeted life goals. Focusing on women empowerment, in 2018 women constituted half of the world’s population but only 48.5% participated in the labour force. Living in both the private and corporate worlds, women empowerment really means to stand independently with unrestricted possibilities to make the right decision. It motivates and promotes women’s participation in all sectors and enhances their capabilities in all areas that they venture into to improve their quality of life. Education plays as an important element to achieve workplace gender equality, and thus allowing women to compete on merits and be aware of their rights in social and economic development for their growth and helping others to grow. The society at this moment need not worry about recognising women empowerment as women have a a very impressive track record of living with their hearts full of responsibilities in managing their own family and nurturing the nation globally.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

Sarifa Alonto Younes Keynote Speaker and Author

Empowerment means different things to different women. Margaret Thatcher equated empowerment to an ability to dedicate oneself to a task. She said: “I’ve got a woman’s ability to stick to a job and get on with it when everyone else walks off and leaves it.” While Michelle Obama defines empowerment as the ability to overcome limiting beliefs. She puts it bluntly: “There is no limit to what we, as women, can accomplish.” On the other hand, Oprah Winfrey describes empowerment as the ability to overcome your fear of failure:

One may view women empowerment as success in leadership, management and politics. Others may define it as achievement in the face of adversities. Yet others may see a rise to celebrity despite the odds being stacked against you as empowering. Regardless of how you view and define women empowerment, we all share the same feelings, vision, and dreams of empowering women for success. My view is that women empowerment is the process of equipping women to realise their true potential so that they have the courage to respond to situations according to their abilities and interests. This allows them to play the role they are most comfortable and confident in, be that politics, economics, education, or so on. Empowering women allows them to intelligently participate in decision making. It’s about allowing themselves to learn and grow despite the obstacles that may try to hinder their progress and development. As Margaret Thatcher would say “you may have to fight a battle more than once to win it”. As women, we may need to keep resisting and persisting to reach our full potential. Only then can we make a difference and empower other women to push even further in future generations. There are various factors or barriers that affect, and even cripple, women as they try to achieve their dreams. Issues such as societal norms, beliefs, traditions, cultures, marital status, and education are just some of the many barriers that women may need to overcome. But of all those factors, I see education as the most important and dominant barrier that affects most women. A lack of education results in women having less participation in politics, socio-economics, leadership, and management in corporate sectors. Through education, women equipped

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

“Think like a queen. A queen is not afraid to fail. Failure is another steppingstone to greatness.” with the ability to learn and acquire other skills that allow them to progress. Education will pull women out of misery and exploitation and will help them to make better decisions for themselves. It’s a particular problem for women in thirdworld countries who have no access to education and may even have been deprived of education as they grew up. In such countries, we see women struggling to participate in the workforce, education, and politics. It is perhaps no coincidence that these countries are experiencing slow growth in economic development. To empower women is to allow them access to both formal and informal education that would equip them to have more bargaining power in the house and workplace and would prepare them to raise brilliant future generations. I believe in a saying that behind every successful man is a powerful woman. And likewise, behind every successful woman is a loving and supportive husband.

W W W. I S F I R E . N E T

PERSPECTIVES

Datin Paduka Ir. Dr. Siti Hamisah Tapsir Director General, Department of Higher Education Ministry of Education Malaysia

Empowering girls and women is powerful and critical in today’s circumstances. A country’s future is largely shaped by the girls of today and the women of tomorrow. Hence, there is a grave need to empower them to realise their potentials through expanding their economic opportunities, lifting their educational aspirations and exploring their hidden talents. Personally, there are three notions that define women empowerment. First, I believe that women are empowered if they are financially independent and enjoy the freedom of choice in living their life to the fullest. Empowerment also signifies their independence in managing risks, improving economic status and wellbeing. Secondly, I am convinced that education is the key to women empowerment. Nelson Mandela once said “Education is the most powerful weapon which you can use to change the world”. A literate girl and an educated woman are change makers who will empower their communities and uplift their countries to a better level. Thirdly, I take the liberty to empower other women in discovering their skills and capabilities. Assumed responsibility and granted authority will make women stronger and more confident, therefore cognizant of their rights and privileges. Women are indispensable members of a society. Empowerment will help elevate the status of women and enhance their decision-making capacity at all levels in all spheres of life.

“Education is the key to women empowerment. Nelson Mandela once said “Education is the most powerful weapon which you can use to change the world”.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

PERSPECTIVES

POINT OF VIEW

EMPLOYEE

NEEDS:

WHAT ARE EMPLOYEE NEEDS OR EXPECTATIONS IN AN ISLAMIC BANK? HOW CAN THESE NEEDS BE FULFILLED IN ISLAMIC FINANCIAL INSTITUTIONS? ARE ISLAMIC BANKS AND ISLAMIC FINANCIAL INSTITUTIONS CAPABLE OF ADDRESSING THESE NEEDS?

A NEW CHALLENGE

FOR ISLAMIC BANKS?

KHALFAN ABDULLAH

Islamic financial institutions operate in different countries with each country having its own unique laws, cultures and values that influence an employee’s expectations of that country in general and Islamic financial institutions in particular. However, when it comes to attracting and retaining top talent, Islamic banks need to understand what their needs and expectations are.

EMPLOYEE NEEDS For a while, the worldwide assumption on employee needs and expectations have revolved around financial benefits, with many others overlooked. Though an employee’s needs or expectations are increasingly becoming hard to generalize as each individual in a culturally diverse society might have different factors influencing a particular need or expectation. The table below highlights some of employee needs:

Work life balance

Diverse rewards programmes

Advancement opportunities

Social-centric culture

Creativity and innovative culture

Health Benefits- Competitive health insurance covers

Embracing new technology

Useful and timely communication

Professional development

Environmental conservation

Job security and work place safety

Flexible hours

Attractive office/Convenient location

No harassment or intimidation

Challenging and meaningful work

Competitive pay

Opportunity to own, i.e. have share in ownership

Financial wellness programmes

Working for Impact

Fun work environment

Inspirations

I S F I R E , AU G U S T 2 0 1 9

POINT OF VIEW

W W W. I S F I R E . N E T

POINT OF VIEW

Opportunity to own: Part of increasing employee participation, employee retention, and employee compensation is providing employees with options to own shares of the company they work for. Certain developed and developing countries are increasingly embracing Employee Share Ownership Plans (ESOPs) for not only the top management team but all employees. Therefore, as Islamic banks embrace partnerships with its external customers through profit and loss sharing arrangement, it is paramount that internal customers, i.e. employees, are given the opportunity to participate in the share ownership of the Islamic banks. Financial wellness programmes: Financial education is increasingly becoming a necessity for Islamic banksâ&#x20AC;&#x2122; customers and employees alike. Some studies have established a link between weak financial management and employee stress, absenteeism, poor performance and job dissatisfaction. As a result, corporates have started to offer financial education to their employees to learn about saving, investing, retirement planning, and estate planning among others. Islamic banks have to streamline their non-monetary benefits by giving opportunity to employees to become financially literate.

THE CHALLENGES Both employee needs and human needs pose a challenge to Islamic banks. Below is an attempt to explore some of these challenges. Embracing new technology: Work places are increasingly becoming technologically driven. Employees are exposed to technological developments such as customer relationship management systems, human resource management systems, procurement systems, credit processing systems, disasters and recovery management systems, cyber security systems, queue management systems among others are likely to face work place shock operating in an environment that lacks some of these systems. Therefore, Islamic banks are required to keep pace with the latest technological developments in work places.

W W W. I S F I R E . N E T

Excitement and creativity: Having fun is part of human necessities, provided it is within the dictates of Shariâ&#x20AC;&#x2122;a. Making the work place productive and exciting is a tall order to balance but an essential requirement. On the other hand, people have internal capacity to be creative provided that they are given enabling environment to flourish. Developing creative minds at work places is becoming an increasing feature of learning organisations. Islamic banks are facing challenges to provide excitement and creative environment to their employees. Love and relationship: Office romance has become a challenge that requires unconventional methods to deal with before it becomes a serious reputational risk to contain. Whereas some Islamic banks might have different work areas for males and females or limit male-female interactions, this does not completely stop people from developing connectivity through social media. While illicit relationship is morally condemned, however, Islamic banks should be open to recognising the genuine need of employees to establish families. Unfortunately, some Islamic banks have lost some talents due to enforcement of policies that prohibit a husband and a wife from working in a similar organisation. While the risk is understandable, exposing employees to choose between forming a family and work requires serious evaluation of possible solutions.

I S F I R E , AU G U S T 2 0 1 9

POINT OF VIEW

CAMBRIDGE

ISLAMIC FINANCE

LEADERSHIP PROGRAMME August 16 - 21, 2020

WHY CAMBRIDGE ISLAMIC FINANCE LEADERSHIP PROGRAMME?

The leadership programme prepares the next generation of leaders by providing them with unique mentoring opportunities, rigorous leadership training from renowned leaders as well industry-specific case studies in Islamic finance.

WHO SHOULD ATTEND?

The Cambridge-IFLP aims at bringing Islamic banking and finance professionals in the middle and upper middle management positions, to the prestigious University of Cambridge for a period of 5 days, with a view to offer them an opportunity to become members of the most prestigious mentoring programme in Islamic banking & finance.

SALIENT FEATURES LEADERSHIP TALK: Covers a wide range of topics including structuring and product development, human resource development and leadership. LEADERSHIP INTERVIEW: Leading personalities share their personal perspectives on leadership in this unique one-on-one interview. LEADERSHIP ACTIVITIES: Identify leadership skills and traits in a fun way. CAMBRIDGE CASES: Delegates apply their theoretical knowledge, develop team skills, and develop solution-oriented decision making SOCIAL ACTIVITIES: There will be numerous social activities, allowing the delegates to interact with each other and with mentors. These include a Garden Party, Punting, and a Leadership Walk, among many others.

https://cambridge-ifa.net/ |

I S F I R E , AU G U S T 2 0 1 9

POINT OF VIEW

CAMBRIDGE I N T E R N A T I O N A L FINANCIAL

L A DV I S O R Y

W W W. I S F I R E . N E T

ISFIRE PERSONALITY

Dr. Hylmun Izhar Senior Economist, Islamic Research & Training Institute, Islamic Development Bank Group 1. WHAT WAS YOUR EARLIEST AMBITION? I recall when I was kid, I dreamt of becoming a policeman.

2. WHAT DO YOU ENJOY THE MOST? Spending quality time with my family.

3. WHY ARE YOU INTO ISLAMIC BANKING AND FINANCE? I owe this to Adiwarman Karim, a pioneer and champion of Islamic finance in Indonesia who introduced me to the ‘universe’ of Islamic economics and finance in the first year of my bachelor degree and has consistently instilled in me a great passion of Islamic economics and finance, even now.

8. IF YOUR 15 YEARS OLD SEES YOU TODAY WHAT WOULD HE SAY? Not bad at all dude…you are blessed.

9. IN A FEW SENTENCES DESCRIBE YOUR 65 YEARS OLD. I hope to stay healthy, content and productive.

10. ANY DISAPPOINTMENT IN LIFE? Well…whatever the nature of events in our life, I am a firm believer that we all have been shaped by the past that would eventually create our own landscape in the future.

4. WHAT DO YOU DO IN YOUR SPARE TIME? Watching movies, sports, and reading history books.

5. WHICH MOVIE IS YOUR ALL-TIME FAVOURITE? [IF YOU WATCH MOVIES] Definitely Shawshank Redemption and Karate Kid 1 & 2.

6. WHO HAS BEEN YOUR GREATEST MENTOR? Without any doubt, my late mum and dad have substantially shaped my worldview. And subsequently I was blessed to have a range of mentors from whom I, still now, seek advice, guidance and inspirations; they are, Prof. Mehmet Asutay, Adiwarman Karim, Sheikh Ahmad Nuryadi, Prof. Azmi Omar and Prof. Seif Tageldin.

7. WHERE ARE YOU THE HAPPIEST? Socialising with people who have positive energy, are full of ideas and willing to execute them.

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E P E R S O NA L I T Y

ISFIRE PERSONALITY

ISFIRE PERSONALITIES

ISFIRE Personality of August 2012

ISFIRE Personality of November 2012

ISFIRE Personality of February 2013

ISFIRE Personality of May 2013

Hasan Bilgrami President & CEO BankIslami Pakistan

Raja Teh Maimunah Raja Abdul Aziz Managing Director of Wholesale Banking at AmBank (M) Berhad

Dr. Nursoﬁza Azmi CEO at Cambridge International Financial Advisory

Sulaiman Al Harthy Deputy General Manager at Bank Muscat

ISFIRE Personality of August 2013

ISFIRE Personality of November 2013

ISFIRE Personality of February 2014

ISFIRE Personality of May 2014

Azhar Aslam Head of Islamic Banking, Standard Chartered Bank, Pakistan

Moinuddin Malim Managing Partner, Islamic Advisory & Structured Finance, AIMS

Sohail Jaﬀer Partner and Head of International Business Development, FWU group, Dubai

Dr. M. Yaqub Mirza President & CEO of Sterling Management Group Inc.

ISFIRE Personality of August 2014

ISFIRE Personality of November 2014

ISFIRE Personality of March 2015

ISFIRE Personality of June 2015

Stefano Padovani Partner NCTM – Head of Islamic Banking

Issam Al-Tawari Chairman, Rasameel

Roslina Abdul Rahman Group CEO at ValueCAP

Nasir Ali Khan Risk Auditor, National Bank of Abu Dhabi

I S F I R E , AU G U S T 2 0 1 9

I S F I R E P E R S O NA L I T Y

W W W. I S F I R E . N E T

ISFIRE PERSONALITY

ISFIRE Personality of September 2015

ISFIRE Personality of December 2015

ISFIRE Personality of February 2016

ISFIRE Personality of April 2016

Amman Muhammad CEO FNB Islamic Banking

Sheikh Nedham Yaqubi Renowned Shari’a Scholar

Junaid Wahedna Group CEO of Wahedna Inc.

Kashif Naeem EVP & Group Head – Retail, SME & Microﬁnance at Bank of Khartoum

ISFIRE Personality of June 2016

ISFIRE Personality of August 2016

ISFIRE Personality of October 2016

ISFIRE Personality of December 2016

Mohamed Izam Mohamed Yusof Former CEO of IAP Integrated, Malaysia

Jonathan Lawrence Partner & Co-Head of Islamic Finance, K&L Gates

Muhammad Kashif COO, East Africa Bank, Djibouti

Kamran Sherwani Head of Shari’a Advisory, Compliance and Quality Control, Abu Dhabi Commercial Bank

ISFIRE Personality of February 2017

ISFIRE Personality of April 2017

ISFIRE Personality of June 2017

ISFIRE Personality of October 2017

Nizar Al Shubaily Islamic Finance Expert

Daan Elﬀers Founder of Islamic Reporting Initiative (IRI)

Amer Bukvic CEO of Bosna Bank International (BBI)

Othman Abdullah CEO Islamic Banking & Innovative Services, Silverlake

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E P E R S O NA L I T Y

ISFIRE PERSONALITY

ISFIRE Personality of December 2017

ISFIRE Personality of April 2018

ISFIRE Personality of June 2018

ISFIRE Personality of August 2018

Mujtaba Khalid Head of Islamic Finance Centre at Bahrain Institute of Banking & Finance (BIBF)

Khalid Ferdous Howladar Managing Director & Founder of Acreditus

James Chua Deputy Head of Treasury & Global Markets at Bank Islam Brunei Darussalam

Mohammed Kateeb Group Chairman & CEO of Path Solutions

ISFIRE Personality of October 2018

ISFIRE Personality of December 2018

ISFIRE Personality of February 2019

ISFIRE Personality of April 2019

Salim Rashid Ali Al Maharbi Chief Financial Oï¬&#x192;cer, Bank Nizwa, Oman

Toyin Kekere-Ekun CEO, Lotus Financial Services Limited

Abed Hakim AVP, Head of Social Media, Dubai Islamic Bank, UAE

Omar Mustafa Ansari Secretary General of AAOIFI

I S F I R E , AU G U S T 2 0 1 9

I S F I R E P E R S O NA L I T Y

W W W. I S F I R E . N E T

ISFIRE PERSONALITY

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

I S F I R E P E R S O NA L I T Y

TECHNICAL NOTE

CAMBRIDGE PROJECT

STANDARDISATION OF NOTATION IN ISLAMIC ECONOMICS, BANKING & FINANCE In the August 2016 issue of ISFIRE, we started with a one-pager to introduce standardisation of notation in Islamic economics, banking and finance (IEBF). This has emerged as a major project since then, as a number of universities engaged in the instruction of IEBF have started to adopt what were initially named as ISFIRE Notes, and subsequently renamed as Cambridge Notes. So far, we have issued 9 Cambridge Notes: Cambridge Note 1 on Bai’ (issued in February 2018)

•

Cambridge Note 2 on Riba (issued in June 2018)

•

Cambridge Note 3 on Murabaha (issued in August 2016)

•

Cambridge Note 4 on Salam (issued in October 2016)

•

Cambridge Note 5 on Mudaraba (issued in December 2016)

•

Cambridge Note 6 on Ijara (issued in February 2017)

on spot. A variant of this contract may be

•

Cambridge Note 7 on Musharaka (issued in February 2018)

the time, T0, when the exchange of object of

•

Cambridge Note 8 on Istisna’ (issued in April 2018)

•

Cambridge Note 9 on Sukuk (issued in June 2019)

WHY IS THERE A NEED FOR STANDARDISATION OF NOTATION IN ISLAMIC FINANCIAL EDUCATION? There is no standard notation in the books written on Islamic economics and finance. In the absence of a standard, authors use their discretion to notate different Islamic financial contracts. This has not only created pedagogical confusion but |

I S F I R E , AU G U S T 2 0 1 9

We believe that standardisation of notation will help develop consistent pedagogical tools to be used for education and training in IEBF. Once Cambridge IIF has issued a sufficient number of notes, we aim to hold a special workshop on Standardisation of Notation in IEBF to finalise all these notes into standards. In this respect a Board on Standardisation of Notation in Islamic Economics, Banking and Finance is under formation. The interested individuals are invited to submit their expressions of interests to Professor Humayon Dar by emailing on hdar@cambridge-iif. com.

•

In this issue of ISFIRE, we issue Cambridge Note 10 on Wa’ad.

has also hampered true understanding of Islamic financial contracts.

TECHNICAL NOTE

Cambridge Note 1 on Bai’ 1. (A.X.B; P) represents a spot sale contract between A (seller) and B (buyer) to buy/sell a commodity X for the price P. Both the object of sale, X, and price, P, must be exchanged notated as (A.X.B; P|T0), explicitly mentioning sale and its price be affected. 2. (A.X.B; P|T1, T0) represents a sale contract between A (seller) and B (buyer) to buy/sell a commodity X for the deferred price P|T1 to be paid by B at a later time T1, allowing the buyer to receive the commodity upfront at time T0. 2a. (A.X.B; P|T1, T0) is essentially bai’ mu’ajjal or what is also known as bai’ bithaman ‘aajil, or a deferred payment sale contact. 3. (A.X.B; P|T0, T1) represents a sale contract between A (seller) and B (buyer) to buy/sell a commodity X for the a price P|T0 to be paid upfront by B at time T0, allowing the seller to deliver the commodity during time period T or on a specific date at the end of T1. W W W. I S F I R E . N E T

TECHNICAL NOTE

3a. (A.X.B; P|T0, T1) is essentially a salam contract as per Cambridge Note 3 on Salam.

Cambridge Note 2 on Riba 1. (A.X.B) represents an (unconsidered) exchange of an asset X between two parties, A and B, whereby A transfers ownership of X to B, without any reference to a consideration or price. This may also be known as an exchange of gift. 2. (A.X.B; B.X.A) represents exchange of an asset X between A and B, whereby A transfers ownership of (an amount of) X to B, while B also simultaneously transfers ownership of (an amount of) X to A. 3. (A.X.B; B.X.A |T0, T1) represents exchange of an asset X between A and B, whereby A transfers ownership of (an amount of) X to B at time T0, and B transfers ownership of (an amount of) X to A at time T1. 4. (A.X1,B; B.X2.A) represents exchange of an asset X between A and B, whereby A transfers ownership of an amount X1 of X to B, while B also simultaneously transfers and amount X2 of X to A; such that X1 = X2 or X1 ≠ X2. 5. (A.X1,B; B.X2.A) is an agreement between two independent parties, A and B, which may lead to riba if A transfers ownership of an amount X1 of X to B who also transfers and amount X2 of X to A; such that X1 ≠ X2. 6. (A.X1,B; B.X2.A |T0) is an agreement between two independent parties, A and B, which may lead to riba if A transfers ownership of an amount X1 of X to B who also simultaneously (at time T0) transfers and amount X2 of X to A; such that X1 ≠ X2. 7. (A.X1,B; B.X2.A |T0, T1) is an agreement between two independent parties, A and B, which may lead to riba if A transfers ownership of an amount X1 of X to B at time T0, and B transfers and amount X2 of X to A at another time T1; such that X1 ≠ X2. 8. (A.X1,B |B.X2.A |T0, T1) is definitely and unambiguously a riba agreement between two independent parties, A and B, if A transfers ownership of an amount X1 of X to B in exchange for B transferring and amount X2 of X to A, such that X1 ≠ X2, irrespective of whether T0 = T1 or T0 ≠ T1

W W W. I S F I R E . N E T

Cambridge Note 3 on Murabaha 1. (A.X.B; PMUR ,∏MUR , T) represents a classical murabaha arrangement between A (seller) and B (buyer) to buy/sell a commodity X for the murabaha price PMUR and murabaha profit of ∏MUR for T as the date of payment of price. 2. (A.X[1].B; PMUR, ∏MUR, T) represents a commodity murabaha arrangement between A (financier) and B (financee) arranged by a single commodity broker 1; whereby PMUR is the murabaha price, ∏MUR is the murabaha profit, and T is the duration of the financing period (in years, months, or days, etc.). 3. (A.X[1.2]X.B; PMUR, ∏MUR, T) represents a commodity murabaha with two commodity brokers, 1 and 2. 4. (A.X[1].B; PMUR, ∏MUR, T, D(.), R(.)) represents a commodity murabaha arrangement between A (financier) and B (financee) arranged by a single commodity broker 1; whereby PMUR is the murabaha price, ∏MUR is the murabaha profit, and T is the duration of the financing period (in years, months, or days, etc.); D(.) and R(.) represent default and rebate clauses, respectively, such that:

Default Penalty = a Xi; and Rebate amount = b Xj whereby Xi = amount outstanding at the time of default; Xj = amount outstanding at the time of early settlement date; and 0 ≤ a ≤ 1 and 0 ≤ b ≤ 1.

5. (A.X[1].B; PMUR, ∏MUR, PMURIK, T / N, PEX) represents a commodity murabaha based Islamic mezzanine financing arrangement between A (financier) and B (financee) arranged by a single commodity broker 1; whereby PMUR is the murabaha price, ∏MUR is the murabaha profit, PMURIK is the payment in kind (one-off balloon payment at the end of the financing period) and T is the duration of the financing period (in years, months, or days, etc.); N is the number of shares that B promises to sell to A in the event of default for an agreed price PEX.

Cambridge Note 4 on Salam 1. (A.X.B; PSAL|T0, T1) represents a classical salam contract between A (seller) and B (buyer) to buy/sell a commodity X for the salam price PSAL|T0 to be paid upfront by B at time T0, allowing the seller to deliver the commodity during time period T1 or on a specific date at the end of T. |

I S F I R E , AU G U S T 2 0 1 9

TECHNICAL NOTE

2. ([A.X.B; PSAL1|T0], [B.X.C; PSAL2|T1], T2) represents a salamparallel-salam arrangement, involving three independent parties, A, B and C, whereby A sells a commodity X to B for a salam price, PSAL1|To, paid by B upfront at T0, to receive the delivery during time period T2 or on a specific date at the end of T2. The salam-parallel-salam arrangement also involves B selling the commodity X to another independent party C that pays salam price, PSAL2|T1, to B at the time of entering into the salam contract, i.e., at T1 ∀ T0 ≠ T1, to deliver the commodity X during time period T2 or on a specific date at the end of T2. 3. (A.X.B.X.C; PSAL1|Ti, PSAL2|Tj, T) represents a three-partite salam-parallel-salam contract, whereby A sells a commodity X to B for a salam price, PSAL1|Ti, paid by B upfront at Ti, and B sells on the commodity X to C for a salam price, PSAL2|Tj, whether Ti = Tj or Ti ≠ Tj; the deliveries take place during time period T or on a specific date at the end of T. This is a null and void contract that does not fulfil the requirement of independence of the two salam transactions.

Cambridge Note 5 on Mudaraba

2. A.K.B; ∏0, α; ∏1, 0; -∏, 1; T) is a mudaraba contract that stipulates that the capital providing party (Party A) will receive α percentage of the profit if the realised profit is up to a threshold level of profit, ∏0; any profit over and above this threshold, i.e., ∏1, will be retained by the managing party, i.e., the share of A will be zero (0). However, in case of the loss, -∏, A shall have to bear it with α = 1. 3. If a mudaraba contract is notated with (A.K.B; α, T), it shall always be deemed as a short version of (A.K.B; ∏, α; -∏, 1; T).

1. (A, X, B; R = r1+ r2 + ... + rt, T) represents a simple ijara contract between A (lessor) who leases an asset X to another person B (lessee) for a total rental value of R to be paid in instalments of r1, r2, ..., rt, for a period of T. 2. (A, X, B; R = r1 + r2 + ... + rt, T; P1, P2) represents an ijara wa iqtina’ contract between A (lessor) who leases an asset X to B (lessee) for a total rental value of R to be paid in installments of r1, r2, ..., rt, for a period of T; with an understanding that B will have to buy the asset for a price, P1, should it happens to default on rental payment during

I S F I R E , AU G U S T 2 0 1 9

TECHNICAL NOTE

5. An ijara contract notated with (A, X, B; R0, T) shall imply that the rental amount is required to be paid in lump- sum at the start of the lease period; and an ijara contract notated with (A, X, B; Rt, T) shall imply that the rental amount is required to be paid in lump-sum at a specific time in future, which may include the end of the lease period.

1. (A.KA.KB.B, Π, α; -Π, βi; T) is a musharaka contract between a Party A and a Party B whereby both parties contribute capital, KA and KB, respectively, to a venture, in such a way that A receives α percentage of the profit, Π, if any, and B therefore receives (1-α) percentage of the profit, Π. In case of loss, i.e., -Π, both parties shall bear loss in accordance withβi, whereby i = A or B; βA = KA/K and βB = KB/K, and K = KA + KB. T is the time period for musharaka; and α and β may differ. 2. (A.KA.KB.B, Π, βi; T) is a simple musharaka contract between a Party A and a Party B whereby both parties contribute capital, KA and KB, respectively, to a venture, in such a way that A receives βA percentage of the profit, Π, whether positive or negative, and B receives βB percentage of the profit. In other words, β = α. 3. If a musharaka contract is notated with (A.KA.KB.B; α, β; T), it shall always be deemed as a short version of (A.KA.KB.B, Π, α; -Π, βi; T).

Cambridge Note 6 on Ijara

3. (A, Y, B; R = r1 + r2 +...+ r3 , T) represents an ijara mausufa dzimma contract between A (lessor) who leases an asset Y (which has yet to come into existence) for a total rental value of R to be paid in instalments of r1, r2, ..., rt, for a period of T (which may coincide with the time that Y must take to come into existence). 4. If an ijara contracts is notated with (A, X, B; R, T), it shall be deemed as an ijara that requires a lump-sum amount of rental either at the start of the lease period or at the end of it.

Cambridge Note 7 on Musharaka

1. (A.K.B; ∏, α; -∏, 1; T) is a simple mudaraba contract between a Party A (capital provider) and a Party B (the managing party) in such a way that A receives α percentage of the profit, ∏, if any. K is the capital contribution (money) by A; while T is the mudaraba time period. In case of loss, i.e., -∏, A shall have to bear it with α = 1.

the term of the lease, and if that (event of default) does not occur B will buy the asset X at the end of the lease period for a price, P2.

Cambridge Note 8 on Istisna’ 1. (A.X.B; P1|T1, P2|T2, … Pn|Tn; ΡIST=∑ni=1 Ρi,Tn) represents an istisna’ contract between A (seller) and B (buyer) to buy/sell a commodity X (which may be manufactured by A during the contract period) for total price of PIST, payable in instalments P1, P2, … Pn, until the time of the delivery Tn, by when the whole price must have been paid. 2. ([A.X.B; P1|T1, P2|T2, … Pn|Tn; ΡIST1=∑ni=1 Ρi,Tn], [B.X.C; P1|T1, P2|T2, … Pn|Tm; ΡIST2=∑mj=1 Ρi,Tm) represents an istisna’-

W W W. I S F I R E . N E T

TECHNICAL NOTE

parallel-istisna’ arrangement, involving three independent parties, A, B and C, whereby A sells a commodity X to B for price, PIST1, paid by B in instalments, to receive the delivery on a specific date at the end of T. The istisna’-parallelistisna’ arrangement also involves B selling the commodity X to another independent party C that pays price PIST2, to B in instalments ∀ i ≠ j and/or PIST2≥PIST1, to receive the commodity X on a specific date at the end of T ∀ Tm≥Tn. 3. A short version of the istisna’ contract stated in (1) can be written as IST(A.X.B; ΡIST=∑ni=1 Ρi,Tn). 4. A short version of the istisna’-parallel-istisna’ arrangement stated in (2) can be written as (IST1(A.X.B; ΡIST1=∑ni=1 Ρi,Tn ), IST2(A.X.B; ΡIST2=∑mj=1 Ρi,Tm).

Cambridge Note 9 on Sukuk 1. (A.X.B, C; N, α, Ρ|Ρ = αN; T, ti|i = 1,2,3,…n) is a sakk issued by an issuer A on asset to be bought by investors B, with a notional price of N. The return on the sakk will be determined by the net revenue Ρ, generated by the asset X by way of dealing with a party C. The issuer will ensure that Ρ is equivalent to an amount added to notional N in such a way that Ρ = αN ∀ 0>α>0. The sakk is issued for a time period T and the return may be distributed in instalments on dates ti. The notional N must be returned at the end of the sukuk period T. 2. (A.X.B, C; N, α, Ρ|Ρ = αN; T, ti|i = 1,2,3,…n) is a general notation for sukuk and may be specified for different types of sukuk. 3. For example, for sukuk al-ijara, (A.X.B, C; N, α, Ρ|Ρ = αN; T, ti|i = 1,2,3,…n) will represent a sakk issued by an issuer A on an asset X to be bought by investors B, with a notional price of N. The return on the sakk will be determined by the rental Ρ, which will be generated by leasing the asset to the party C involved in the structure (normally an obligor). 4. The relationships between A, B and C will be determined by sale contracts (C.X.A; P|T0) and (A.X.C; P|Tn) as per Cambridge Note 1 on Bai’, and lease contract (A, X, B; R = r1 + r2 + rn, T) as per Cambridge Note 5 on Ijara. 5. Thus, a sukuk al-ijara may be notated like ((A.X.B, C; N, α, Ρ|Ρ = αN; T, ti|i = 1,2,3,…n)| (C.X.A; P|T0), (A, X, B; R = r1 + r2 + rn, T), (A.X.C; P|Tn); Ρ = R)).

Cambridge Note 10 on Wa’ad

or a sale and purchase agreement may be executed pursuant to the promise. <B.X.A, P |b> represents a promise or undertaking (wa’ad) between B (promisor) and A (promisee) to buy a commodity/asset X for the price P. 2. <A.X.B, P|s> represents a promise or undertaking (wa’ad) between A (promisor) and B (promisee) to sell a commodity/ asset X for the price P. Both the object of purchase/sale, X, and price, P, may be exchanged at a future date when a Bai’ or a sale and purchase agreement may be executed pursuant to the promise. <B.X.A, P|s> represents a promise or undertaking (wa’ad) between B (promisor) and A (promisee) to sell a commodity/asset X for the price P. 3. The notation <•> implies a non-binding arrangement as opposed to the notation (•) that refers to a binding contract. 4. <A.X.B, P|b; To, T1> represents a promise or undertaking (wa’ad) between A (promisor) and B (promisee) at time T0 to buy a commodity/asset X for the price P at a future date T1. Both the object of purchase/sale, X, and price, P, may be exchanged at the future date T1 when a Bai’ or a sale and purchase agreement may be executed pursuant to the promise. This also applies to a promise to sell, i.e., <A.X.B, P|s, To, T1>. 5. [<A.X.B, P|b>, <B.X.A, P|s>] is an arrangement in which A promises to buy X for a price P, and B simultaneously promises to sell X for the same price P. 6. <A.X.B, P ∀ P = Pm1 + ∆ |b; To, T1> represents a promise or undertaking (wa’ad) between A (promisor) and B (promise) at time T0 to buy a commodity/asset X for the price P = Pm1 + ∆, where Pm1 is the future market price of the commodity/ asset X at a future date T1 and ∆ is an incremental which may be positive, negative or even zero. The same holds for a promise to sell, i.e., <A.X.B, P ∀ P = Pm1 + ∆ |s; To, T1>. 7. A promise to purchase between A (promisor) and B (promisee), i.e., <A.X.B, P |b; To, T1>, and a promise to sell between B (promisor) and A (promisee), i.e., <B.X.A, P |s; To, T1>, are considered equal and opposite promises. 8. Two promises will be considered as equal and diagonal promises if they must affect a binding arrangement in future. For example, <A.X.B, P ∀ P ≥ Pm1 |b; To, T1> and <B.X.A, P ∀ P < Pm1 |b; To, T1> are two equal and diagonal promises, as B will call upon the first promise to purchase (given by A) if the promised price P is actually greater than the future market price Pm1. Also, A will call upon the second promise (given by B) if the promised price P is less than the future market price Pm1.

1. <A.X.B, P|b> represents a promise or undertaking (wa’ad) between A (promisor) and B (promisee) to buy a commodity/ asset X for the price P. Both the object of purchase/sale, X, and price, P, may be exchanged at a future date when a Bai’

W W W. I S F I R E . N E T

I S F I R E , AU G U S T 2 0 1 9

TECHNICAL NOTE

2019 THE LEADING ISLAMIC FINANCE PUBLICATION SINCE 2010

THE MOST AUTHENTIC SOURCE OF INTELLIGENCE IN ISLAMIC BANKING AND FINANCE WITH NINE MOST AUTHENTIC AND WIDELY RESPECTED ANNUAL REPORTS, THE GIFR HAS GAINED RECOGNITION AND ACCOLADE FROM THE ISLAMIC FINANCIAL SERVICES INDUSTRY, INCLUDING LEADING ISLAMIC FINANCIAL INSTITUTIONS AND POLICYMAKING BODIES. THE 10TH EDITION OF GIFR CARRIES THE THEME “ARTIFICIAL INTELLIGENCE AND INNOVATION IN ISLAMIC FINANCE”. THIS THEME WAS CHOSEN TO HIGHLIGHT THE TRANSFORMATIVE POTENTIAL OF ARTIFICIAL INTELLIGENCE IN ISLAMIC FINANCE AND HOW THE INDUSTRY CAN HARNESS INNOVATION TO DRIVE SUSTAINABLE DEVELOPMENT.

CONTENTS Digital Transformation of Islamic Financial Institution: A Global Survey on the State of Readiness and Influencing Factors

Artificial Intelligence Applications in Islamic Finance Industry

Enhancing Legal & Regulatory Framework for Islamic FinTech Development

The Impact of Technology, Innovation and Artificial Intelligence on the Current State of the Global Islamic Economy

Harnessing Fintech Innovation for Sustainable Growth in Islamic Finance

Shari’a Analysis of Cryptocurrencies and Bitcoins The Race to Be the Global Islamic Fintech Hub

http://gifr.net/

To get a copy of GIFR 2019 please contact: fmehmood@edbizconsulting.com

L O N D O N

HAVE YOU RECHARGED YET? SUBSCRIBE TO ISFIRE, THE MOST INFLUENTIAL MAGAZINE IN ISLAMIC BUSINESS AND FINANCE WITH A SHARP ANALYSIS ON THE LATEST TRENDS, DEVELOPMENT AND INNOVATIONS.

12 MONTHS 6 ISSUES

SUBSCRIBE AND READ EVERY BACK ISSUE FREE

Website: https://isfire.net

For subscription contact fmehmood@edbizconsulting.com