Page 1

VOLUME 7 - ISSUE 1 | FEBRUARY 2017 - £20





Founder of MIT Global and First Global Academy

Introduction: Islamic Bankers Association (IBA) is a new international industry representative body for practitioners of Islamic banking and finance. It is officially incorporated in United Kingdom, with its registered office in London. The IBA membership is open to individuals and corporates, and aims to become the largest industry representative body for Islamic banking and finance in the world.

Membership categories include: Corporate Membership: For all Islamic banks and the institutions offering Islamic financial services – IIFS (Annual Fee: £3,500) Associate Corporate Membership: For all businesses that offer their services to Islamic banks and IIFS (Annual Fee: £5,000) Individual Membership: For all the employees of Islamic banks and IIFS, with work experience of a period of five years or more (Annual Fee: £100) Young Professional Membership: For all the employees of Islamic banks and IIFS, with work experience of a period of less than five years (Annual Fee: £50) Associate Individual Membership: For any professional whose application is endorsed by at least one existing member of IBA (Annual Fee: £100) Islamic Bankers Association is a non-profit organisation, registered in England and Wales as a company limited by guarantee, and does not offer any financial products and as such is not regulated by Financial Conduct Authority.

If interested in becoming a member, please get in touch with Khuram Shehzad on:

+44 (0) 20 3617 1089 or

GIFA MILLION DOLLAR CAMPAIGN “Edbiz Corporation is pleased to announce GIFA Million Dollar Campaign to set up an Islamic Finance Scholarship Programme to support studies and research in Islamic banking and finance“

 

ISSN 2049 - 1905



COVER STORY 10 Muhammed Ikram Thowfeek

Founder of MIT Global & First Global Academy



74 Nizar Al Shubaily

Islamic Finance Expert


24 Fintech for Islamic Finance 2017 Outlook

Othman Abdullah, Managing Director, Islamic Banking, Silverlake

26 Diary of a Mad Philosopher 30 Currency Salam: A Real Innovation

Example of Misconception of an Economic Need

or an

Professor Humayon Dar

40 A Risk Leader Can Lead Business Better, Safer, And Stronger

Tauhidur Rahman

TALKING POINTS 42 Islamic Asset Management: Riding

the Waves of Global Political and Economic Uncertainties in 2017

Ramlie Kamsari, CEO, Nomura Islamic Asset



48 Perspective on Leadership Style:

Transformational, Transactional and Entrepreneurship

Dr. Rashidah Kamarulzaman

52 Islamic Corporate Culture

Muath Mubarak, Chief Executive, First Global Academy

62 Hedging Rate of Return Risk: Wakala based Islamic

Profit Rate Swap

Suleman Muhammad Ali, Head of Products & Segments, Muzn Islamic Banking, National Bank of Oman

68 Paving the Way for Islamic Finance Contribute to China’s Ambitious Economic Plans to

Professor Nabil Baydoun, Vice Chancellor for University Advancement, HBMSU


72 Standardisation of Notation in Islamic Economics, Banking and Finance


76 Is it Too Late for Islamic Banking and Finance to Make a Difference to the Global Financial Services Industry?


58 2016 Islamic Financial Cooperation Roundtable In Beijing


CONTENTS Editor-in-Chief

Professor Humayon Dar PhD, Cambridge University


Dr. Sofiza Azmi CEO, Edbiz Consulting

International Editorial Board


Professor Nafis Alam Sunway Universiy, Malaysia

Professor Mehmet Asutay Durham University

Professor Dr. Mehmet Bulut Istanbul Sabahattin Zaim University, Turkey

Dato’ Dr. Asyraf Wajdi Dusuki Deputy Minister, Prime Minister’s Department Malaysia

Professor Joseph Falzon University of Malta

Dr. Mian Farooq Haq State Bank of Pakistan

Professor Kabir Hassan University of New Orleans

Datuk Noripah Kamso Islamic Finance Expert


Moinuddin Malim Alternative International Management Services

Dr. Asmadi Mohamed Naim Universiti Utara Malaysia

Professor Muhamad Rahimi Osman Universiti Teknologi MARA

M. Saleem Ahmed Ranjha Wan Miana Rural Development Programme

Dr. Usamah Ahmed Uthman King Fahd University of Petroleum & Minerals


Designed By Mehtab Ahmed Ehtisham Ahmad

Executive Staff

Published by Edbiz Corporation Limited 305 Crown House, North Circular Road, Park Royal, London, NW10 7PN, United Kingdom T: +44 (0) 203 617 1089 E:

Khuram Shehzad Hassaan Malik Saqib Nawaz Huma Akhtar

Advertisements, Commercial and Subscription Enquiries Khuram Shehzad E: T: +44 (0) 203 617 1089

W: 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.

Copyright © 2017 Edbiz Consulting


Note from the

EDITOR-IN-CHIEF Prince Mohamed bin Faisal bin Abdul Aziz Al Saud (may God bless his soul) passed away on January 14, 2017. He was certainly one of the founders and early proponents of Islamic banking and finance (IBF). His legacy will remain with us as long as IBF is relevant to financial services and is a key to further development of financial markets in the countries comprising the Organisation of Islamic Cooperation (OIC). Our heartiest condolences to the Saudi royal family for this great loss. From this issue of ISFIRE, we have decided to further develop it as a journal-magazine or what we would rather like to call as jagazine. We shall gradually build it to include peer-reviewed academic articles, in addition to the regular features we have been publishing since its inception in 2011. Our cover story features Muhammed Ikram Thowfeek (MIT) who is an experienced Islamic banker, entrepreneur and advocate of IBF. MIT Global, an Islamic financial services group he founded, is now an award-winning Islamic financial institution offering a wide range of Islamic financial advisory services, in addition to being a training provider and a capacity-building institution. We are pleased to include a Personality Interview of Nizar Al Shubaily who now enjoys life of rather early retirement after having a short but illustrious career in IBF. Nizar developed Islamic finance and investment franchises of a number of institutions including, but not limited to, Deutsche Bank, NCB and Shamil Bank. His last venture was Najd Investments that he founded before calling it a day as a financial services player. An interesting article on salam on currencies is included to stir a debate on the use of salam for trading in currencies, a practice that has fast emerged in Pakistan after Sheikh Taqi Usmani’s conditional allowance for the use of salam in currencies. Sheikh Taqi Usmani also features in St. Barbarossa’s Memoirs, a feature we started in the December 2016 issue. Diary of a Mad Philosopher, another new feature of ISFIRE, looks into the issue of nomenclature in IBF. I hope that all these features, articles and reports will interest our readers. At the end, I would like to congratulate Dr. Nafis Alam, a member of our international editorial board, for making a move to Sunway University Business School as Professor of Islamic Finance. I am happy that our advisors are making good progress in their careers while being associated with ISFIRE. It is comforting to learn that our choice of advisors was not only right but also futuristic in approach. It was particularly true in case of Professor Kabir Hasan, another member of our international editorial board, who won IDB Prize in Islamic finance last year. Enjoy reading your new jagazine look - ISFIRE.

Professor Humayon Dar, PhD (Cantab) Editor-in-Chief

A socially responsible initiative of


CURRENT ARTICLE Cambridge Analytica


GLOBAL GOOD GOVERNANCE AWARDS 2017 Celebrating Good Governance and Commitment to Social Welfare April 24, 2017 | Dubai, UAE













ith 30 years of industry experience under his belt, Muhammed Ikram Thowfeek, Founder of MIT Global and First Global Academy, is truly devoted to help Islamic finance develop as a dynamic, flourishing and unique system offering a tangible and real value proposition. In this exclusive interview with ISFIRE, Muhammed Ikram Thowfeek (or better known as MIT to his closest friends and peers) shares his personal journey and his thoughts on Islamic finance.

ou are a passionate practitioner of Islamic banking and finance. Where do you draw the inspiraton from to play a lead role in this niche field?

From my early school days, I was inspired by the patience and wisdom with which my late dad, M.M. Thowfeek, led his life. His admirable patience was the envy of everyone around him. My mother, on the other hand, was the complete opposite. She was tough on all 8 of us (6 boys and 2 girls), but only because she wanted to inculcate good behaviour, discipline and foster unity among us siblings. My late dad was both an accountant and a successful entrepreneur. In the family, I am the only one who pursued a profession as a Chartered Accountant whereas all others ventured into their own business. I still remember vividly the day when I received news from a friend that I had qualified as a Chartered Accountant. Overwhelmed with excitement, I immediately rode to the Institute of Chartered Accountants of Sri Lanka (ICASL). I had to see the official results for myself. Unknowing to me,


my dad had overheard the good news and soon it spread like a bush blaze. By the time I got back home; family, friends and neighbours were all congratulating me on my achievement. I was told later that he even shared my achievement with passers-by, telling all that were willing to listen that his son had just qualified as a Chartered Accountant. Seeing your parents’ smiling face and making them feel proud of you is definitely one of the greatest sources of happiness. Soon after this, I pursued the Chartered Management Accountant from United Kingdom and completed my 5 year internship with Ernst & Young. But all throughout this period, my only ambition was to join the one and only Islamic bank in Kuwait at that time - Kuwait Finance House. In July 1992, my dream turned to reality and since then I have never looked back. Over my 30 years of career span in Islamic finance, I have helped set up some of the most prominent Islamic banks in the world from scratch. These have been some of


the many defining moments in my career that have taken me farther than I could have ever dreamed of. One might ask, “What is the secret to success?” Make life a learning lab. You do yourselves a great disservice if you don’t grow intellectually. I believe I am enormously blessed and successful not because of my qualification, experiences and the exposure I had, but due to my upbringing, guidance and sincere prayers of my beloved parents. Indeed, it was my late dad who inspired me to pursue my career path, along with my paternal late uncle MJM Ashraf, who also played a significant role in my journey of growth. (May Almighty Allah forgive them all and grant them Jannah).



et’s be realistic. Islamic finance is not panacea for all economic ills that the interest-based economies are facing. Yet many tend to believe that Islamic finance offers solutions to all the economic and financial problems. What are your views on this?


Being a practitioner for almost 3 out of the 4 decades since Islamic finance first made its debut, I am a strong believer and a passionate Islamic banker and still believe that Islamic finance can be a solution provider, if not for all then for most of the financial ills that emanates from an interest-based economy or financial system. Many will not agree with me and would have their own opinions and justifications on this issue, but truth must be said. Not as per my own conviction, experience and exposure to the Islamic finance industry but by the wisdom of the Creator, Almighty Allah. Riba (interest and usury) has been prohibited in the sternest terms to the extent of waging war against the humanity by the Creator and His messenger. Many couldn’t fathom the wisdom of the Creator, Almighty Allah. He permitted trading but prohibited riba, which is the fundamental cause of the global economic or financial crises today. There is clear evidence that nothing good emanated from riba apart from calamities to individuals, corporates and the governments at large. The global financial crisis in 2008 has been given many labels by the media and the global financial community - sub-prime lending, unethical practices, mismanagement of leveraged products, toxic assets, to name a few. These are merely words and jargons. Many failed to see the real underlying issue or problem, which is the issue of riba or interest and its economic impact. 1001 reasons, stories, jargons and explanations were used and given to describe the worst crisis but none referred to the effects of riba that continues to shock the world with the remnants of the crisis without providing any hopes or light at the end of the tunnel. My benchmark in measuring the success of Islamic finance industry is to bring a change in the economic indicators of an economy by taking into account the presence of Islamic banks or Islamic financial institutions in the country.




Islamic finance is based on risk sharing, asset-based transactions for the purpose of income generation and wealth distribution in the society. Therefore, it should bring improvements to individuals, corporate entities and economy, which unfortunately are not being captured in the present economic indicators. In a recent report released by Oxfam International, it is reported that the world’s 62 richest people hold the same wealth as the poorest 50% of the world’s population. This statistic is indeed alarming as it shows that there is huge inequality gap. Another statistic revealed that there are 3.4 billion people who are living with a meagre US$2 per day, without knowing when and how they will get their next meal. This is how unjustifiable the entire global wealth distribution system is! Now the question is not “how many will own 90% of the global wealth in the next 5 to 10 years?”, but “how equitable the global wealth distribution system can become?” But most importantly, what is our role as Islamic bankers and practitioners to address this widening inequality? As proponents and supporters of Islamic banking and finance, we must take time to reflect and ponder on these profound questions: what difference can the Islamic finance industry bring to all stakeholders to bridge the gap between the rich and the poor and empower these 3.4 billion people to stand on their own feet through Islamic financial solutions. There is certainly no one pill for every ill, but there is one for all financial ills; which I am truly convinced without a shadow of a doubt is Islamic finance. If Islamic finance industry is implemented in its true spirit, it can bring solutions to improve the lives, financials and investment choices of millions of people - both Muslims and those of other faiths. This can only happen through equity participation, risk sharing and fair dealings.



ou founded MIT Global and First Global Academy, which offer a wide range of services. Can you share with our readership the vision behind the setting up of MIT Global and First Global Academy; what do you aim to achieve?

MIT Global was established four years ago in April 2012. Based in the UAE, we are a specialised Islamic finance advisory firm with unique practical experience and insights of the industry built on my own experiences and dealings with Islamic financial institutions worldwide. MIT Global has managed and advised various investment projects for clients with different risk and return profiles from a Shari’a-compliant perspective. One of our signature products or offerings is the award-winning Musharaka Partnership Model (MPM). It was developed and introduced to our global clients, targeting micro, small and medium enterprises (MSMEs). Our mission is to emerge as a significant player in the Islamic finance industry with a global mind-set, whilst reaching our stakeholders’ targets and adding value to the community at large, both in Asia and the Middle East.


Riding on this mission, MIT Global focuses on the following specialised areas:

Set up specialist

Islamic wealth management advisory

Business development and restructuring

Corporate finance advisory

Capital market and sukuk

MSME advisory

First Global Academy (FGA), is another institution that was established in 2006 before the onset of the global financial crisis but has weathered the storm and continued to work towards ‘building a new breed of professional Islamic bankers and Islamic finance specialists’. This is something that we not only believe in but promote with enthusiasm. Over the last decade, we have groomed the much needed Islamic finance talent in the country where our alumni are now present in every Islamic banks and Islamic financial institutions, including takaful companies in Sri Lanka.

M 4

IT Global and First Global Academy won a number of awards last year. First at the Global Islamic Finance Awards in Jakarta, followed by the Islamic Retail Banking Awards in Dubai. Would you care sharing with us details of these success stories? Indeed, we are very happy that our work was recognised at the Global Islamic Finance Awards 2016 in Jakarta where First Global Academy (FGA) was named ‘Pioneering Islamic Finance Education Initiative in Sri Lanka’. Such a global award for FGA is a testament to our sincere contributions in developing talents for the Islamic finance industry. We are now even more inspired to continue our initiative to contribute our expertise to develop Islamic finance in


I am happy to share that we recently celebrated our 10th Anniversary on January 5, 2017, under the theme of ‘carving tomorrow’s leaders’. Since its establishments, FGA has groomed more than 3,000 students and professionals. Today, we have greater plans for the next two decades, where we want to establish our own ‘FGA Global Campus’ that will not only provide Islamic finance related programmes but also other programmes in management, accounting and finance, ethical entrepreneurship, information, communication, e-commerce and digital technology, wealth management, crowdfunding and fintech, and awqaf etc. We are now in talks with a number of global universities and institutions specialising in the programmes I mentioned earlier. We want to attract students and professionals not only from Sri Lanka but also from Asia, Middle East and other countries. No success is without hurdles and no dream is achieved without patience and continuous hard work. I am grateful that our hard work and commitment has been recognised by the prestigious Global Islamic Finance Awards. This is a true testimony to our pioneering efforts in Islamic finance education initiative in Sri Lanka.

achieving its true potential. If you look back over the last 10 years when FGA was first established, this was the era of economic instability and uncertainty. Definitely not the ideal economic conditions to establish an institute like FGA. But where other similar institutions that were established after us had a short life span, we continued to persevere and hold our fort. Our passion made our survival possible, though we were unable to meet ends initially. Money making was never the motivator but to add value to the industry was the passion that kept us going. Today, we are reaping the fruit with a small, dynamic, sincere and passionate team and have plans to grow bigger, impacting global markets, in shaa Allah. As I previously mentioned, one of our unique offering is the Musharaka Partnership Model. Under this model, MIT Global acts as an advisor to musharaka partners to be part of the Micro, Small and Medium Entrepreneurs’ projects on a musharaka partnership basis. Under this unique relationship, we have adopted the PLS model, which has been operating successfully since the last 2 years and received the “Critics’ Choice Most Innovative SME Product Award at the Islamic Retail Banking Awards (IRBA) 2016. This global recognition was a great motivation and a morale booster to take this project to the next level. We are looking for more ‘risk mitigations’ through takaful coverage that will attract global Islamic banks and Islamic financial institutions to be part of the MPM in the near future, in shaa Allah.


Y 5


ou were born in Sri Lanka and have spent a considerable amount of time in the Middle East. Can you please share with us how the Muslim community is fairing as a whole in an otherwise predominantly non-Muslim country, and what role are Sri Lankan Muslims playing in developing Islamic banking and finance in and outside the country? Sri Lanka has made great headways in Islamic finance despite having only one full-fledged Islamic bank called Amana Bank. However, there are a number of Islamic financial institutions operating under the conventional banking umbrella with different models. Recently the government has taken a more proactive role in developing Islamic finance and providing opportunities for all stakeholders of the Islamic finance industry both in and outside the country to rally around to support the government initiatives to bring foreign direct investments to the country through various Islamic finance propositions, including sukuk. As a strong advocate of Islamic finance, I have never shied away from promoting the industry. On many platforms I have strongly voiced my opinion that there is enormous potential to tap into the riches of the Islamic finance industry. I have been advocating for people not to look at Islamic finance as beneficial only to the Muslim community (which comprises of only 10% of the 25 million population), but the enormous benefits it can bring to the whole nation and to the people of all faiths. The message I have been promoting is to raise funds through Islamic finance propositions for various government developmental projects. However, the West is attracting these sources of funds by attracting them to their respective countries through the creation of and portraying themselves as Islamic finance hubs. Today, the Islamic finance industry in Sri Lanka is quite vibrant with a number of Islamic financial institutions including takaful operators and education providers. The capital market operators are also spearheading the industry with government support. Various global events are also taking place in the country with increasing support from the government. For all the good things happening in the industry, we too have a share in raising the bar of Sri Lankan Islamic finance industry.





ho has been your greatest mentor? And why?

My greatest mentor is none other than my late beloved mother (May Almighty Allah forgive her, have mercy on her, and grant her Jannah). Although my mother studied only up to standard four in school, she had the wisdom and the courage of an intellectual. She brought up eight of us to do well in our lives and flourish in different fields. I was the third and chose to become a Chartered Accountant and an Islamic banker, while others ventured into entrepreneurship.


Why my mother is the greatest mentor? Because she taught me ‘Risk Management’ and ‘Corporate Governance’ when I was only 10 and 12 years old, though I didn’t know what these were at that age. I only realised its significance when I was studying for my Chartered Accountant qualification. One might wonder how a mother, with no education background in these areas, is able to teach subjects that are only taught by professionals and qualified people. If you are interested to know the full story, you can read my LinkedIn post entitled “Corporate Governance”.


any industry observers believe that Islamic banking and finance is not sufficiently different from conventional banking and finance. Do you agree with the statement that “Islamic banking and finance has failed to develop itself as a differentiable and independent system”? I cannot be so blunt as to say that Islamic banking and finance has failed or has not contributed in anyway over the last 4 decades with its modern experiments. However, Islamic finance industry has built a strong and long standing foundation despite some failed attempts in

certain jurisdictions. But this has been mainly due to the wrong approach taken or mismatch of demand with product offerings not catering to the different risk and return profiles of customers. Failures are pillars of successes. It is timely to look into these shortcomings and drive lessons from the mistakes and failures and create a platform to bring Islamic finance to the mainstream banking and financial system by clearly portraying it as an alternative to the conventional banking and finance. I must stress that Islamic banking and finance needs to be portrayed as a distinct alternative to the conventional banking and finance. Otherwise, Islamic finance will be tugged into the conventional banking umbrella and rendered as another offering, like internet banking, mobile banking, and electronic banking. This distinction holds a paramount importance to differentiate Islamic financial system from that of the conventional and it is only possible through greater awareness and understanding of Islamic financial product and services to a wider audience, especially amongst professionals working in Islamic financial institutions. Such lack of understanding has led to the misconception that Islamic finance is no different from conventional finance.





M ow do we right this wrong?

As I mentioned earlier, 80% of the market potential of Islamic finance is still untapped due to the lack of awareness and understanding towards Islamic finance and the products and services it offers. Collectively, all stakeholders in the Islamic financial industry must contribute towards awareness programmes coupled with research and development to demonstrate how Islamic finance can benefit people at all points on the wealth spectrum. Stakeholders must also play their part in practicing the true spirit and value of Islamic finance. Only then can we see greater acceptance of Islamic finance not only amongst Muslims (including those who are currently shying away from it) but also other faiths and the entire humanity.


IT is not merely an individual; but rather a brand. What characterises MIT as an individual as well as a brand?

Alhamdulillah, I am lucky and blessed to be named Muhammed Ikram Thowfeek or better known to many as MIT. The Arabic meaning of Ikram is “honouring, glory, esteem, respect, veneration” and Thowfeek is “the ability and opportunity to achieve success”. The abbreviation MIT fits well in building a global brand. Given the meanings attached to my name, I am bound to be ‘humble, simple and a community asset’. Therefore, I must add value to fellow members and the community at large. People are deceived by power and position that they see in others forgetting that no one is ultimate. We all have our own weaknesses and shortcomings. None of us is perfect except Almighty Allah. We shouldn’t be deceived by all the worldly material, glories and accomplishments. What is needed is to question thyself, whether I am eligible to have the mercy of Almighty Allah to enter His Jannah? Am I working towards it? Today many are driven by success in this materialist world, but I want to be successful in this world as well as the Hereafter. In shaa Allah It took me more than 4 decades to build my own success formula; which I believe is a success formula for both worlds. But we must be conscious of the fact that every individual is a unique brand and no two individuals are alike, even in the case of twins, triplets or quadruplets. As a brand, MIT wants to build and lead a global business company where anyone who interacts with the company adds value to the brand and is recognised as a specialist in Islamic finance with some unique and profound approaches to bring Islamic finance to its true spirit and form.





oming back to Islamic banking and finance. Let’s not kid ourselves by claiming that everything is honky dory in the industry. We can’t completely deny that Islamic banking and finance has by and large been opportunistic, i.e., it has chased economic and business opportunities rather than creating opportunities. Do you consider this as a serious deficiency of Islamic banking and finance?

As a seasoned practitioner, I have been in the kitchen of some of the prominent Islamic banks and I am truly aware of the ingredients needed for growth and profitability. The focus of Islamic banks and Islamic financial institutions has always been to grow their bottom line. There is nothing wrong with this. In fact, Islam encourages wealth generation and creation. But whilst focusing on profit with some CSR projects, they have conveniently ignored the part of creating opportunities by empowering entrepreneurs who can create ripple effects in bringing the much-needed economic value by generating more jobs, more businesses and economic opportunities. Islamic banks have also adopted a risk averse approach to business and have tended to shy away from those product


offerings that can potentially empower the millennials who prefer to become entrepreneurs. They are starving for the right funding partners who can fund their unique, innovative and first-of-the-kind initiatives, which should be a high priority in the offerings by Islamic banks. Unfortunately this is a far cry the current reality and is a serious deficiency in the Islamic banking and finance industry. With the emergence of crowd-funding and fintech, Islamic banks have to think along these lines in order to support entrepreneurial projects, whilst having their own risk mitigations in place, with takaful and other coverages; to cater for the funding needs of these micro, small and medium sized entrepreneurial projects.

E 11

veryone is talking about FinTech these days. There is hardly any conference in Islamic banking and finance where FinTech is not mentioned or discussed. What do you think will be the future role of technology in Islamic banking and finance?

If Islamic banking and finance wants to become mainstream and cater for all humanity, then they must embrace new technological innovations and adopt augmented, virtual and digital realities while at the same time complying with Shari’a principles. The new millennials who are technologically driven are fast becoming the number one source of global income, wealth and spending. What we have achieved at the age of 40 can now be achieved at the mere age of 20 in today’s world. The banking industry, irrespective of whether

conventional or Islamic, must change their modus operandi to accommodate the demands of the millennials. Otherwise they will be left out from the rat race and new players will spearhead and lead, making banking and finance redundant. Undeniably, FinTech and crowdfunding platforms are gaining popularity in the banking sector. Islamic banking industry must embrace technological innovations as strategic initiatives and invest more in this space.




12 E

ducation must play a role in creating awareness on the demand side of Islamic banking and finance. However, it is more important to provide the right kind of education and skills to those involved in the supply side to ensure more “useful” Islamic financial products are structured and offered. What role can MIT Global and First Global Academy play in the field of Islamic financial education?

I was truly honoured to meet a personality with such a calibre. Dr. Yaqub Mirza is a great mentor and a fatherly figure to me. It was indeed a privilege listening to his leadership interview, and getting a signed copy of his book, Five Pillars of Prosperity, was icing on the cake. I am indeed grateful to Professor Humayon Dar for bringing such great leaders to an amazing leadership programme. I must say that we all benefitted from the wisdom and advice given by these leaders throughout the programme. I was greatly touched by the book as I read it through my journey back home, making notes and jotting down comments. I highly recommend this book to all those who want to lead a life of ethics and integrity. This book is also a good read to Islamic bankers, current practitioners and leaders in the Islamic finance industry who would like to learn about investing and financing from a different perspective. May Almighty Allah shower His blessings on Dr. Yaqub Mirza and all his family members for sharing his valuable insights.


I agree that creating awareness is one of the core areas that the Islamic finance industry must place greater emphasis on. I would like to reiterate again that 80% of market potential in Islamic finance remains untapped due to the lack of understanding as to what Islamic finance is all about. The educational landscape is changing tremendously and together with this, techniques and teaching methodologies have changed too. It is becoming a real challenge to assess the level of competencies and technical knowledge of professionals. In respect to the dearth of professional Islamic bankers, many media publications have reported that the Islamic finance industry is growing at double-digit rates. Unfortunately, those who are tapping the doors of Islamic financial institutions are not equipped with the required qualifications and the practical experiences, and hence failed to get employed. Most of the Islamic finance programmes offered in the market - from certificates right up to PhD programmes, do not have faculty or teaching members who have practical industry experience to teach these courses or programmes. The role of MIT Global and the First Global Academy is to build a new breed of Islamic bankers and Islamic finance specialists who will have both the qualifications and the practical exposure by the time they complete their programmes with us. Our advice to all our graduates is “Islamic bankers are not mere job seekers, but solutions providers”. We encourage our graduates to utilise their knowledge and practical exposure in Islamic banking and finance not only to seek jobs but with the objective of getting fund (through a mudaraba or musharaka product) for their entrepreneurial projects.



ou were at Cambridge Islamic Finance Leadership Programme 2016 where Dr. Yaqub Mirza shared with the delegates his Five Pillars of Prosperity, i.e., Earn, Save, Invest, Spend and Give. What is your take on it? How can we incorporate this principle in Islamic banking and finance?



14 W

here would you like to see MIT Global in the next 5 years?

We want to touch the hearts and lives of some of the 3.4 billion impoverish people through our Islamic finance solutions. I also want to support those young entrepreneurs in kick-starting their own micro, small or medium enterprises or initiatives, through our award-winning Musharaka Partnership Model. To be specific, in the next 5 years, we want to become specialists in the Islamic finance industry that are fully equipped to provide solutions in any part of the world within 100 days in reference to the establishment of an Islamic bank or Islamic financial institutions. Through my own personal experience, many new projects and initiatives are delayed and become very costly as a direct result of lack of practical knowledge and experience of the team. We do not want to re-invent the wheel. Instead we want to sign the mandate, put our sleeves up and accomplish the goals. That is our unique approach in supporting any new entrants to the Islamic finance industry.

Y 15

ou have been a CEO, have founded and developed a number of businesses and companies. What’s next?

Alhamdulillah (All praise be to Almighty Allah), He has groomed me to take up many challenges and reach the top as a CEO. I have also held several senior positions as CFO and Group CFO in some of the most well established Islamic banks, where I have been part of steering committees or founding teams. While working on my core mandates, I spend my late evenings and early mornings to get into the projects that are close to my heart. I not only believe in knowledge sharing but making it a personal quest to practice it. Whilst setting

up First Global Academy and MIT Global, I made it a habit to share all information with my Chairman and the Board. I wanted to spread awareness amongst them and made them see their role beyond mere investors but as contributors to the Islamic finance industry. As I mentioned earlier in this interview, I strive to make ‘every day a learning lab’. What is next you ask? Time is running out and age is catching up. The candle that has illuminated many is burning out. Before this candle burns out, I would like to see new and young Islamic bankers step forth and light their candles alongside mine. Before I take my last breath, I want to become a champion of Islamic finance industry by making a difference to those who are truly sincere in their quest in seeking Islamic finance solutions. My goal will be accomplished when MIT is being referred as a house of knowledge for Islamic finance and I am able to make a difference to at least one individual out there. When that time arrives, I can proudly tell myself that I have succeeded in my career as an Islamic banker and a champion in Islamic finance. I want to inspire and touch the hearts and lives of those who are in need; not by charity but instead by empowering them to stand on their own two feet. I believe, the award-winning Musharaka Partnership Model (MPM) has the potential to make that difference globally, in shaa Allah.





ny message you would like to share with the professionals and practitioners out there in Islamic banking and finance?

Four decades of Islamic finance industry were sufficient to build a strong foundation. However, the industry remains largely untapped, which presents a huge market potential for all of us; irrespective of our faiths and believes. It is time to cement the bricks for the next decade and thereafter to develop a 100-year plan for the Islamic finance industry collectively if we are to build the legacy we want to leave behind. Islamic finance should be accessible to all irrespective of lifestyle, colour, religion, race or the ethnic group. We need to reach out to everyone through Islamic finance solutions to suit a variety of customer profiles and their risk appetites.








FOR ISLAMIC FINANCE 2017 OUTLOOK Othman Abdullah, Managing Director, Islamic Banking, Silverlake




Fintech or financial technology has become such a popular theme that there is hardly a day without news about how fintech is disrupting the financial world. High on the agenda of all events this year and a hot topic in many discussions is how to deal with the impact of fintech disruption. During the 23rd Annual World Islamic Banking Conference (WIBC 2016) held in Bahrain last December, the topic of fintech took centre stage. For the second consecutive year, one of the salient features of WIBC 2016 was on fintech. FinTech and Digital Banking - Enterprise Excellerate, one of the two parallel sessions on Day 1 was dedicated to fintech, where prominent fintech personalities and advocates engaged audience into interesting and thought provoking discussions on fintech revolutions, challenges and regulations, fostering culture of innovations, blockchain and cryptocurrency, robo-advisors, crowd-funding, digital banking and cybersecurity. As one of the panellists, I shared my insights on how best to engage customers in enhancing their digital experiences. In addition to the dedicated stream on Day 1, fintech topics also appeared in the main agenda on the next 2 days of the conference. Islamic finance in digital age, cyber security challenges faced by the banking industry and digitization of Islamic financial institutions were also hotly debated. Other related topics included how to adapt Islamic finance to the fintech revolution and enhance banking growth through integration. I was also on a panel in the latter. Curated based on robust industry research and in conjunction with stakeholders across the global industry, the line ups of agenda in many conferences in Islamic banking and finance pertaining to various aspects of fintech proves that global Islamic finance fraternity do realise fintech potentials as enablers to bring Islamic finance to the next stage. This is further evident by the remarks on fintech disruptions and opportunities made by numerous speakers and audiences even when they were discussing topics not dedicated to fintech. Certainly, fintech is the catchphrase of the industry at the moment. Sitting through whole three days of the conference, I had observed that there were still a few sceptics, the majority were in agreement that fintech disruptions was real and there were huge opportunities for fintech in Islamic finance space. For example, during CEO Power Debate session, discussing the way forward for Islamic finance, a speaker highlighted the fact that Islamic finance has not fully tapped on the potential of huge Muslim market in Indonesia, Pakistan and Bangladesh which coincidentally has a large unbanked segment. While traditional brick and mortar branch network could be a challenge to reach out to these prospects, digital financial services could be a good solution to drive inclusion for this segment, thanks to the amazingly high mobile phones penetration in these geographical locations. Besides addressing fintech opportunities and disruptions in general, there were also discussions on the implications to traditional banking services. Some audiences related their unfriendly experiences with the current banking services. This could be easily solved with customer experience centric digital banking design. Customers in digital age expect personalised banking services which some of the fintech companies have been able to provide. In order not to lose more to the fintech companies, Islamic banks must embark into digital banking journey. Experts speaking at the conference said like their conventional peers, Islamic banks too have no choice but to embrace the next generation of computing and leverage on new generation digital technologies. Quoting one speaker, “Digital Banking is not about providing banking services online but about transforming banking experience from acceptable to delightful”. I left Bahrain on the evening of 7th December 2016 feeling satisfied with my own conviction on fintech in Islamic finance that we have come to past the awareness stage. There has been enough excitement and the stakeholders have begun to realise the way of doing business is changing. I believe that decision makers are getting accustomed to the phrase, “if you do not disrupt your own organizations, others will”. Some have started to take actions and I am optimistic that we will be seeing more in the near future. Indeed Islamic banking and finance are expected to hugely benefit from fintech and block chain technologies that will help to simplify transactions involving complex structures. 2017 looks very promising for collaborations for innovative solutions between fintech companies with the traditional financial services’ providers. We can expect to see more of the “platformification of banking” that kicked off in 2016. Platformification is a strategic partnership between existing banks and start-ups toward becoming banking platforms. Platformification concept originates from the platform idea of plugand-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other and create exchange value. There is undeniably huge scope for collaboration. All that is needed is a change in the conventional mind set.









“Every man who is not a monster, a mathematician, or a mad philosopher, is the slave of some woman or other.” George Eliot

27 27


Call me mad or a philosopher or both, I don’t mind but what I really mind is the insistence of people to make Islamic banking and finance (IBF) all-inclusive by changing its very nomenclature. I fear that reading meaningless discussions on social media and various other platforms on the issue of rebranding Islamic banks by another name to make it more mainstream is getting me to the point of madness. Before suggesting so-called renewed names to IBF, these guys should first change their own names from Muhammad to Michael or John Travolta or whatever that suits and pleases them, if they are not already called so or haven’t done so. These alleged supporters and advocators should learn from the great story of Muhammad Ali Clay whose death was mourned by everyone – Christians, Jews, Hindus, Muslims and so many others – despite him being a Muslim who not only insisted on his Muslim identity but was proud of it as well . Those who advocate for terms like participation finance, Abrahamic finance, ethical banking, or just naming a bank as a bank (and not an Islamic bank!) completely failed to understand the demography of Muslims and the potential market IBF can tap into by just being Islamic. In the today’s world, businesses owned by non-Muslims are trying to exploit the opportunities that Muslims offer them as a globally significant social group. On the other hand, these alleged supporters are trying to lure Islamic bankers to focus on getting Islamic financial business from non-Muslims. It is complete nonsense! There are almost 2 billion Muslims living on this planet, and IBF has so far reached out to no more than 100 million of them. The proponents of making IBF more mainstream by changing its nomenclature are like those who have been defeated on their home turf and are now proposing a new game at an “away” venue. This is akin to suggesting that the English cricket team should play and win at Eden Gardens after being defeated by the Indians at Lord’s. Changing the nomenclature of IBF is a propaganda developed by the so-called Western experts of IBF. Such individuals are found in abundance when IBF performs well, much like those myriad of small and uninvited bugs that suddenly appear from nowhere in rich environments. When they fail to get any business from Islamic financial institutions or when they find that Islamic financial markets are not doing as well as they first thought or believed, they are quick to jump ship when their expectations are not met. Some can be seen running businesses like photography in the cities like London. It is a fact that Muslim users of Islamic financial services have rejected Western banks and financial institutions that tried to get their patronage. The proof of this lies in the size of the IBF teams of such banks. Either they have completely disappeared or have shrunk in size too much to be visible. The so-called Heads of Islamic Finance of such banks are involved in conventional businesses of the banks they are working for. In the process, they are losing personal credibility even more. I have huge respect for many Western intellectuals who have been involved for a long time in IBF. Their analyses are always deeper than what they otherwise appear. If they suggest something like using a neutral name for an Islamic bank in the



UK or Germany, it is in a context. The social media “freemen” would like to generalise everything that may come their way. It is saddening to see such intellectually pauper minds have quite a few yes-men around them. I had no qualms when Islamic Bank of Britain changed its name to become Al Rayan Bank PLC or when Gatehouse Bank chose not to use the word “Islamic” in its title. The Western markets are on the periphery of IBF and Islamic banks therein may call themselves whatever they want to. However, I shall object if tomorrow Meezan Bank decides to call itself an ethical bank rather than an Islamic bank. I am not suggesting that such a move is even under consideration at Meezan Bank! What is more important here is increasing socio-economic value of IBF rather than trying to give it another identity. If Islamic banks provide cheaper financing, better service quality, greater social concern, and in fact show more compassion; no one – whether Jews, Christians or Hindus – would have any problems in dealing with Islamic banks. Just imagine an Islamic bank offering interest-free mortgages for a limited time period and asking people to take oath on the Holy Quran that they would pay the bank what is owed. You would see even atheists lining up in front of the bank. Their religious inclination or lack of faith will not stop them from dealing with an Islamic bank. Islamic bankers should be asked to improve their business model: be better than conventional banks; show more compassion when someone may default owing to adverse personal economic circumstances or due to illness; give payment holidays to those who may need a bit of respite; or simply allow debtors to pay early without having to incur any early payment penalty. These are the important Islamic characteristics that IBF should adopt, and when they do so all non-Muslims will be interested in dealing with Islamic banks even if Donald Trump attempts to construct a wall to stop them doing so. Understanding the financial needs of Muslim communities around the world is crucial to the success and sustainable growth of IBF. A vast majority of Muslims need access to finance. Hence, financial inclusion should be big on the agenda of Islamic banks. They must reach out to the financially excluded through technology and other modern means. FinTech could be a relevant tool here. Mobile banking, branchless franchises and non-bank agency models must be adopted by Islamic banks to increase their shares in the markets they are operating in. There is also a need to emphasise on changing the lifestyle of Islamic bankers who should show moderation and modesty in their behaviour and conduct. Creating examples of best practices – for example, CEO of an Islamic bank riding a bicycle to office – may also help. Employees of an Islamic bank donating a meal per month to the needy and the destitute must also boost their profile in social sector. Some of these practices have already been adopted by Islamic banks but there is a need to institutionalise them in the practice of IBF at the industry wide level. If Islamic bankers become better Muslims, no one would need to be apologetic about the identity of Islamic banks.






For further information, please contact 29on










INTRODUCTION Salam is a quasi-forward sale contract that allows trading parties to a transaction to defer delivery of merchandise to a future date. The price of the merchandise is paid upfront. A strict condition of validity of salam is that it should be used for trading in unspecified but specific1 homogenous commodities or items. There is almost a consensus of Muslim jurists that salam cannot be used to trade in currencies, for which a specific set of rules is relevant, called ahkam al-sarf. In fact, the first Shari’a Standard issued by Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI) deals with trading in currencies, which specifically prohibits trading in commodities in such a way that counter-values (one or both) are deferred. Similarly, AAOIFI Shari’a Standard No. 10 clearly prohibits the use of salam for trading in currencies2. There is a minority of scholars in the Indian sub-continent (and elsewhere), who opine that paper currency should not be considered like a commodity-based money, and hence is an imperfect substitute of the classical money in the Islamic history, i.e., gold and silver coins. According to this view, even if paper currency is not considered as commodity, modern money should be considered as a new medium of exchange for which trading rules may be different from what are prescribed under ahkam al-sarf. However, this view is refuted by vast majority of jurists from all over the Muslim world. The question arises if currencies as used in all countries of the world (i.e., as money with principal use as medium of exchange) should be considered as commodities, and if they are perfect or imperfect substitute of the money in the form of gold and silver coins. There are some parallels to this debate


in the old juristic writings wherein non-precious metal coins, called fuloos in Arabic, have been compared with the gold and silver coins.

HISTORICAL JURISTIC TREATMENT OF CURRENCIES There is a plethora of literature on the juristic treatment of later currencies (non-precious metallic coins called fuloos) and modern paper-based currencies. There is growing interest in digital currencies but a globally accepted juristic view on it has yet to emerge.

The juristic opinions can be divided into six groups: 1. Later currencies, i.e., fuloos should be treated like the gold and silver coins; 2. Later currencies, i.e., fuloos should not be treated like the gold and silver coins; 3. Paper currencies should be treated like fuloos, and hence should be treated like the gold and silver coins; 4. Paper currencies should be treated like fuloos, and hence should not be treated like gold and silver coins; 5. Paper currency should not be treated like fuloos but it should be treated like the gold and silver coins; and 6. Paper currency is neither like fuloos nor like the gold and silver coins.

1) Specification of merchandise is a basic condition of a sale contract in Islamic law. However, salam disallows selling of a specified commodity like “this sack of wheat” or the produce of a specific field of land. 2) “It is not permissible to use a currency, or gold or silver as object of sale of salam when the price is also in a currency, or gold or silver.” (AAOIFI Shari’a Standard No.10, Section 3/2/4).



CURRENCIES VERSUS MONEY In economic literature, a more generic term is preferred over currencies, i.e., money, which ideally should serve as a medium of exchange, store of value, unit of account and standard for deferred payments. All currencies are different forms of money, although it is not true conversely. Ahkam al-sarf should apply to anything that serves basic functions of money. Singling out paper currency as a special case and, hence, allowing salam or deferred payment sales in it will open a Pandora’s Box, which will defeat the whole purpose of developing a new system based on the prohibition of interest.

Ahkam al-sarf should apply to anything that serves basic functions of money. Singling out paper currency as a special case and hence, allowing salam or deferred payment sales in it will open a Pandora’s Box, which will defeat the whole purpose of developing a new system based on the prohibition of interest.


The safest bet would be not to create any distinction based on the form, i.e., gold and silver coins, other metallic coins, paper currency or digital forms of money, but to rather consider anything that fulfils the functions of money, subject to ahkam al-sarf.

AN ECONOMIC ANALYSIS OF SALAM3 Salam can be seen as a tool to access finance from the viewpoint of the seller, and a hedging instrument for the buyer. The buyer and seller must agree on a price that maximizes financial benefits to the seller and hedging benefits to the buyer. Therefore, the price determination must be left to the trading parties, and must not be determined exogenously. A rule of thumb for price determination on part of the buyer is to agree on a price equivalent to p=(1-|σ|) p-μ; where σ is the standard deviation of the price; p is the average market price over a certain time period, t; and μ is the bargaining factor. The finance-seeking seller will agree on a price that is no more than (1 + r)p; where r is cost of borrowing from financial markets. In a perfectly competitive market, μ=r(1-|σ|) p, giving rise to an agreed salam price, p=(1-r)(1-|σ|) p. If μ>r(1-|σ|) p, then salam as a financing tool will be more expensive than an interest-based alternative available in the financial markets. The salam price in this case will have a premium more than the interest rate prevailing in the financial market. μ-r(1-|σ|) p>0 may be construed as Shari’a premium. The above salam price formula suggests that a true salam transaction will expose the buyer to any benchmarked rate of interest as well as the risk of commodity price fluctuations. Any other formula for price determination in case of salam (in which commodity price does not feature) may in fact give rise to a pseudo-salam contract4.

3) Ebrahim and Rahman (2005) provide and economic analysis of salam and its comparison with a futures contract to suggest inferiority of the former vis-à-vis the latter. Ebrahim, M. S. and Rahman, S. (2005) “On the Pareto-optimality of Futures Contracts Over Islamic Forward Contracts: Implications for the Emerging Muslim Economies.” Journal of Economic Behavior & Organization, Vol. 56, p. 273-95. 4) This could be a test for other trade-based contracts like murabaha and bai’ mu’ajjal. If pricing of such contracts exposes the trading parties to only a benchmarked rate of return, such contracts should be deemed pseudo-trade contracts.








Figure 2 compares a salam contract with financing based on variable interest rate5 (black line), purchase of commodity for a price on a future date at the time of delivery of salam commodity (red line), and a futures contract based on the variable rate pricing formula (green line). This is of course a hypothetical representation of the performance of a salam contract vis-à-vis market changes. In this particular case, a salam contract performs better than the alternatives depicted in the Figure. Figure 3 presents a scenario where a salam contract incurs loss on the buyer, as the market price of the commodity is less at the time of delivery, as compared with the salam price. The salam contract may also perform less favourably as compared to a futures contract with actual delivery. This kind of economic implications of the views of jurists must be taken into account in a meaningful eco-juristic analysis. Failing to do so may result in acceptance and application of some of the contemporary juristic views in product development, which may prove to be irreversible even if they happen to be erroneous.

SALAM IN CURRENCIES Salam in currencies implies sale of a given currency (say British pound, £) for another currency (say US dollar, $) whereby the sellers of currency are allowed to deliver the currency on a future date. For example, if a Party A sells £100 (the subject matter) for a price of $150 to another Party B, then A must receive $150 now to deliver £100 in future. This type of salam in currencies is not permissible, in accordance with the majority view. However, Sheikh Taqi Usmani, a permits sale of one currency for sold currency can be deferred in price is paid upfront. This is an merits an economic analysis.

prominent Pakistani jurist, another one such that the delivery if the spot market interesting exception that

It seems as if Sheikh Usmani allows salam in currencies on the pretext that it serves a purpose for hedging against fluctuations in the price of the currency to which a party may have exposure in the future. He believes that this purpose may safely be achieved by allowing salam in currency conditional upon the salam price to be strictly the market price prevailing at the time of entering into salam6. This, however, is a flawed assumption, as spot sale and purchase of currencies serves the purpose of hedging better than the proposed salam (see below for further details).


THE ISSUE OF DIAGONALITY IN TRADING IN CURRENCIES If we accept Sheikh Usmani’s view on the salam in currencies, then there is merit in exploring if a deferred payment sale in currencies is also allowed. Following Sheikh Usmani’s relaxation for salam in currencies, one may argue that it should be acceptable to defer price (in terms of one currency) for the purchase of another currency, provided that the agreed price in the sale is the prevailing market price, and not any other mutually agreed price between the transacting parties. Trading in currencies is different from trading in commodities and other items that are not used as a medium of exchange. Perhaps this is why there are different rules prescribed in Islamic jurisprudence for trading in currencies. One important aspect of trading in currencies is that it does not matter whether one currency is a price or subject matter of sale. This is called diagonality in trading in currencies. For example, if a person A wants to sell US dollars (US, $) for GBP (GB, £) to a person B, the trade can be executed by a sale of $ from A to B who pays £. Alternatively, the trade can be executed by a sale of £ from B to A who pays $. The end result is the same. This diagonality does not exist in case of sale of a commodity for money. For example, if A wants to sell wheat to B for cash, the trade can only be executed by way of sale of wheat (as a subject matter) for a price denominated in a currency ($, £, etc.). It makes little sense to execute such a sale whereby $ or £ is subject matter of sale and wheat is the price7.

THE RATIONALE BEHIND SHEIKH USMANI’S PERMISSIBILITY OF DEFERMENT OF ONE COUNTER-VALUE IN TRADE IN CURRENCIES Sheikh Usmani seems to permit the so-called currency salam on the grounds that it allows the buyer to lock-in the exchange rate and hence hedge their position against exchange rate fluctuations. As stated above, this is not a valid rationale for permissibility of currency salam. A spot trade in currencies may in fact be superior to the disputed currency salam, as it is more flexible and more in favour of the hedging party. In the currency salam, the buyer pays $ upfront to receive £ in future, as per the prevailing market exchange rate at the start of the salam period. The buyer in fact ends up foregoing the use of £ during the salam period before £ is actually delivered. In case of a spot trade, the buyer will have the £ in hand to use it as and when it makes sense, or keep on using it as a hedge for its future foreign exchange obligations.

5) K is the amount of money lent on an interest basis. 6) Some scholars tend to sympathise with Sheikh Usmani’s distinction between paper currency and the gold and silver coins. According to them, if the distinction is acceptable, then salam in currencies should be acceptable outright, without the condition of the current market exchange rate to determine the salam price. 7) Admittedly, from the viewpoint of a pure exchange, there is no difference between the two cases, whether money is price or subject matter of sale.




The permissibility of currency salam should be deliberated very carefully, as it may give rise to the structures that may change the whole view of ahkam al-sarf. One example is given in the following, which shows how currency salam can be used to structure short selling in currencies.



Mufti Ismail Ebrahim Desai




Figure 4 presents the case where short-selling works in favour of the speculator; while Figure 5 is a case where a speculator’s expectations are not fulfilled, and hence incurring loss for them.

B) The customer may appoint the bank as its agent to buy the currency on its (customer’s) behalf from the market at the then prevailing exchange rate, and then deliver it to the bank.

The products based on currency salam already have shown divergence from the exceptional permissibility and the conditions attached. For example, the condition that only current market exchange rate should be used as price for salam in currencies seems to be violated by the currency salam product offered by Islamic banks in Pakistan. The salam price in this product is not based on the current market exchange; rather it is a mutually agreed price between the two parties. In this sense, it is a standard salam contract (impermissible according to the majority view, and in violation of Sheikh Usmani’s condition for permissibility).

C) Alternatively, the customer must arrange for the foreign currency from whatever sources to deliver it to the bank on the agreed date. Step 2: One a future date of delivery, the bank, pursuant to B above and serving as the agent of the customer, buys the specific amount of $ from the market, and delivers it to itself on behalf of the customer.

Many Islamic banks use currency salam as a tool for providing liquidity to their customers. It is certainly not used as a hedging tool, as prescribed by Sheikh Usmani, and it seems as if it does not use the current market price as the salam price.

D) The customer must pay the bank an amount in Rs required to purchase the agreed amount of foreign currency that must be delivered to the bank pursuant to the salam sale.

This is how the product works: Step 1: A customer undertakes to supply a certain amount of a specific foreign currency (say, $) to the bank on a specific future date in exchange of local currency (Pakistan rupee, Rs) to be paid by the buyer (the bank) as advance price.

Important Considerations:

Important Considerations:

E) If the customer was expecting foreign exchange pursuant to an export bill, they will be able to deliver the required amount of the foreign currency, as per the salam agreement. The transaction flow is shown in Figures 6 and 7. The former is an example of the use of agency in the structure, and the latter is a straight forward structure, without agency.

A) The exchange rate is not exactly the prevailing spot market rate (i.e., the salam price is not strictly the prevailing market price).






To further explain the above structure, accounting treatment of a currency salam transaction as employed by Islamic banks in Pakistan should be used. This is provided in Table 1




CONCLUSION Currency salam may not be as straight forward from a juristic and economic viewpoint. It has huge implications for the way Islamic banking and finance is being practiced and the future direction it may take in wake of the permissibility of salam in currencies. As globally accepted Shari’a standards exist on salam, it is advisable to strict to them, instead of attempting to exercise Islamic financial engineering based on the views of some individual Shari’a scholars, even if they happen to be among the greatest jurists of the present time.

39 39




BETTER, SAFER, AND STRONGER Tauhidur Rahman A C-suit level risk and Islamic banking practitioner

Risk management is a hard job and is often concerned with the challenge of making difficult decisions. We all know that difficult decisions give rise to an adverse paradigm. To this context, the question arises; how do risk managers utilise the paradigm to produce synergy? But before this, they need to overcome ‘naïve realism’ as the ideas generated from the paradigm shift are still newfangled and many people may not be ready to appreciate the same. While others see things straight and take decisions based on psychological biases for an immediate outcome, a risk manager takes the decision in an analytical way. He/she evaluates things comprehensively, taking a 360 degrees approach to arrive at a superior result. This is because ‘left of boom booms right of boom’. This does not mean that risk managers stop or slow down businesses; rather they facilitate businesses in a cost effective and more sustainable way, the outcome of which people may not see immediately, but the goodness of which they realise consequently. A short case study: A CEO and his business team wanted to avail a huge sum of funds to finance the operations of a giant and well-reputed company dealing in oil exploration in an oilrich country. The credit memo was presented at the highest management committee meeting, after passing through all delegated offices including risk management. After looking at the financial records and industry analysis, the company seems to favour the strong argument put forward by the business team to approve the credit. Also, the sum of the credit involved was large enough to give them adequate profit to meet the year’s target alone. However, the risk management team, though positively disposed to the transaction, certified the same subject to some major amendments.




The risk management team equally indicated the possibility of novelty risk occurring in near future, and thus requested for more information on regulatory decisions and potential mitigation measures that may be adopted in the case of occurrence. The risk management team further recommended reduction of the amount to be availed to the company to a certain percentage of its large portfolio, and expansion of utilisation period, i.e., disbursement based on ‘observe and go’. But the committee chairman as well as the CEO and other members cared less about the chief risk officer’s position and proceeded to approve the disbursement of the facility in favour of the company, as they needed it urgently to top up the balance sheet target. The result was ‘too big to fail’. Huge regulatory changes and systemic risk adversely affected the business revenues and payment. The bank failed to meet its capital requirement due to huge loan loss provision and so on. Subsequently, the bank was tagged as an ‘ailing bank’ and it consequently suffered the resultant consequences. The lesson from the above signifies the value of risk experts’ advice and taking decisions not only based on psychological paradigm but based on analysis. Risk management works better by utilising analytical thought and making decisions based on long term profit and outcome. The meaning of exercising risk management is not just seeing the ‘black swans’ and closing the file, but the approach must be ‘doing it’ with some required management, by enabling all stakeholders ‘to do it’ not just ‘it’s not doable’. This is how golden goose can be found. Historically, chief risk officers (CROs) have been associated with restriction and control. However, as the role evolves, they are increasingly becoming crucial decisionmakers in the executive suite. Today’s CROs lead the process of integrating risk and crisis management with internal controls, allowing organisations to better anticipate emerging and operational risks. This is the state-of-the-art of risk management in today’s world, which is business focused and not just working as a gatekeeper, but as an enabler too. An ideal risk management function should become proactive as well as fast-track, not simply by minimising negative risk but also maximising opportunities. To do so, Enterprise Risk Management (ERM) should be a continuous process, constantly monitoring and assessing risk in a forward-looking way that provides organisations with a path toward opportunity and value maximisation. It is also important to emphasise risk thoughts on decision-making. In this case, risk managers put themselves in the shoes of the decision-makers and ask, “What risk information they need, what are some potential hazards and opportunities?” By asking these questions, they are able to make intelligent decision, thus selecting the best among all alternatives! A CRO has to be analytical but they must combine this with commercial, strategic, leadership and communication skills. It’s no longer sufficient to be just a good quantitative, or qualitative person.


CRO’s thinking focuses on how to find a way to enable others to do business; not only model validation process but using both science and art. A standard risk management paradigm assists in identifying almost all tractable risks but outside the box, while the intractable risks or novelty risks have to be kept in view. After all, CRO’s use a dynamic approach because ‘one size does not fit all’. It should clarify what prominent and vital role CRO plays at the board level, right through to the front line of the business. A risk manager’s role in Islamic finance is more relevant and ‘a must do’ because of its nature and unique risk profile. Being ethical and responsible paradigm of business, Islamic finance entails the act of proactively adopting a robust risk management system to safeguard the interest of Investment Account Holders (IAHs), who are vulnerable to the risk of losing their capital. A CRO’s role is very important to protect an organisation from various types of unique risks it would be exposed to, aside from the common risks it shares with other conventional finance institutions. This includes, but is not limited to, managing displaced commercial risks by way of putting a robust income smoothing plan to protect its profit and loss sharing partners and shareholders as well. Fiduciary and reputational risks are also paramount to manage, indicators include Shari’a noncompliance and legal risks for example. Any of the above risk categories can cause an Islamic finance institution to go down. They are equally capable of constituting systemic risk for the whole industry as well as market participants since they are working under the same umbrella. Apart from this, various types of credit, market, liquidity and operational risks related to its assets and operations that are uniquely embedded and managed through a bundle of robust mechanisms in a transparent, responsive and ethical way. In such a peculiar situation, risk managers in Islamic finance utilize proactive as well as more prudent risk management techniques mostly by way of risk transfer within the parameters of Shari’a dictums. From a leadership perspective, the indispensability of risk management is a ‘MUST DO’. A leader in an Islamic finance can’t ignore the stated risk scenario that can jeopardise the image and even existence of the institution overnight if not well managed. A CRO’s function is like a ‘camel in the desert’. Having journeyed through the desert, a CRO can be in a better position to lead by turning all ‘black swans’ down and grabbing all ‘golden geese’ in more hands-on, professional as well as responsive way. Ethics and responsible approach to business operation needs such leadership, who believes in such responsibility, to understand and appreciate, and to better manage risks while leading the organisation to the Promised Land. To conclude, a risk management oriented leadership can uplift the business performance and sustainability of an organisation by maximising the value more aptly and ethically than others can do.

Businesses are all about taking risk and reaping benefits. Hence, a CRO with a risk averse mind set would not work. A





Ramlie Kamsari, CEO, Nomura Islamic Asset Management What is driving Islamic asset management industry? What is on the horizon for Islamic asset management in light of global political and economic uncertainties? Ramlie Kamsari of Nomura Islamic Asset Management takes a closer look at some of the key developments and provides insights into this niche sector.

The global asset management industry has undergone fundamental change in recent years. Increased regulations, geopolitical uncertainty and market volatility are some of the profound challenges reshaping the industry. Islamic asset management, dubbed as the “new frontier” for the global Islamic finance industry, is no exception. Despite being a growing industry, Islamic funds represent a mere 5% of the total global Islamic finance assets. According to the ISFB Stability Report 2016, 71% of Islamic funds have assets under management (AuM) of less than US$25 million, which primarily means that these funds have not reach critical mass that is necessary for efficiency and sustainability. Similarly, Thomson Reuters’s Global Islamic Asset Management Outlook 2015 highlighted the substantial growth opportunities of Islamic funds. With AuM of about 1. Thomson Reuters Global Islamic Asset Management Outlook 2015


US$60 billion in 2016 and current latent demand of US$147 billion, the supply-demand gap for Islamic AuM is estimated at US$87 billion.1 This supply-demand gap is expected to widen as the global Islamic asset management industry is forecasted to grow to US$77 billion by 2019. In the recent ICD-Thomson Reuters Islamic Finance Development Report 2016, global Islamic funds are projected to reach US$77 billion in 2017 and US$105 billion by 2021.

LACKLUSTRE GROWTH Overall, 2016 was another slow year for Islamic asset management after the global Islamic funds fell 1.6% in 2015. The performance of Islamic funds reflected the sluggish global market environment. The persistent low oil prices since 2014 further dampened Islamic funds growth, predominantly in oil-



exporting countries. However, Asia performed better than the Middle East with Asia Pacific mandated Islamic funds up by 2.63% while that of the Middle East lost 8.87%. Global macroeconomic events including geopolitical events in the Gulf Cooperation Council (GCC) and Southeast Asian countries - the two main regions where Islamic funds are heavily concentrated; also weighed in on the overall performance of Islamic funds. With Standard & Poor forecasting that oil prices will remain low in the next two years – US$45 a barrel in 2017 and US$50 a barrel in 2018; the lacklustre growth is expected to continue into 2017. By geographical area, the largest proportion of AuM in terms of Islamic funds outstanding are to be found in the GCC countries (37%) and in the Southeast Asia region (30%) (ICD-Thomson Reuters [2016]). By country, Saudi Arabia, Malaysia and Iran are the top three in terms of the percentage of Islamic funds outstanding, making up 81% of total global Islamic funds’ AuM. Meanwhile, the US and Luxembourg are

major centres where Islamic funds are domiciled, representing 4% and 3%, respectively, of the Islamic fund market outside the Muslim countries. It should be noted here that Iran had displaced the US and Luxembourg to rank number 3 globally in 2015. Equity Islamic funds, which made up 51% of total Islamic funds outstanding, had a rough year in 2016 primarily due to the heavy exposure to the GCC equity markets. Another key drags on performance was the fall in annual management fees. On the global front, global sukuk issuance increased marginally by 2.2% in 2016 to reach US$77.1 billion as compared to $75.4 billion during 2015. However, this increase was much smaller than the growth registered in 2015 at 5.5%. This is a stark contrast to what was happening a few years ago where sukuk issuance totalled more than US$100 billion a year from 2012 to 2014. At its peak, sukuk issuance came close to US$150 billion in 2012, which is more than twice the

Chart 1:

International and Total Sukuk Issuance 2010-2016

International Sukuk issuance

Total Sukuk issuance

International issuance as a share of the total

(Bil.$) US$ billion 160 140 120 100 80 60 40 20 0









45 40 35 30 25 20 15 10 5 0

Source: Eikon and S&P Global Ratings




Level expected for 2016. The subdued issuance volumes in 2016 were the result of external factors affecting global financial markets but mostly driven by the Bank Negara Malaysia’s resolution to cease issuance of its short-term sukuk. Malaysia is currently the largest sukuk issuer and is expected to continue playing a significant role together with Indonesia, after issuing US$28.4 billion and US$7.3 billion of sukuk, respectively last year. However, in 2017 the GCC may likely take a larger share as we can expect to see more issuance coming out of the GCC countries to finance their large budget deficits and infrastructure projects.

KEY DEVELOPMENTS While demand for Shari’a-compliant investments is rising, about US$9.5 trillion of Islamic wealth still remains outside of Islamic finance industry. But unlike the conventional funds industry, 80% of Islamic AuM is made up of retail investors whilst only 20% comprises of institutional investors. Hence, the key challenge remains penetrating the institutional investor segment, which includes pension funds and sovereign wealth funds. In this respect, the move by the Malaysian pension fund, the Employee Provident Fund (EPF), to offer Shari’acompliant investment option to its members has been seen as a positive development. According to statistics released by EPF, as at 31 October 2016, a total of 50.25%, amounting to RM50.25 billion from the initial allocation of RM100 billion for Simpanan Shariah 2017 have been taken up since registration for the Shari’a investment scheme was opened to its members on 8 August 2016. Two major events in 2016 that will help boost the sukuk market (infrastructure sukuk in particular) in 2017 are the launch of Saudi Arabia’s Vision 2030 and the lifting of international sanctions on Iran. Unveiled in April, the plan aims to shift the Kingdom’s economy away from its dependence on oil revenue, increase non-oil government revenue and increase private sector’s contribution to GDP. It is anticipated that Vision 2030 could potentially contribute to the growth in sukuk market as the Kingdom turns to sukuk issuance to fund its large-scale infrastructure projects. Iran’s return to the global market is expected to drive sukuk issuance as the country entire financial sector is Shari’acompliant with the passing of the Law for Usury Free Banking Operations in 1983. Due to the sheer size of the country’s investment needs, the government will be looking at issuing sukuk as it shifts its funding needs to the capital market. Nevertheless, Iran needs to review its current legislation, which forbids sukuk trading in foreign currencies, if it wants to tap the international sukuk market (for recent developments in the Sukuk market, please refer to Chart 1). A positive development in the Malaysia’s Islamic wealth management industry was the launched of the 5-year Islamic Fund and Wealth Management Blueprint by the Securities Commission Malaysia (SC) in January this year. The Blueprint aims to further strengthen Malaysia as a leading international centre for Islamic fund and wealth management. Malaysia currently has Islamic assets under management at US$29.66 billion (MYR132.4 billion), which is among the largest in the


world. In order to broaden the global capacity of Malaysia’s Islamic fund industry, which is very much domestic-centric, several initiatives were highlighted including formalising a framework on Shari’a sustainable and responsible investments (SRI), the introduction of a digital investment services framework, the broadening of linkages and connectivity, capitalising on global opportunities and increasing the value add and talent base within the Islamic capital market to enhance its product and service offerings. The SC is also proposing to set up a fund which would invest in multi-currency Islamic investment products managed by Malaysia-based asset managers, and including equity products, to increase their size and make them more attractive to investors. The move is aimed at attracting significant institutional money and foreign investors.

A NEW GLOBAL ERA However, two important developments in the Western hemisphere continue to shake up the world market as the bumpy ride of 2016 is expected to linger in 2017 with another momentous year in global economics and politics. Continuing uncertainty over Brexit, politics and economic policy developments in the US as Trump takes on the US presidency as well as the upcoming elections in Europe are likely to add to uncertainty in the global economy this year. The Brexit vote in June 2016 sent shockwaves through the UK’s political landscape, shook the European Union and dragged global financial markets with it. In the immediate aftermath, the global markets lost US$2.1 trillion in value while the British pound fell to a record 30-year low. In a recent twist of events, the Supreme Court ruled that the British government cannot trigger Article 50 of the Lisbon Treaty to formally start the Brexit negotiation process without Parliament’s consent. Thus, adding to greater economic and political uncertainty in the country. The question of passporting still hangs in the air and remains front of mind for asset managers in the UK. As the city of London is the leading international financial centre, ongoing uncertainties on the timing and nature of the Brexit process could pose additional risk to the already fragile global economic recovery. According to the World Bank’s semi-annual Global Economic Prospects 2017 report, Brexit uncertainty could drag down growth prospects across Europe. According to World Bank forecasts, the UK GDP growth is predicted to fall from 2% last year to 1.2% in 2017 (for other GDP growth forecasts, please refer to Chart 2). But most notably, Brexit has far reaching implications on the geopolitical landscape in Europe as it has the potential to trigger similar referendum in other European Union countries. Many observers believe that the UK vote out of the European Union is part of a wider and more global backlash against the government, rising inequality and globalisation. If other EU countries follow UK’s lead, this will have wider ramifications on the global economic order and financial environment. However, the weaker pound and the declining property prices post Brexit have generated considerable opportunities for international investors including Middle Eastern investors who are looking to buy real estates in London.



Chart 2:

Real GDP Growth (including estimates and forecasts)


United States

Euro Area

United Kingdom

Source: World Bank

The election of Donald Trump as the US president also raised big questions about global policy uncertainty. Political analysts believe that Trump administration is going to reverse the cornerstone of seven decades of American foreign policy and scale back the US involvement in global affairs. Living true to his promises during his presidential campaign to take a more aggressive stance against foreign competitors as part of his “America First” approach, Trump’s recent executive order for the US to withdraw from the Trans-Pacific Partnership (TPP) carried broad geopolitical implications in a fast-growing region.

With the US looking inwards, China is ready to step in to fill the economic vacuum in an attempt to establish itself as an economic anchor among Asian nations. China is already moving swiftly to establish and strengthen bilateral trade ties with Pacific and Middle Eastern countries, thus strengthening its position as an economic power in the region. At the recent, World Economic Forum in Davos, China’s President Xi Jinping likened protectionism to “locking oneself in a dark room”, thus signalling that China would look to negotiate regional trade deals. And top of this list is the Regional Comprehensive Economic Partnership (RCEP), being led by China,



countries, as well as Japan, South Korea, Australia, New Zealand includes southeast asian and India. What does all these means to Asian economies and global trade? The RCEP could be the new trading bloc on the block. Where the TPP tried to set regulations on environmental standards, labour rights and intellectual property, RCEP is focused on traditional matters like lowering barriers to trade, such as tariffs. All eyes are on Europe this year with several key elections in France, Germany, the Netherlands and along with possibly Italy. All four nations are founding members of European Union. Against the backdrop of rising support for the populist parties across the globe, many political analysts expect the Brump (Brexit and Trump) factor to likely fuel the rising tide of nationalism, putting both the European Union and Euro at risk. The stress of such geopolitical uncertainties with political risk



taking centre stage are likely to continue to constraint global economic growth. It may also have a deeper impact on oil prices as the total EU bloc accounts for 15% of the global oil demand. With expectations of market volatility and heightened global economic uncertainty in 2017, the European Central Bank (ECB) continued to keep its interest rate unchanged at zero and extended its bond-purchase plan until the end of 2017. However, it has announced to cut the monthly purchase amount from the present EUR80 billion to EUR60 billion in April 2017. The low interest rate environment and strong demand for bond investors is expected to drive the sukuk market in 2017. Hence, negative yields in Europe could also be good news for the sukuk market as funds start flowing in as investors look beyond traditional fixed income products for better yields and portfolio diversification.



A GAME CHANGER Moving forward, to further promote the growth of Islamic asset management, Shari’a-compliant socially responsible investments (SRI) could be the much needed game changer. Both Islamic finance and SRI have weathered the economic downturn. In a number of developed markets, SRI is a fast growing subsector of the conventional funds industry with the potential for alignment to Islamic funds. There are advantages to positioning Islamic funds as SRI funds. First, this would enable asset managers to reach broader range of investors’ increasingly diverse investment needs. Islamic funds could be attractive to some of those investing in socially responsible portfolios. Secondly, the combination of Shari’a-compliant screening and SRI principles would certainly reduce the risk profile of the funds. As far as SRI sukuk is concerned, the market can expect to see more ‘green’ sukuk issuance to originate from the GCC countries in the coming years. For example, Abu Dhabi announced a target of generating 7% of its energy capacity from renewable sources by 2020. Similarly, the Dubai government has also stated its goal of financing clean energy and efficiency goals through sukuk. In 2015, Dubai launched the Dubai Clean Energy Strategy 2050, which aims to make Dubai a global centre of clean energy and green economy. In Saudi Arabia, the ACWA Power company has announced their intentions to finance renewable energy projects through sukuk. Hence, a convergence of SRI and Islamic funds could boost appeal in Western markets and tap into a market that complements Shari’a principles.










What may work well in developing countries not necessarily work in other parts of the world, i.e., the Western world and the emerging markets. It is also true conversely. This means that successful adoption of a style in one context may lead to failure if emulated elsewhere. This article focuses on different leadership styles being practiced in banking and finance in emerging markets, with a special reference to Malaysia. From a wide spectrum of leadership styles, three types can be identified, namely, transformational, transactional and entrepreneurial. It is hard to pick the best out of the three, as one may work better than the other in a given context. It is equally possible that no one individual leadership style may suit in an environment but a combination of two or even three may be the best choice. Although various leadership styles share general aspects of leadership and management, some vital factors differentiate them from each other. As national cultures are influenced by geographical boundaries of the countries, leadership styles vary from country to country. Hence, location of an organization may lead to a leadership style generally acceptable in a national context. Within a country, different industries may have slight, and in some cases, significant differences. Next, we briefly discuss the three above-mentioned leadership styles.

TRANSFORMATIONAL LEADERSHIP Transformational leadership as a concept was introduced by James McGregor Burns in his seminal work, Leadership, first published in 1978. According to him, leaders and their followers raise one another to a higher level of morality and motivation. The leaders are expected to set higher expectations as well as clear goals and at the same time lead with example. They support their followers and recognize their work and contributions. In this paradigm, the leaders must inspire their followers. Hence, a leader is not only someone who talks the talk but someone who also walks the walk. A transformational leader not only leads their followers but also encourage them to share their ideas to evaluate and give their feedback on them. In an old-style leadership, leaders would give instructions and monitor their followers. Transformational leadership, however, emphasizes upon coaching and mentoring instead. The underlying view is that coaching and mentoring breeds creativity and innovation, unlike the old school that personal interest and initiative hampers learning to progress within the organization. There are four factors associated with transformational leadership, which are discussed next.

Intellectual Stimulation Intellectual simulation encourages creativity and innovation. The leaders encourage their followers to develop new ideas and avoid criticizing them publically for their mistakes. People make mistakes but leaders try to correct them rather than blaming the wrong-doers. At least, this should be the first

course of action following a mistake. There must be solutions and mechanisms to ensure that the mistakes are not repeated.

Individualized Consideration Individualized consideration means that the leaders treat the followers individually, based on their talent and knowledge. Each of the followers is treated differently and a transformational leader acts as a mentor and coach rather than a manager. Leaders with this trait empower the employees to make their own decisions that the leaders support.

Idealized Influence The idealized influence implies the leaders acting as role models to the followers. In this respect, the leaders influence their followers to get a job done by demonstrating their own high standards. Ethics is important here, as the leaders influence their followers with ethical conduct and moral behaviour. By doing so, the leaders gain more respect and trust from their followers. In other words, the leaders with idealized influence reduce the risk of corruptions and scandals in their organizations. Furthermore, the leaders at times sacrifice their own personal gains, in consideration of their followers’ needs.

Inspirational Motivation The transformational leaders inspire their followers by providing clear mission, vision and goals to solicit their full




commitment to work. The leaders also promote teamwork among the followers to achieve the set goals collectively instead of working towards achieving individual goals.

mistakes. Through mistakes, these leaders will have the ability to learn new things and discoveries. Entrepreneurship leaders are able to sell and promote their organizations. Hence, they add value to the organization due to their boldness and braveness.

TRANSACTIONAL LEADERSHIP Max Weber is attributed to have first highlighted in 1947 what is now known as transactional leadership style. In this style of leadership, the role of the leader is to manage, monitor and supervise the followers. Followers must obey the instruction of the leaders. In exchange of the work done by the followers, the leaders promise them a good reward. On the other hand, if the followers disobey the leaders’ instructions and perform poorly in their works, the leaders have the right to penalize them. This type of leadership does not welcome new ideas, innovations or creativity from the followers. Leaders set rules and regulations that must be followed by the followers. Unlike the transformational leaders that are concerned with the mission, vision and long-term goals, the transactional leaders are concerned with the short-term performance goals of the organizations. The transactional leaders must ensure that the followers achieve their targets to ensure the organization achieve its overall performance target. Each follower is to ensure that they achieve their own KPIs on which a reward system is based. The transactional leaders also are not emotionally bonded with the followers. As the leaders believe that any directions or orders should come directly from them, employees’ engagement and their empowerment do not feature significantly in this style of leadership.

ENTREPRENEURSHIP LEADERSHIP Entrepreneurial leadership involves forming a group of people to achieve a common goal through entrepreneurial behaviour by optimizing risks , exploiting opportunities, taking personal responsibility and managing change within a dynamic environment. The end result of this is for the benefit of the organization. To strive for excellence in performance, leaders should equip themselves with the entrepreneurial skills. Leaders must think as an entrepreneur, know when to grab opportunity, and treat the organization as their own business. As an entrepreneur, a leader must know when to drop a nonworking strategy. If the routine SOPs and procedures fail to give desired result, the entrepreneur ought to be brave enough to change to a new plan that may give better results. An entrepreneurship leader knows better when to grab the opportunity that can impact their organization favourably. Similar to the transformational leaders, entrepreneurship leaders also listen to the ideas of their followers. These leaders welcome feedback and act upon it after adequate assessment. Finally, entrepreneurship leadership is based on perseverance, determination and the ability to make changes constantly. Leaders with entrepreneurship traits are not afraid to make


ANALYSIS Among the famous transformational leaders is Warren Buffet who transformed a clothing manufacturer into a giant holding company. Another transformational leader is Jack Welch who transformed General Electric into a lean and agile powerhouse. John D. Rockefeller, who was the founder of Standard Oil, transformed it into a huge company from a single refinery, through acquisitions. From the contemporary Islamic banking and finance (IBF) industry, Dr Adnan Chilwan (Group CEO of Dubai Islamic Bank), Datuk Sri Zukri Samat (CEO of Bank Islam Malaysia), and Dato’ Wan Fadzmi Wan Othman (CEO of Agrobank Malaysia) provide examples of transformation leadership. By way of example, we present the case of Datuk Sri Zukri Samat who was appointed as Managing Director of Bank Islam Malaysia Berhad in 2006, with one immediate mission. The mission was to resuscitate the bank after the huge losses it incurred prior to appointment of Datuk Sri Zukri. He managed to transform the bank and returned it to black in just six months after implementing his strategy. The first challenge facing him was to change the culture of the bank. He instilled his vision for the bank amongst all the employees – from low management positions right to the top – and motivated them to accept changes willingly. He welcomed new ideas and encouraged feedbacks from his employees. Leading by examples, Datuk Sri Zukri inspired the employees and gained their trust and respect. He also took concrete measures to empower his employees and engaged them in the decision-making process. Obviously, all these measures are popular amongst transformational leaders. An example from outside the IBF industry is provided by Kamardy Arief who was appointed as the President Director of Bank Rakyat Indonesia (BRI) in 1983 – a time when the bank was suffering huge losses. As a first step towards transformation, he attempted to change the culture of the bank. His leadership style transformed the bank from being a subsidized bank into a profitable business. Like Datuk Zukri, Kamardy Arief also implemented the change of attitudes among his employees. He brought changes in the organizational and institutional structures, salaries and rewards, and in product offerings and credit policies. Consequently, Kamardy Arief was able to transform BRI from a government-owned bank into a viable and self-sufficient business. As a leader he is motivated, inspired, sought commitment from his employees, and recognized their contributions and achievements. These are certainly among the good qualities of a transformational leader.


One may argue that in any profit-oriented business, the transformational leadership style of nurturing, coaching and mentoring may not be the best model. Hence, the transformational leadership style may be fused with the transactional leadership style to achieve desired optimality of profits. This suggestion assumes that the transformational leaders alone may not sufficiently succeed in contributing to the bottom line. Thus, the transactional leaders remain important in such environments. Having said that, most people tend to believe that the transformational leaders are important in creating conducive environments within organizations. However, it is also true that the reward systems drive the organizations towards performance. Most Malaysian organizations are still not open to the transformational leadership style. This can partly be explained by the national culture that still respects authority and a top-down approach. This suits transactional leaders. For the followers, their own personal gains are important. They look forward to be awarded with the rewards as promised by the leaders. Moreover, it remains a cultural taboo for the followers to share their own views and ideas to the leader. This in many ways is not unique to Malaysia, as other neighbouring countries, particularly Indonesia, also share similar culture. Perhaps this is why Kamardy Arief tried to fuse his transformational leadership style with an explicit performance reward system. One famous example of transactional leaders was Steve Jobs of Apple Computers. He was known as a down to earth leader but was not hesitant to give his employees a dressing down if they failed to meet his expectations.


There are a few reasons for the adoption of transactional leadership in Islamic financial institutions, including: 1. Lack of sophistication of management practices; 2. Lack of depth from historical legacy for the top management; and 3. Shari’a restrictions in some limited cases.

CONCLUSION In concluding the article, one must emphasise that all the three leadership styles have their own strengths. As the competition in the industry has become fiercer, leaders should equip themselves with the correct style that can enhance the sustainability and ensure growth of the organization. All the three styles should be adopted interchangeably. None of the leadership style is superior to the other. In Islamic financial institutions, the transactional leadership style is more prevalent for the reasons given above. IBF is still new compared to its conventional counterpart. Understandably, conventional financial institutions are more innovative and creative due to their longevity. There are now some scattered examples of transformational leadership emerging in IBF. One may hope that this will take IBF away from a heavy emphasis on the bottom line to more passion, compassion, inspiration and pursuit of ideals.

Going forward into the new economy with fierce competition in the financial sector, the key players must adopt both the transformational and transactional leadership styles. It is fair to assume that the lower management staff require a transactional leader to monitor, supervise and control them in achieving the performance of the organizations. They can best be led by transformational leaders. This certainly helps in stimulating creativity, innovative ideas and feedbacks from the employees. The middle level of employees should be allowed room for improvement through employee empowerment and continuous engagement. Finally, the top level employees should adopt the transformational leadership style in ensuring that the organization achieves its long-term goals.

IBF AND THE LEADERSHIP STYLES Transformational leadership may best suit Islamic financial institutions. The reality is actually different, as Islamic financial institutions tend to follow national cultures many of which are not entirely in its favour. Having said so, many conventional financial institutions in the Muslim world have successfully adopted the transformational leadership style. However, given the heavy emphasis on the bottom line, Islamic financial institutions tend to favour the transactional style.









NAIL IT FOR THE MILLENNIAL TALENT RETENTION Muath Mubarak Chief Executive of First Global Academy (FGA) – Sri Lanka The success of a business venture lies exclusively in the hands of its people as they are key enablers for organisations to achieve their corporate objectives. The contemporary commercial world is changing rapidly due to internationalisation of business and technological advancement. Within the context of talent management, a paradigm shift is evident. For example, there is a growing focus on results and empowerment, not hours worked. Global brands like Virgin and Netflix have introduced ‘unlimited holiday time’ to their employees. Because high performance is so ingrained in their corporate culture, employees are trusted to act responsibly. Another out-of-the-box example is Google. Famously known for its unique and unconventional perks that promote greater creativity and innovation, Google’s corporate culture entails flexitime and free lunches. More and more organisations are taking bold steps outside the status quo to nurture a corporate culture that creates an inspiring and engaged work environment, including encouraging ‘work from home’, considering commute hours as working hours and creating various job opportunities for women. But at the heart of a strong corporate culture is an organisation’s values. Entrenched in Islamic principles are virtues of trust, morality and accountability. Hence, organisations operating in accordance to Islamic principles tend to embrace a distinctive corporate culture that is premised on these notions, unlike the conventional corporate culture based upon beliefs and values.



ISLAMIC FINANCE TALENTS The Islamic finance industry is set to grow at a faster pace globally with total assets expected to reach between US$3.5 trillion to US$5 trillion by 2020. For the industry to stay on this growth trajectory and remain sustainable, Islamic financial institutions should strive to advance best practices in corporate culture, which uphold the values of Islamic principles. At best, there exists a corporate culture gap when it comes to engaging the Gen Y workforce between Islamic financial institutions and their western counterparts. As the industry matures and moves into the mainstream, Islamic finance’s ability to build a qualified workforce that is in tune to the need of the hour is crucial. According to recent



reports, there are more than 750 educational institutions that are offering degree programmes (certification courses to fullfledged degrees) in Islamic finance. The Islamic Outlook Report 2016 reported that 80% of Islamic finance practitioners from the Middle East North Africa and Southeast Asia (MENASEA) believed that there was limited or very scarce availability of qualified human resource capital. They also listed shortage of qualified personnel as the biggest internal threat facing Islamic banks. Numerous reports have noted that a wide gap exists between what is learnt in the classroom and the actual field experience. Hence, it becomes critical for Islamic finance industry to fill the gap through practical exposure in order to give learners the balanced knowledge they need. When such practical





exposure is combined with classroom studies, learners would be in a better position to understand and appreciate the profession.

PEOPLE FIRST CULTURE According to a research conducted at the University of Warwick, people who were happier at work were 12% more productive than those who were not. The report went on to say that there is positive correlation between investment in employee support and employee satisfaction. Google is a prime example of this. This is what a “people-first” culture is all about. More and more companies are recognising the need for treating their employees like customers in order to attract and retain good quality employees. As Islam desires and encourages unity, Islamic finance industry must therefore promote a “we” culture, which is characterised as a culture of shared core. This, coupled with people-first culture, embodies the spirit of Islamic corporate culture. Such relationship should be a bond of trust, honesty, and integrity. It should be an association for fair dealing and social justice. No stakeholder should feel aggrieved that his or her group’s interests have been ignored. This forms the bedrock of a strong corporate culture to develop. In Islam greeting one another with salaam is highly recommended whether one knows them or not. Islam encourages greeting both physically and verbally when we meet other people, respect others, and assist in all possible ways. Even saving customer’s time reflects the ‘people-first’ culture. Islamic corporate culture needs to depict Islamic values when it comes to dealing with customers for uplifting Islamic finance industry. In some parts of the globe, Islamic financial institutions lack ‘people-first’ customer services, which leaves a negative impact on the customers/clients.

ENGAGEMENT To develop a strong and long lasting financially beneficial understanding, employer, employee and customer must be optimistically associated as the positivity trickles down from a satisfied employee to exceptional customer services; achieving loyalty of the offerings/products or company/brand. The affiliation strengthens the connections between the employer-employee and customer and appeals to form a universal corporate culture. All the global brands are living examples of this interconnection. Understanding an employee’s aspirations is not difficult; whether the employee work solely for money or actually workfor passion and utilises best of the time by serving customers and providing them with the best available (possible) solutions. Hence, Islamic principles encourage to serve generously. History of Islamic civilization show many such examples. However, if an employee does not do justice to their work,



Islamic principles clearly imply their compensation as prohibited income for them. Organisations having people-first culture are eager to offer better work environment, as they do realise that happy, satisfied and loyal staff members ultimately leave the customers satisfied and in good will. When working together people either realise their dreams or collaborate to achieve vision of like-minded people. To create an everlasting Shari’a-compliant corporate culture, employer, employee and customer relationship is as important as the other key stakeholder’s interests in the company.

ENTREPRENEURIAL LEADERS A people-focused culture emphasises upon providing solutions to the customers instead of merely dealing with them as matter of routine. Such an entrepreneurial mindset is required to empower banking and financial services in its true spirit. Presently ATMs and chequebooks exemplify entrepreneurial inventions. However, Islamic finance industry inspires to provide financial solutions in a unique style, embodying an entirely diverse experience to all stakeholders. Islamic finance eco-system promotes the creation of an entrepreneurial mind-set within the workforce for the long term sustainability of the industry and personal development of the individuals, especially the millennial talents aspiring. Leadership is all about creating new leaders and driving them towards the vision with zeal and zest. To keep the ball rolling transitional leadership culture is a must. Without accelerating transitional leadership culture, it would be impossible for an organisation to fill the vacuum created at different levels and to find new leaders within the organisation. The entrepreneurial leadership inspires to cultivate a uniquely Shari’a-driven culture. A people-driven corporate culture will always offer empowerment and independence to the respective stakeholders, assuring retention of the talent. An Islamic corporate culture is not confined to employeremployee relationship rather it goes beyond the borders, including the communities. Hence, the Corporate Socially Responsible (CSR) projects are the live wire of Islamic banking and business transactions. In conclusion, the Islamic finance industry is at the crossroads of creating an exemplary Islamic corporate culture for the growing industry and considering best practices in the global marketplace to drive the industry. It is pivotal to have peoplefirst culture with total engagement in an entrepreneurial leadership in the Islamic finance eco-system to experience the shifting paradigm. The Islamic corporate culture can inspire Islamic organisations to become friendlier, keeping high standards of morals with Islamic values.


New York






Expertise in Islamic Investments since 2006

Shari’a Conforming Investments in Global Real Estate with a Sustainability Overlay •

A unique UCITS Fund to invest in publicly traded shares of real estate companies around the world with a sustainability overlay

Investments to adhere to Islamic Principles

Companies are evaluated by a leading rating agency regarding compliance with Environmental, Social, and Governance (“Sustainable”) requirements

Daily liquidity of fund shares Website: • E-mail: • Phone: +1 212 735 9500

This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by EII Capital Management, Inc., its subsidiaries and affiliates. This does not constitute an offer to buy the Fund's securities in any jurisdiction and nor shall there be any sale of shares in any jurisdiction in which an offer, subscription or sale would be unlawful, in any event no securities shall be sold until authorisation has been obtained from the Central Bank or any other regulatory authority. Neither the Fund nor this term sheet has not been approved by the Central Bank and there is no guarantee that the Central Bank approval will follow. The information contained in this document is subject to updating, completion, modification and amendment in final form. Any ultimate sale of units of the Fund will be on the basis of the Prospectus of the Trust, the Trust Deed of the Trust and the application form for the Fund. EII Capital Management, Inc. is an SEC registered Investment Adviser managing Global Real Estate Securities for offshore domiciled clients. EII Capital Management, Inc. does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice.










May the Muslims be united to defend the Muslim holy lands from the banks of the Nile to the deserts of Kashgar1 (Iqbal) International Technology and Economy Institute (ITEI) at Development Research Centre of the State Council of the People’s Republic of China (DRC) and the China Islamic Finance Club (CIFC) organised the 2016 Islamic Financial Cooperation Roundtable in Bejing on December 28, 2016. The event was held to recognise and promote “the Belt and Road Initiative.” It was a strategic event by CIFC that has shown tremendous commitment to promote Islamic finance in China. With the Belt and Road Initiative, the government of China is building partnerships worldwide. Dubbed as the most significant development in the international politics and economics after the Marshall Plan by the USA (1948), the Belt and Road Initiative is deemed as an important development relevant to IBF. Edbiz Consulting and Cambridge IF Analytica was represented in the Roundtable by its Chief Executive Officer, Dr Sofiza Azmi, who spoke on the topic of Islamic wealth management and its growth potential. As an editor of Islamic Wealth Management Report, Dr Azmi is considered as a globally respected expert on Islamic wealth management. Local delegates as well as foreign participants of the Roundtable proposed to develop links with Cambridge IF Analytica and other companies in the HD-Edbiz Group. Other speakers included Professor Nabil Baydoun, Vice Chancellor for Enterprise and University Advancement at Hamdan Bin Mohammed Smart University, Dubai; Mr. Lu Wei, Assistant Dean of ITEI; Dr. Chi Hongtao, Deputy Director of the Centre for International Cooperation at National Development and Reform Commission; Dr. King Guifei, Deputy Director of National Remote Sensing Centre of China; Dr. Liu Naiya, Researcher at Chinese Academy of Social Sciences; Mrs Guo Jing; Mr Moinuddin Malim, Managing Director of AIM; and Mr. Li Weiqan, General Secretary of China Association of Private Equity. It was a well-attended event, and the foreign delegates were impressed by the progress that China Islamic Finance Club had made to promote IBF in China. They appreciated the efforts of Mrs. Huang Lei, CEO of China Islamic Finance Club, who served as the official host. Participants had a warm discussion on leverage on Islamic finance expertise to accelerate the international financing cooperation for Chinese enterprises.

Kashgar is a city in the Xinjiang Uyghur autonomous region in China’s far west. It has been part of the Muslim world before and during the Ottoman Empire.





HEDGING RATE OF RETURN RISK WAKALA BASED ISLAMIC PROFIT RATE SWAP Suleman Muhammad Ali, Head of Products & Segments, Muzn Islamic Banking, National Bank of Oman



A major challenge facing any banking institution is estimating the impact of interest rate movements on its financial standing. In light of such uncertain movements of interest rates, banks can face significant challenges in managing their interest rate risk exposure. These interest rate movements can also affect Islamic banks in terms of rate of return risk. In a system where Islamic financial institutions (IFIs) are operating handin-hand with their conventional counterparts and the practice of benchmarking their products on the market interest rate, these factors could expose Islamic banks to the rate of return risk, which has significant consequences for IFIs’ stability and performance. Rate of return risk is one of the major strategic risks which needs to be managed by IFIs as highlighted by Islamic Financial Services Board’s (IFSB) Guiding Principles of Risk Management for institutions offering only Islamic financial services. The risk is different from the interest rate risk faced by conventional institutions in the sense that as per the underlying contractual agreements between IFIs and their depositors, the returns to the depositors are directly dependent on the actual earnings that the IFIs generate on their assets during an investment period. The rate of return risk leads to the displaced commercial risk. This can be defined as the market pressure on Islamic banks to maintain their profit rates to depositors at par with the competition - along with other IFIs and the conventional banks; despite the fact that actual return on its assets in an investment period are lower than rates distributed to the depositors or would not allow the equity holders to earn their required rate of return.


Most Islamic banks use the concept of hiba to waive their share in the profits to mitigate this risk. This again has commercial ramifications for the Islamic banking entity and erodes the commercial viability of the banking operations. On the other hand, due to market pressures Islamic banks are forced to tow this line to avoid withdrawal of deposits resulting in liquidity risks. This becomes more pronounced given the long term nature of Islamic banking assets. IFSB advises the following guiding principles for managing the rate of return risk: •

Principle 6.1: IIFS shall establish a comprehensive risk management and reporting process to assess the potential impacts of market factors affecting rates of return on assets in comparison with the expected rates of return for investment account holders (IAH).

Principle 6.2: IIFS shall have in place an appropriate framework for managing displaced commercial risk, where applicable.

Along with other recommendations, the IFSB Guiding Principles encourage Islamic banks to adopt the following strategies for minimising the exposure to the rate of return risk: •

determining and varying future profit ratios according to expectations of market conditions;

developing new Shari’a-compliant instruments; and

issuing securitisation tranches of Shari’a permissible assets.



INNOVATIVE MECHANISM FOR ISLAMIC PROFIT RATE SWAP INSTRUMENT BASED ON WAKALA ISTITHMAR Currently one of the favored instruments for conventional finance entities to hedge against interest rate risk is to use the Shari’a non-compliant interest rate swap; which of course Islamic banks cannot use. On the other hand, an Islamic



alternate of profit rate swap based on commodity murabaha has been used whereby both the counterparties make a wa’ad to enter into a series of commodity transactions to achieve the result of profit rate swap and hedging. However, the major forms of international commodity murabaha prevailing today have been criticised by a number of scholars on Shari’a grounds; including the Islamic Fiqh Academy (IFA); and termed as organised tawarruq. Hence, commodity murabaha together with the use of bilateral wa’ad makes the structure even



more critical on Shari’a grounds. What is more, increasing number of regulators are taking steps to restrict the use of commodity murabaha in their jurisdictions. In line with IFSB’s guidelines on developing new instruments; the following sections propose a new method for Shari’a-compliant hedging of profit rate based on the concept of wakala istithmar (investment wakala) and without the use of the controversial commodity murabaha. A wakala istithmar refers to a method whereby IFIs manage funds on behalf of clients through the provision of agency (Wakala) services in return for specific fund management fees, which are pre-agreed and do not vary based on profit and loss from the relevant funds. The fees can be fixed or a percentage of invested assets. Wakala istithmar is now popular in Islamic financial transactions and has been applied in various structures of Islamic banking and Islamic capital market.



A base case is used to explain this in more detail. Suppose ABC Islamic Bank has provided a $100 million financing under a 5 year ijara period to a customer under a fixed rate of 10%. The Bank keeps the financing on its books for the first year and earns the agreed return. From the following year, the ABC Islamic Bank foresees increase in market benchmark rates and hence runs the risk that if the market benchmark profit rates (i.e., KLIBOR) increase to 12% the Islamic bank will be locked with the 10% return over the five year period. Given that the Bank has many fixed rate financings on its balance sheet, the bank runs a significant rate of return risk and displaced commercial risk if the market profit rates for depositors are inelastic or increase with the benchmark rate. Hence, the bank needs to hedge this risk by swapping its fixed profit rate into a variable profit rate with a party that is willing to do the opposite based on its reading of the market.

other. Since both parties will be investing in equal amounts with each other, the net outflow of each entity will be zero.


Hence, ABC Islamic Bank will receive a variable return according to its targeted benchmark equal to 12% and not as per the fixed rate under ijara.

ABC Islamic Bank can achieve the above purpose through the wakala istithmar structure. Under this structure, ABC Islamic Bank acting as muwakkil will enter into a wakala transaction with another Islamic bank/Islamic window/financial institution/takaful fund (hereinafter referred to as ‘FI’) with Islamic assets of equal value to the outstanding ijara for the purpose of this example is $100 million). Under wakala, the wakil (i.e. the FI) will agree to invest the funds of ABC Islamic Bank in identified pool of assets to earn a return equal to the benchmark KLIBOR+2 for four years for the profit to be paid annually.

Assuming that in the third year the market profit rates fall and KLIBOR touches 8% mark; with this rate KLIBOR +2 = 10%. On the profit payment date the following shall be the situation:

Similarly, the FI providing this hedging facility shall also agree to invest as muwakkil $100 million with the Islamic Bank at a fixed rate of 10% (same rate of ABC Islamic Bank’s ijara facility) under the wakala contract. Hence, both parties will execute the wakala investment contracts of equal value with each



Now assuming that in the second year the market profit rates rise as forecasted by the Islamic Bank and KLIBOR touches the 10% mark; with this rate KLIBOR +2 = 12%. On the profit payment date the following shall be the situation: 1. ABC Islamic Bank will receive a return of 10% under its initial ijara financing. 2. The FI will have to pay a return at 12% to the Islamic Bank under the 1st wakala. 3. ABC Islamic Bank will have to pay a return at 10% to the FI under the 2nd wakala. 4. Payments under point (2) and (3) will be set off and the Islamic bank will receive 2% return from the FI.

1. ABC Islamic Bank will receive a return of 10% under its initial ijara financing. 2. The FI will have to pay a return at 10% to the Islamic Bank under the 1st wakala. 3. The Islamic Bank will have to pay a return at 10% to the FI under the 2nd wakala. 4. Payments under point (2) and (3) will be set off and there will be no payment by either party.


Now assuming that in the fourth year the market profit rates fall KLIBOR touching the 6% mark; with this rate KLIBOR +2 = 8%. On the profit payment date the following shall be the situation: 1. ABC Islamic Bank will receive a return of 10% under its initial ijara financing. 2. The FI will have to pay a return at 8% to the Islamic Bank under the 1st wakala. 3. ABC Islamic Bank will have to pay a return at 10% to the FI under the 2nd wakala.


versions of Interbank Master Wakalah agreements. The same standardised contracts with minor modifications can be used to standardise the structure and operational procedure for this wakala istithmar based Islamic profit rate swap mechanism. All Islamic banks and Islamic finance standardisation bodies such as IIFM are encouraged to use this structure as an Islamic alternate to profit rate swap post approval from their respective Shari’a Boards. The views and opinions expressed by the author in this article are author’s personal and must not be construed as the opinion and views of Muzn Islamic Banking – National Bank of Oman.

4. Payments under point (2) and (3) will be set off and the Islamic Bank will have to pay 2% return to the FI. Hence, the Islamic Bank will receive a variable net return of 8% equal to the benchmark of K+2. Through the above mechanism, ABC Islamic Bank has successfully managed to swap its fixed profit rate for a variable one. Depending on their readings of the market and monitoring processes, Islamic banks can apply this mechanism to their profit rates from fixed to variable or vice versa. The corresponding party providing the hedging facility can charge a fee for this facility in the form of a fixed wakala fee. The solution requires that both counterparties have Shari’acompliant assets to create a wakala pool. This will not be a problem since even most of the conventional banks and takaful companies also now hold Islamic assets in the form of sukuk, Islamic syndications, equity shares and units of Islamic mutual funds. The structure based on wakala istithmar is widely accepted in terms of Shari’a; with majority of the Islamic banks already using the concept on their liability side of the balance sheet to generate call and long term deposits. Even in terms of operational implementation, the structure is more effective as compared to the commodity murabaha based structure due to the following reasons: a) Involves only the two parties concerned and not the numerous commodity; b) The transaction can be executed locally and does not require to be processed through the international commodity exchanges; c)

Less documentation; and

d) No requirement of multiple Wad or undertakings.

GLOBAL STANDARDISATION AND IMPLEMENTATION Although wakalah istithmar either in short term or long term investment has been adopted widely in Islamic banking and financial transactions as well as Islamic capital, more innovation and standardisation is needed. The International Islamic Financial Market (IIFM) has finalised the standardised








Professor Nabil Baydoun Vice Chancellor for University Advancement, Hamdan Bin Mohammed Smart University

The One Belt, One Road initiative has become central to China’s evolving role in the global economy. This initiative is part of China’s ambitious strategy to target the economies along the “one belt, one road”, which account for approximately 63% of the world’s population and 29% of global GDP. As China is rebuilding its Silk Road trade links with Asia and Europe, strong ties are expected to cover the world’s main centres of Islamic finance - the Middle East and Southeast Asia, where Shari’a-compliant assets account for as much as a quarter of total banking assets. The growth potential of Islamic finance in China is huge given the country’s 1.3 billion population. Even if we take a more cautious and pessimistic view of the demand for Islamic financial services; 2% Chinese Muslim population makes a 26 million untapped market.




ONE BELT, ONE ROAD The One Belt, One Road (OBOR) refers to twin initiatives covered by the Silk Road Economic Belt and 21st Century Maritime Silk Road, a development strategy of the Chinese government aimed at promoting economic co-operation among countries along the proposed five routes, connecting Asia, Europe and Africa. The Silk Road Economic Belt focusses on: (1) linking China to Europe through Central Asia and Russia; (2) connecting China with the Middle East through Central Asia; and (3) bringing together China and Southeast Asia, South Asia and the Indian Ocean. Meanwhile, the 21st Century Maritime Silk Road, focusses on using Chinese coastal ports to link China with Europe through the South China Sea and Indian Ocean; and connect China with the South Pacific Ocean through the South China Sea. The OBOR’s initiatives extend beyond physical connections as it aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural cooperation. It also offers China a gateway to use Islamic finance to build business relationships and foster increased cooperation on infrastructure projects with the Middle East and the Muslim-majority Southeast Asian and African countries. Once completed, OBOR is said to impact some 4.4 billion people and generate trade beyond US$2.5 trillion.

Source: Xinhau



UAE AND CHINA’S THRIVING PARTNERSHIP During the past decade, trading between China and Middle East has increased considerably. China is the largest importer of oil from the Gulf region and OPEC’s share of China’s oil imports is increasing. Trade between the UAE and China increased fivefold to register a growth rate of 395% over the past 10 years. The GCC governments see the more influential China as a source of growth vis-à-vis the United States and Europe. As China expands its economic influence in the Middle East, Islamic finance will gain more prominence in China and open doors for Chinese companies to tap on Islamic finance capital markets. This will only have a positive influence in developing Islamic finance in China. Both the “One Belt, One Road” initiative and the recent initiative by H.H Sheikh Mohammed bin Rashid (Vice President of the UAE and Ruler of Dubai) of making Dubai a “global capital” of Islamic economy; are together paving way for Islamic finance to contribute to China’s ambitious economic plans. The essential logic of Islamic funding is compelling for China as the country’s capital needs are growing exponentially. Dubai with its excellent Islamic finance infrastructure provides China a gateway to access liquidity from the Middle East, North Africa and sub-Saharan Africa. Dubai is now the world’s largest center for sukuk with listings of US$36.71 billion taking over Malaysia as the world’s leading center for international sukuk listings. Nasdaq Dubai currently lists about US$55 billion in bonds and sukuk.

As China turns to Islamic finance to expand its economic clout, the “One Belt, One Road” could be the much needed boost for Islamic finance.



In 2016, the China Construction Bank (CCB), one of the largest listed banks in the world, listed a US$600 million bond on Nasdaq Dubai. The listing supported the expansion of CCB’s commercial and financing activities across the Middle East. With this recent listing, CCB became the fourth Chinese bank to list a bond on Nasdaq Dubai. This is an indicative of the expanding economic ties between Middle East and China. Various events and transactions have formed strong foundations for Islamic finance to contribute to China’s economic plans. The events are depicted in the infographic that looks at the development and status quo of Islamic finance in Greater China Region including Hong Kong SAR, Mainland China and Taiwan. The opening of the Chinese banking sector to foreign banks in 2006 encouraged several banks to utilise Islamic financial instruments to fund infrastructure projects. Since 2006, seven sukuk with a value of US$5.8 billion have been listed on the Hong Kong Stock Exchange including two renminbidenominated sukuk issued by Khazanah Nasional and Axiata. Hong Kong’s intention to develop itself as an Islamic financial hub in the East was first mooted in 2007 by the then Hong Kong SAR chief executive, Donald Tsang who identified the introduction and development of the Islamic bond market in Hong Kong as a key government initiative. In the same year, Hang Seng Bank launched Hong Kong’s first Shari’a-compliant retail fund. In the following year, Hong Kong’s first Shari’a-compliant syndicated loan for Noble Group raised US$80 million. Hong Leong Bank became the first bank to launch Islamic banking in Hong Kong in 2008, offering innovative Shari’a-compliant wholesale and investment banking solutions. This was also the year that saw Polaris collaborating with DBS Group to start an exchange traded fund that tracked the MSCI Taiwan Islamic Index. The index contains about 60 stocks listed on the Taiwan Stock Exchange. In 2009, the Hong Kong Monetary Authority signed a memorandum of understanding with Bank Negara Malaysia to promote Islamic finance. In Taiwan, the Taiwanese Stock Exchange Corporation established exchange-traded funds with Abu Dhabi Securities Market and the Dubai International Financial Center and established a Taiwan Shariah Index. China was admitted to membership of the Islamic Financial Services Board in 2009 and since then Islamic finance has been gaining prominence as a channel for the country to expand its economic influence. A significant development came from Mainland China in October 2009. With encouragement from the China Banking Regulatory Commission (CBRC), Ningxia Hui Autonomous Region took the lead in spearheading Islamic financial





services in China. Ningxia, in the north-west of China, is an autonomous region where 35% of the population is Muslim. Bank of Ningxia became the first bank with Islamic finance windows to offer Islamic banking services in Mainland China. However, the Islamic finance windows at Bank of Ningxia are currently offering basic Islamic banking services containing safe custody current account, Restricted Investment Account (mudaraba), and cost-plus (murabaha). In 2011, Khazanah Nasional, the investment holding arm of the Malaysian government, succeeded in issuing Hong Kong’s first yuan-denominated sukuk of 500 million yuan. This was also the first sukuk issued in RMB. The issuance attracted investors from Malaysia, Singapore, Hong Kong, the Middle East and Europe. In the subsequent year, Malaysian telecommunication firm, Axiata, launched the first corporate yuan sukuk in Hong Kong, raising 1 billion yuan. In the same year, Bank Muamalat Malaysia and Bank of Shizuishan of China agreed to offer Islamic banking products through the Chinese bank branch network of 23 branches. An ordinance was passed by the Hong Kong government in 2013 to create a level playing field for Islamic finance through equalising the tax treatment of sukuk with conventional bonds. The Loans (Amendment) Bill 2014 followed the introduction of the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013. Hong Kong once again made headlines in 2014, when it successfully raised US$1 billion sukuk with a 5-year tenor, making the world’s first dollar-denominated sukuk originated by an AAA-rated government. This reaffirmed the city’s ongoing commitment to develop itself as a regional hub for Islamic finance. Also in the same year, RHB Asset Management launched an Islamic


fund for public investors whilst the RHB Capital (RHB Banking Group) expressed its intention to establish an Islamic banking operation in Hong Kong and China. Ningxia Halal Food International Trade Certification Centre became the first halal certification body in China with the approval of the Certification and Accreditation Administration of the People’s Republic of China. Chinese consumers spending on food and beverage is projected to grow by a Cumulative Annual Growth Rate (CAGR) of 11% to reach US$1.5 trillion by 2020. Of this aggregate, China’s estimated 26 million Muslims contributed around 0.1% or $10 billion, according to estimates released by the State of the Global Islamic Economy 2015/16 report. In the following year, Qatar International Islamic Bank (QIIB) and QNB Capital signed an agreement with Chongqingbased Southwest Securities to develop Shari’a-compliant financial products. Besides helping Southwest Securities to access investor markets in Qatar and the Middle East, the agreement would allow QIIB and QNB Capital access to the Chinese market for financing and investments. In addition, the Industrial and Commercial Bank of China - China’s largest bank by assets, signed a deal with the Islamic Development Bank (IDB) to develop Shari’a-compliant banking products in China and the 52 IDB member countries. In early January of the same year, the Chinese government announced plans to accelerate 300 infrastructure projects valued at US$1.1 trillion or 7 trillion yuan. This bodes well for the sukuk market as sukuk are seen as well-suited for infrastructure financing. To further promote Islamic finance in the country, the China Islamic Finance Club in Beijing was



established by Zishang. This is the first platform for various agencies from China and the Middle East to cooperate in Islamic finance. The 1st China-UAE Conference on Islamic Banking and Finance was held in 2016 under the theme ‘Islamic Banking and Finance: Perspectives, Challenges and Sustainable Impact’, and organised by Hamdan Bin Mohammed Smart University’s (HBMSU) Dubai Centre for Islamic Banking and Finance and Dubai Islamic Economy Development Centre (DIEDC). This conference was organised in cooperation with China Islamic Finance Club and ZhiShang Intercultural Communication, in partnership with Thomson Reuters. The event gathered senior decision makers, experts, leaders, and researchers specialising in Islamic banking and finance from the UAE and China to discuss current emerging trends and challenges in the industry today as well as tackle joint collaborative opportunities to globally promote Islamic economics to the “one Belt one Road strategy”.

CHINA GEARS UP FOR ISLAMIC FINANCE Islamic finance has the potential to contribute to China’s economic plans in several dimensions. Its emphasis on assetbacked financing and risk-sharing feature means that it could provide support for small and medium–sized enterprises, as well as infrastructure projects. Based on the principles of risk-sharing, Islamic finance poses less systemic risk than conventional finance. However, various challenges still need to be addressed before the true potential of Islamic finance industry in China can be fully realised. As Islamic finance industry is not meant to serve only Muslims, measures to attract non-Muslims is required in order to gain a larger foothold in the country. Given the country’s 1.3 billion population and with recent approval of 300 infrastructure projects; the growth potential of Islamic finance in China is huge as the projects are valued at US$1.1 trillion or 7 trillion Yuan. While China recently, allowed local governments to sell bonds directly to refinance debt following a two-decade ban, the country will need to make more regulatory changes to promote Islamic finance. First and foremost, Islamic finance should be on an equal footing with conventional finance in China. Local laws and tax regulations need to be modified to permit Shari’a-compliant investments. This requires cooperation between central and local government. China is a huge nation that has been experiencing unprecedented growth over the past few decades – an average annual GDP of well over 10%. As China turns to Islamic finance to expand its economic clout, the “One Belt, One Road” could be the much needed boost for Islamic finance. In the very famous words of Napoleon Bonaparte:

“China is a sleeping giant. Let her lie and sleep, for when she awakens she will astonish the world.” Napoleon Bonaparte

“China is a sleeping giant. Let her lie and sleep, for when she awakens she will astonish the world.”





ISLAMIC ECONOMICS, BANKING AND 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). We issued Note 1 on murabaha in August 2016 (“ISFIRE Note 1 on Murabaha”), which was followed by Note 2 on salam (“ISFIRE Note 2 on Salam”) in October 2016. The Note 3 on mudaraba (“ISFIRE Note 3 on Mudaraba”) was issued in December 2016. In this issue, we are reproducing all the previous 3 notes along with our Note 4 on ijara (“ISFIRE Note 4 on Ijara”). We believe that standardisation of notation will help develop consistent pedagogical tools to be used for education and training in IEBF.

Note 1: 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 X i; and

Rebate amount = b X j

whereby X i = amount outstanding at the time of default; X j = amount outstanding at the time of early settlement date; and 0 ≤ a ≤ 1 and 0 ≤ b ≤ 1.


Note 3: Mudaraba 1. (A.K.B; ∏, ; -∏, 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 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 = 1. 2. (A.K.B; ∏0 , ; ∏1, 0; -∏, 1; T) is a mudaraba contract that stipulates that the capital providing party (Party A) will receive 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 loss, -∏, A shall have to bear it with = 1.

5. (A.X[1].B; PMUR, ∏MUR, PMUR IK, 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, PMUR IK 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 .

3. If a mudaraba contract is notated with (A.K.B; , T), it shall always be deemed as a short version of (A.K.B; ∏, ; -∏, 1; T).

Note 2: Salam

1. (A, X, B; R = r1+r2+…+r t, 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, …, r t, for a period of T.

1. (A.X.B; PSAL|T0 , T) 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 T or on a specific date at the end of T. 2. ([A.X.B; PSAL1|T0], [B.X.C; PSAL2|T1], T) 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 T or on a specific date at the end of T. 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 T or on a specific date at the end of T. 3. (A.X.B.X.C; PSAL1|Ti , PSAL2|Tj , T) represents a threepartite 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.

Note 4: Ijara

2. (A, X, B; R = r1+r2+…+r t, 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 instalments of r1, r2, …, r t, 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 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. 3. (A, Y, B; R = r1+r2+…+r t, T) represents an ijara mausufa fidzimma 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, …, r t, 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. 5. An ijara contract notated with (A, X, B; R0, T) shall imply that the rental amount is required to be paid in lumpsum 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.




NIZAR AL SHUBAILY Islamic Finance Expert

Nizar Al Shubaily has had an illustrious investment banking career with the likes of Deutsche Bank, NCB and Shamil Bank, before setting up his own asset management business. Nizar has now retired from financial services but continues to enjoy life and the good things about it. He is our youngest retired ISFIRE Personality.

What was your earliest ambition? Growing up I never had any great ambition. I have always focused on accomplishing short-term tasks and building on small successes. I always hoped that I would do no harm and perhaps in some way I would contribute something however small to the world.

If I had to pick one (western movie) then it would be “The Wings of Desire” directed by Wim Wenders. Mere description would not justify it, it has to be seen.

What do you enjoy the most?

I have had many mentors. Many have been kind to me and have taken me under their wings and have taught me a lot. I have also had negative mentors who were not very positive. But one learns from hardship as well.

I enjoy travelling to a new city, especially when it’s an old historic city. I love walking in the streets and imagining history on the same pavements I’m walking on. They say the anguish and victories of souls are still stamped on the stones, and sometimes I almost believe that I can feel this as I walk in a city.

You earned name for, among other things, structuring of Islamic financial products. What took you into Islamic banking and finance? I fell into banking by accident. An industry I must admit I didn’t like very much. To absolve myself of sins, I followed my heart to Islamic banking. It alleviated the guilt of not doing anything useful and was very stimulating intellectually. I hoped that my contributions would somehow strengthen an industry tied to my faith.

Now that you have luxury of an early retirement, what do you do in most of the time? I love reading and walking. Both are exercises, one for the body, and the other for the mind. I also travel to new places, where I love to see the day-to-day life of ordinary people. I always discover that ordinary people are actually quite extraordinary.


Which movie is your all-time favourite? [if you watch movies]

Who has been your greatest mentor?

Where are you the happiest? I’m happiest when I travel to a new city and walk around its streets, never knowing what’s around the corner, and remembering the history that has taken place on the same streets I’m stepping on.

If your 15 years old sees you today what would he say? He would probably ask me what pitfalls to avoid, and what important aspects of life he should concentrate on.

In a few sentences describe your 65 years old. I hope he would be able to be happy and healthy. I hope he would be able to say he did his best. And I hope he would be ready to meet his Creator.

Any disappointment in life? Many disappointments. One would not be human if one didn’t have any regrets. It’s all really summarized in one statement: Did you do your best to reach the potential God gave you?




Islamic Market Intermediary DDCAP Group’s award winning Sharia’a compliant 24/7 financial technology Part of the DDCAP Group

DDCAP Limited

Copyright © 2011 Hayes Davidson / Nick Wood

Positions itself as an intermediary in the Islamic Financial Services Industry providing structuring support, trade execution and value-added services to its global clients DDCAP holds a unique market position as facilitator across a diverse range of Sharia’a compliant products, asset classes and instruments in both the Islamic primary and secondary market

DD&Co Limited Asset and Commodity Facilitation

DDGI Limited Transactional Solutions Direct Investment

DDCAP Limited

DDCAP (DIFC) Limited

8-10 Grosvenor Gardens London SW1W 0DH United Kingdom

Suite 39, Level 3 Gate Village 4 P.O. Box 506683 Dubai, United Arab Emirates

t: +44 207 863 1250 e:

t: + 9714 401 9844 e:







GLOBAL FINANCIAL SERVICES INDUSTRY? Every new social, political and economic phenomenon takes about 20 years to get established. It takes another 30 years to either achieve excellence or go into oblivion. The next 30 years see its complete dominance if it has already survived in the preceding years. Citing the Russian Revolution and emergence of the USSR in 1918-20, within 20 years the socialist regime had direct or indirect control over territories in Asia and Europe. Within 50 years of its origin, it became a well-established governance system that has survived to date, albeit with major changes and modifications. A more recent example is that of the IT1 Revolution that has its origins in the 1940s. Although it impacted businesses in the 1970s, a full blown impact to businesses and households only occurred in the 1990s. Today, it has changed the whole spectrum of human lifestyle. Since Islamic banking and finance (IBF) is just over 40 years old, it is left with another 10 years to achieve excellence in the financial services markets. The 30 years from 2025 will determine whether it can make any meaningful impact on the global financial services industry and the national financial services markets where it has achieved critical mass. An optimistic view on IBF would lead to a distinct Islamic financial lifestyle that has yet to emerge.

Professor Humayon Dar

In the first 20 years (1975-95), we saw the emergence of Dubai Islamic Bank, Kuwait Finance House, Al Baraka Bank, Bank Islam Malaysia Berhad and the likes, which continue to play important roles in the industry. Interestingly, the largest Muslim countries such as Pakistan, Indonesia and Turkey hardly featured in the first 20 years of IBF. During the next 20 years (1996-2015), IBF gathered momentum and the industry grew significantly but not sufficiently to make a real mark on the global financial services industry. It attracted almost all the big players in financial services (making it an inclusive phenomenon) but nearly all of them retrieved and cut down their involvement in IBF gradually and in some cases abruptly. Consequently, IBF is emerging as a pan-Islamic movement, with decreasing involvement of Western conventional financial institutions. Impressed by this, some of the industry pundits are blowing the trumpet on the need for IBF to be more inclusive by changing even its nomenclature to attract more participation from non-Muslims and conventional financial institutions. Suggestions of changing the nomenclature, however, is at best naïve if not completely ill-conceived. The Islamic financial services industry must come up with a collective strategy to

1) IATA defines information technology (IT) as, “The study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware.”




grow with a global impact, rather than just changing names here and there.

of attempting to make Islamic banks look like conventional banks and asking Shari’a scholars to sit on back benches.

The scope of advocacy platforms for IBF must also be enhanced to ensure that major global players like the World Bank, International Monetary Fund (IMF), the Organisation of Islamic Cooperation (OIC) and similar multilateral organisations are engaged in a policy of debate in a meaningful way. It must be acknowledged that all the above organisations have been involved in IBF in different capacities. For example, the World Bank set up a Global Islamic Finance Development Centre in Istanbul in 2013. The IMF has also attempted to remain engaged with Islamic finance, and in this respect it has constituted an External Advisory Group comprising heads of industry-level organisations like AAOIFI and IFSB and some others.

I am hesitant to accept that IBF has perhaps already missed the train, and that Muslims will lose another great opportunity for the revival of the Islamic renaissance. Political Islam (or what some people would rather more adequately like to call political Islamic movements) has already failed to achieve its objectives in the last century or so. If Muslims do not assume full control of leadership of IBF, they face danger of letting it fade into oblivion2 . Worse, if IBF continues to prosper but ends up as a younger sister of conventional banking and finance.

All these are important developments but not significant enough for someone to claim that IBF has developed with an impact. Next 10 years, therefore, will determine whether it emerges as a force to be reckoned with just or another fading phenomenon. Mainstream relevance of IBF with weaker Shari’a spirit and Islamic identity will certainly be a failure. IBF must attempt to enhance its role by further strengthening its Islamic identity and by bringing Shari’a to the forefront of its business instead

If IBF wishes to remain relevant to the needs of Muslims around the world, it must develop a framework with clear targets. By some estimates, there are no more than 100 million Muslims out of the 2 billion population that are presently being served in one way or the other by Islamic financial institutions – merely 5% of the global Muslim population. The remaining 95% Muslims are either not interested or are not being offered Islamic financial services. For IBF to create an impact, it must target 5 countries with Muslim populations of 100 million or more in the next 10 years. This is what I would like to call a 5x10x100 strategy for growth of IBF with an impact. It is not difficult to guess which countries I am referring to!

2) Given the importance of leadership-related issues in IBF, our annual publication – Global Islamic Finance Report (GIFR) – has once again chosen leadership in IBF as its main central theme for the 2017 edition. This follows a previous edition of 2014, which also centred around the same theme.




August 13 - 18, 2017 Clare College, Cambridge

Leadership Workshops

Leadership Interviews

Leadership Activities

Cambridge Cases

Leadership Talks

Social Activities

The Cambridge Islamic Finance Leadership Programme (Cambridge-IFLP) aims to prepare the next generation of outstanding leaders in Islamic banking & finance by providing them with unique mentoring opportunities, rigorous leadership training from renowned leaders, and industry- specific perspectives through case studies specifically written for this programme. Get in


Email: Register:


Innovative Islamic finance solutions

Volaw specialises in creating and managing innovative Shari’a-compliant financial structures to meet your needs. What do we offer? We We We We

deliver consistency and continuity. nurture our customer relationships. are an independent business. can provide wealth structuring expertise.

Contact us to discuss how we can help you:

Trevor Norman

Director - Head of Islamic Finance & Middle East e: t: +44 (0)1534 500418

Richard Fagan

Director - Wealth Structuring e: t: +44 (0)1534 712438

Winner - Best Islamic Trust Formation Services 2016 Details of the legal and regulatory status of Volaw Group’s members may be found at

Ashley Le Feuvre

Director - Volaw Fund Services Limited e: t: +44 (0)1534 500417


February 2017 Issue