Irshad Ahmad Aijaz is the Shariah adviser for BankIslami Pakistan and is also a member of the Shariah board. He informed The News on the Shariah aspects of Islamic banking and what issues have arisen with its arrival in the financial sector.
Question: When was the concept of Islamic banking introduced in Pakistan and how did it develop here?
Answer: Islamic banking was initially introduced during the time of Zia ul Haq when the theoretical base was provided by a scholar who said that if Musilms wanted to replace conventional banking, then this was an acceptable system. However, when it went into execution it was to be implemented by bankers, and they said practically it was not possible to follow.
At operational level there were lots of problems and then there were policy problems and there was no one at this introduction level with Islamic banking expertise and so a solution could not be found to the issues that arose. Nonetheless, banks went ahead and launched Islamic banking parallel to conventional banking. Then arose the issue that only the name had changed and it was basically the same theoretically and practically as conventional banking methods.
But the attempt failed. However during the Nineties Islamic banking revived again and policy-makers decided that if Islamic banking was given an individual identity and made a separate institution, then it might work and be a success. This is when the concept of a Shariah body to decide on matters such as laws, policies and conflicts was introduced.
The Shariah body initially also had issues such as they being not taken seriously and stronger decision-makers prevailing over them, an example of which is of the Islami Nazriati Council that raised objections but were convinced. Nevertheless, now the Shariah board has powers even over board of directors and can overrule them, and this makes Islamic banking more successful now as there is a strong foundation established to support it.
Q: What are the tasks of the Shariah board and Shariah advisers?
A: For instance, if there is an issue, then the State Bank of Pakistan (SBP) would ask the Shariah board if they approve of it. If they say it’s not permissible, then that would not be implemented. It also makes strategic level policies such as policies for business finance, house finance and reviews the proposals and then gives approval to concepts presented by Islamic banks.
After approval comes the role of the Shariah adviser. When the time comes for implementation, the documentation, agreement, the process of introduction are all checked by the Shariah adviser to ensure that it is in accordance with the guidelines of the Shariah board. The SBP has made it mandatory that every Islamic bank should have a Shariah adviser and it’s a part of the regulatory law.
Q: What if there are disagreements between the Shariah board and advisers? How are the issues solved?
A: If there are disagreements, then several discussions are held by all the board members. The Islamic Fiqh Academy and the Accounting and Auditing Organisation of Islamic Financial Institution are international bodies where scholars and Muftis gather and vote on issues that have conflicting views.
Q: What job opportunities are there in this sector?
A: First of all, a fact that has to be accepted is that Pakistan has worked wonders in this field. Pakistan, Malaysia and Bahrain have an edge over all other countries.
Unfortunately, even then there are many issues with regard to Islamic banking. The most important is that there are no skilled and informed Islamic banking human resources as there is not a single institution to teach Islamic banking, though the SBP is trying its best. There is a Centre for Islamic Economics at Bait ul Mukarram, Karachi.
These are not enough, however. This sector offers many good opportunities, but the right people are lacking.
There is also a wide gap between business people and Shariah scholars which needs to be bridged. This is important because when Shariah scholars bring ideas, business people say it’s not practicable and vice-versa, so we need people who have knowledge of both the fields to bridge this gap which can be done by creating awareness or by practice. Resolution of this issue is critical to the success of Islamic banking.
Q: What problems Islamic banking is facing?
A: A major problem is lack of awareness of Islamic banking among people. Seminars and conferences should be organised to popularise and remove misleading perceptions about Islamic banking. The media should also play its part because it is the easiest mode to reach out to the masses as Islamic banking may be progressing but people are generally not aware of it.