The active product innovation in the area of Islamic finance has expanded to a wider investor base, and this has given the Muslim Ummah more choices of Syariah-compliant products.
One of the key challenges of such innovation, however, is the Syariah compliance issue. In the context of Brunei Darussalam, the Syariah Financial Supervisory Board through the Brunei International Financial Centre, for example, has recently approved 11 Syariah compliant products introduced by banks and financial institutions last year.
This observation was made by Dato Paduka Hj Ali bin Apong, the Permanent Secretary at the Ministry o f Finance, during a talk on Islamic finance matters at the Theatre Hall of the Ministry of Finance yesterday.
Two Islamic finance experts, Sheikh Nizam Yaquby of Bahrain and Dr Muhammad Daud Bakar of Malaysia, also shared their views on “Fiqh al-Muamalat” and modern financial markets particularly those related to Syariah.
He also talked about the investment strategy where a bulk of assets will be invested in Islamic fixed income securities like Sukuk, which will give a fixed income throughout the period.
The income plus capital invested will equal to the initial amount of capital at the end of the period of investment. The remaining capital will be invested in “Islamic Option” through the `Urbun’ mechanism to give investors the potential profit, he said.
Unlike Islamic mutual fund, Islamic private equity fund is invested in non-listed companies and more often that not, the investment is aimed at acquiring the invested companies.
As it leads to ownership of the invested companies by Islamic investors, some tolerance, which is given in screening public listed companies, are not granted in the case of Islamic private equity funds.
All activities such as ‘borrowing’ and ‘investment’ must be fully compliant (unless the scholars give a certain period of conversion). In current Islamic private equity fund, the investment is done as minority investors, which is less than 50 per cent of the total investment, Dr Muhammad said.
Meanwhile, Sheikh Nizam talked about the latest developments in Islamic finance. He sits on the Islamic supervisory boards of several Islamic financial institutions and is an active scholar in Islamic finance.
Sheikh Nizam also advises a number of banks and financial institutions including Abu Dhabi Islamic Bank, BNP Paribas, Dow Jones, Lyods TSB, Citi Islamic Investment Bank E C Bahrain and Standard Chartered.
Apart from keeping Syariah members updated on the latest developments in Islamic finance, yesterday’s talk was aimed at enhancing their knowledge on a number of Syariah issues, which are often raised regionally and globally.
The talk also gave Syariah members the opportunity to be updated on matters related to the Accounting and Auditing Organisation for Islamic Financial Institution (AAOIF).
Among those who attended the talk were Deputy State Mufti Pehin Orang Kaya Paduka Setia Raja Dato Paduka Seri Setia Hj Awang Suhaili bin Hj Awang Mohiddin, Syariah Court Judge Pehin Orang Kaya Paduka Setia Raja Dato Paduka Seri Setia Hj Awang Salim bin Hj Awang Besar, members of Syariah Supervisory Board of Brunei Darussalam, as well as officers from the Attorney General’s Chambers, Ministry of Religious Affairs, Ministry of Finance and financial institutions.