The International Centre for Education In Islamic Finance (INCEIF), which was established by Bank Negara, has devised three new Islamic financial instruments and is also working on a new set of wakaf laws, which will enable Malaysia to stay ahead in the Islamic financial world.
According to Professor Dr Murat Cizakca, who is a member of INCEIF’s professional development panel and joint director of research, the sukuk and cash wakaf products are 100% syariah compliant, coupled with the dynamics of Western financial instruments.
“I don’t know if it can actually be implemented. Bank Negara is studying them and they will have to decide if it can be used,” Cizakca said after delivering a lecture on the Maqasid Al-Shariat, Rule of Law, Democracy and Capitalism at INCEIF yesterday.
He said Malaysia needed to introduce a new wakaf law, which is 100% syariah compliant and efficient.
“Wakaf is a powerful instrument but the system here is in shambles. It is operating in a system that has been introduced by the British. The Western-inspired system is impeding the wakaf,” he said, adding that the issue was not confined only to Malaysia but also in Turkey.
He added that a new wakaf law was introduced in Turkey in 1967 which gave a boost to the system.
Malaysia, he said, was the forerunner in Islamic finance. “You are competing with the Gulf but because of the better democracy you have here, I have no doubt Malaysia will proceed faster and further,” he said adding that the country also had a healthier and more diversified economy.
Cizakca said although plentiful, existing Islamic financial instruments were not yet “perfect.” He cited the case of sukuk, which obeyed the letter but not the spirit of the law. “The transaction was designed to hide the interests,” he added.
The new proposed products were devised based on comparative financial history, Western financial practices and syariah law, said Cizakca who lectures economic history at the Bahcesehir University in Turkey.
“The challenge is to develop future new financial instruments that are both 100% syariah compliant and as efficient as anything you have in the West,” he said, adding that if such instruments could be developed, Western countries could also be expected to make use of them.
Cizakca said the venture capital instrument, which is based on the mudarabah contract, was widely used in the West especially in the Silicon Valley in the United States. He said the venture capital was an evolution of the mudarabah, based on profit sharing.
He said the West thought they were inventing something new but it was actually a modern version of mudarabah, which had been widely used in India and Europe of late.
Cizakca said if highly efficient Islamic financial instruments could be developed, such products may take precedence over Western ones.