The event featured five distinguished scholars and experts in the field of Islamic finance. They included Prof. Frank Vogel, senior fellow and head of Muslim World Law and Islamic Finance, Institution Quraysh for Law and Policy and Umar Moghul, Partner at Murtha Cullina LLP and co-chair of the firm’s Islamic Finance and Investments Group.
Yusuf Talal deLorenzo, chief Shariah officer at Shariah Capital, Aamir Rehman, managing director at Fajr Capital Limited and Ibrahim Warde, adjunct professor of International Business at the Fletcher School of Law and Diplomacy, Tufts University, were the others.
The panelists addressed a several hundred attendees on the various aspects of contemporary Islamic finance such as its historical legacy, the compatibility of Shariah-compliant institutions with US law, derivative instruments and the development of sukuk in the Gulf, Shariah financial regulation and practice in the GCC (Gulf Cooperation Council) and Islamic finance in the light of the recent financial crisis.
It also addressed Shariah financial regulation, how the rise of Gulf capital is affecting financial markets and how it should be regulated, as well as the compatibility of Shariah institutions with US law and regulation and the objections of Shariah scholars challenging the permissibility of derivatives under Islamic Law.
The discussions were moderated by Jean-Francois Seznec, visiting associate professor at Georgetown University’s Center for Contemporary Arab Studies.
Regarding the question of sukuk in the Gulf, DeLorenzo said ownership is an important issue for Shariah scholars to understand.
“Ownership is always a sticky subject and it is not always a failure of the Shariah advisers when ownership and sukuk is questioned,” he said.
DeLorenzo, wrote the introduction to Islamic bonds, a book that introduced sukuk to the world’s Islamic capital markets as well as a three volume Compendium of Legal Opinions on the operations of Islamic banks, the first English/Arabic reference on fatwas issued by Shariah boards.
One clear lesson, he said, “is the need for more and more diligence on the business side.”
Questioned on whether sukuk is a sound investment, he said there are serious Shariah issues that need to be addressed. “There are tensions between GCC investors and Malaysian investors who have different philosophies in the jurisprudence.”
He said that sukuk need to have a viable trading market.
“We need to confront these issues. The tensions need to be resolved before real trading can take place.
“Sukuk are hybrids, some look like equity, others like debt. They need to be traded and exchanged, and unless everyone understands the rules there will be a lot of confusion in the marketplace and people will leave. There is a need to deal with this sooner than later.”
DeLorenzo’s 30-year career as a scholar of Islamic Transactional Law was a front-page story in the Wall Street Journal in 2007.
“It’s a rules-based business; people need to understand that, whether they’re in Hong Kong or Chicago, and the way to do this is through an exchange of information,” he said.
“Many of the high profile sukuk defaults have taken place as the result of poor business decisions, not Shariah.”
He said the problem was that the “press picks up on a sukuk default and then blames it on Shariah. We need to explain it better.”
The expert said a new generation of sukuk coming to the market also needs to be closely examined.
“My feeling is that the issuers need to be more transparent to investors, and feel the same way about Shariah boards. We need to be careful about managing perceptions.”