Category Archives: Sheikh Nizam Yaquby

Video: Understanding Shariah Compliance: UFANA Conference 2010, Toronto, Canada

Video: Understanding Shariah Compliance: UFANA Conference 2010, Toronto, Canada

Dr. Aznan Hasan, Sheikh Nizam Yaquby, Mufti Barkatulla and Ustadh Taha Abdul-Basser discuss Shariah compliance issues at the UFANA Conference 2010 in Toronto, Canada.

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Shariah Experts Push for Scholar Certificates

Shariah Experts Push for Scholar Certificates

certification

Leading Islamic finance scholars are preparing the first global certification for Shariah experts, seeking to bolster the industry’s reputation and make it easier for banks to find qualified advisers.

The International Shariah Research Academy for Islamic Finance in Kuala Lumpur will pick a board of regulators by year- end to issue permits for scholars qualified to sit on Shariah boards, said Aznan Hasan, the president of the oversight committee. The scholars decide whether financial products meet the religion’s precepts, including a ban on interest payments.

“We are worried that people who aren’t qualified to be Shariah scholars may enter and become members of the advisory boards as the market flourishes,” Hasan said in an Aug. 30 interview in Kuala Lumpur. “Banks try to search for competent advisers, sometimes they get the right person, sometimes they get the wrong person.”

Attempts to set up an organization with a code of ethics to certify Islamic scholars have been frustrated by differing interpretations of Shariah law across the Muslim world, Madzlan Mohamad Hussain, a partner at Zaid Ibrahim & Co., Malaysia’s largest law firm, said in an interview on Aug. 30. Scholars are now required to have recognized university degrees before they can act as advisers to banks and companies.

The council of scholars at the academy includes Sheikh Nizam Yaquby of Bahrain, Mohammad Daud Bakar of Malaysia and Abdul Sattar Abu Ghuddah of Syria, who were all ranked among the top-10 experts in a 2008 report by Chicago-based Failaka Advisors LLC, an advisory company that monitors and publishes data on Islamic funds.

‘Strengthen Confidence’

Yaquby serves on the Islamic boards of 52 institutions including New York-based Citigroup Inc. and London-based HSBC Holdings Plc. Bakar advises firms such as Paris-based BNP Paribas SA, according to the data.

“The whole idea is to further strengthen confidence by making Shariah scholars truly professional,” Madzlan said, adding that the majority of experts also have full-time careers. “The plan will materialize because there’s a need for it.”

A shortage of scholars versed in Shariah law means they tend to sit on a number of advisory boards simultaneously, which increases the risk of conflicts of interest, according to the Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions, also known as AAOIFI.

‘Common Platform’

“We desperately need an institution that could certify and standardize different Islamic products in the market,” Kaleem Iqbal, a senior executive vice president at Al Baraka Islamic, a unit of Bahrain-based Albaraka Banking Group, said in an interview yesterday from Islamabad. “The banking community will certainly welcome a common platform with a global mandate.”

Shariah-compliant bonds returned 10 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, while debt in developing markets gained 12.5 percent, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows. The Islamic notes rose 1.3 percent in August after a 2.6 percent increase a month earlier.

The spread between the average yield for emerging-market sukuk and the London interbank offered rate narrowed 16 basis points, or 0.16 percentage point, to 385 last month, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.

Global sales of sukuk dropped 13 percent to $10.1 billion so far this year, compared with the same period in 2009, according to data compiled by Bloomberg.

The yield on Malaysia’s 3.928 percent government Islamic note was little changed at 2.72 percent today and dropped 21 basis points from the end of July, according to prices from Royal Bank of Scotland Group Plc. It reached a record-low of 2.63 percent on Aug. 24.

Global Standards

The Islamic finance industry, with $1 trillion in assets, is facing a challenge to develop global standards to attract funds from the world’s 1.6 billion Muslims.

AAOIFI, whose standards have been adopted in countries including the United Arab Emirates and Qatar, is proposing rules for scholars to reduce the risk of conflicts of interest, Mohamad Nedal Alchaar, the secretary-general of the organization, said in an interview on Aug. 5 in Kuala Lumpur.

The guidelines by AAOIFI may address whether Shariah scholars can own shares in the institutions they serve and how many advisory boards they can join, he said.

A centralized regulator for scholars will help increase investment because banks would save time in choosing experts to ensure products meet religious principles, said the academy’s Hasan, who also serves on the Shariah board of Malaysia’s central bank. The institution doesn’t plan to restrict scholars on the number of advisory panels they can join, he said.

“Global regulation is beneficial, be that through a test of fit and proper criteria as to what makes one qualify as a scholar,” Omar Shaikh, a board member of the Glasgow-based Islamic Finance Council U.K., said in an e-mail yesterday. “The challenge will be on the operational execution of this and the acceptance, use by global regulatory bodies.”

Source: http://www.businessweek.com/news/2010-08-31/shariah-experts-push-for-scholar-certificates-islamic-finance.html

–With assistance from Haris Anwar and Dana El Baltaji in Dubai. Editor: Simon Harvey, Shanthy Nambiar.

To contact the reporter on this story: Khalid Qayum in Singapore kqayum@bloomberg.net; Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

Sheikh Nizam Yaquby opposes proposed restrictions on Shariah scholars

Sheikh Nizam Yaquby opposes proposed restrictions on Shariah scholars

Restricting the number of boards religious scholars are involved in would curb growth in the $1 trillion Islamic finance market, says a Bahraini scholar who advises Citigroup Inc. and HSBC Holdings Plc.

The Accounting & Auditing Organization for Islamic Financial Institutions, a Manama-based agency, said in August it’s considering guidelines on scholars owning shares in the institutions they serve and the number of advisory boards they can join, to reduce the risk of conflicts of interest. The top 20 scholars serve on 621 boards globally, said Zawya and Funds@Work AG, a Dubai-based research company.

“Capping the number of boards will be devastating to the industry’s growth,” Sheikh Nizam Yaquby, who was born in 1959, said in an interview in Beirut on Nov. 4. “Sometimes people ask me, are you Superman? How can you sit on so many boards? I tell them it’s hard work.”

Yaquby and Syria’s Abdul Sattar Abu Ghuddah ranked first among the top 20 experts, each serving on 85 boards of Islamic financial institutions, according to Zawya’s report. Yaquby is listed as serving on more than 50 boards, according to data compiled by Bloomberg.

The Islamic finance industry, with assets the Kuala Lumpur- based Islamic Financial Services Board will almost triple to $2.8 trillion by 2015, is struggling to develop global standards and a centralized regulator for scholars. Banks and companies can’t find enough experts to meet demand for new Shariah- compliant products, creating a “bottleneck,” said Khalid Howladar, Dubai-based senior credit officer at Moody’s Investors Service, in an e-mailed response yesterday.

Fragmented Industry

“One scholar advising so many companies doesn’t help make an Islamic product universal,” Kaleem Iqbal, a senior executive vice president at the Pakistani unit of Bahrain-based Albaraka Banking Group said in a telephone interview yesterday from Islamabad. “Unless we adopt a more standardized model, the industry will remain fragmented.”

Islamic institutions typically have their own panels of scholars who pass rulings, or fatwas, to determine that products comply with Shariah principles. Shariah scholars need to be experts on the Koran, commercial law and finance. Yaquby has a degree in economics and comparative religion from McGill University in Montreal.

Mohamad Nedal Alchaar, secretary-general of AAOIFI, said in August that a shortage of experts means they tend to sit on several advisory boards simultaneously. The Bahrain-based agency also plans to address concerns that these scholars’ private companies receive preferential treatment from banks they advise.

‘Conflict of Interest’

“There’s a potential case for conflict of interest, and a case of information leakage or perhaps competition impact,” Alchaar said. “We wanted to address the concerns in an unbiased manner.”

AAOIFI, which has more than 200 members, sets accounting and auditing standards that are used in Bahrain, the Dubai International Financial Centre, Jordan, Lebanon and Qatar, according to its website. The agency said its guidelines have also been used to help frame policy in Indonesia, Malaysia, Pakistan, Saudi Arabia and South Africa.

“What’s key is to create a robust framework in which the industry can thrive and grow,” said Yavar Moini, senior adviser of global capital markets at Morgan Stanley, in an interview in Dubai yesterday. “Clearly scholars’ expertise and representation on Shariah boards are an integral part of such a framework. Placing limitations in this regard will hinder the industry’s growth potential.”

Declining Bond Sales

Global sales of Islamic bonds fell 29 percent to $13.7 billion this year from the same period in 2009, according to data compiled by Bloomberg. Islamic law restricts investors to transactions based on the exchange of assets rather than money alone because interest payments are banned.

Sukuk returned 11.7 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, compared with a 14.5 percent gain in developing markets, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

Pakistan’s central bank requires Islamic banks to appoint one scholar as a “Shariah adviser,” who is barred from serving at other financial institutions in the country, Karachi-based Saleem Ullah, director of the Islamic banking department at the State Bank of Pakistan, said in an e-mailed response yesterday.

“The restriction is aimed at addressing the issue of conflict of interest and giving comfort to the banks regarding confidentiality of their business policies and product structures,” he said. The scholar can advise Islamic banks outside the country.

No Restrictions

Some Islamic banks also have Shariah boards and committees which have between three and seven scholars, Saleem Ullah said. There are no restrictions on how many boards scholars can serve on, he said.

“If a country wants to put a limitation, it is up to them,” said Yaquby. “Countries have to question if there are enough scholars to put such limitations.”

Chicago-based Failaka Advisors LLC, an advisory company which monitors and publishes data on Islamic funds, lists 253 practicing scholars worldwide in its 2008 report. There are now an estimated 600 scholars, said Yaquby. Among the top 10 are Mohammad Daud Bakar of Malaysia and Saudi Arabia’s Mohammed Elgari, according to the report by Zawya and Funds@Work.

The difference between the average yield for emerging market sukuk and the London interbank offered rate was little changed at 341 basis points yesterday, having narrowed 32 basis points since Sept. 30, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. A basis point is 0.01 percentage point.

The yield on Malaysia’s 3.928 percent Islamic note due in June 2015 rose two basis points to 2.71 percent today, according to prices provided by Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed 9 basis points to 384.8, according to data compiled by Bloomberg.

Islamic financial institutions “want scholars who understand finance and banking, and can speak languages,” Yaquby said. “This is not a popularity contest. This is a multi-disciplinary specialization, which is rare to find.”

Shariah scholars roundtable conference

Shariah scholars roundtable conference

From the UFANA Islamic Finance Conference on March 30-31, 2010. Sheikh Nizam Yaquby, Mufti Barakatulla and Dr. Aznan Hasan. Detailed discussion on Shariah standards and regulations, in particular the AAOIFI standards.

Organized tawarruq is permissible: Sheikh Nizam Yaquby

Organized tawarruq is permissible: Sheikh Nizam Yaquby

The use of the organised tawarruq financing structure does not contradict Islamic law, prominent scholar Sheikh Nizam Yaquby said, disagreeing with a Saudi-based ruling to the contrary.

Tawarruq is a key financing structure of the $1 trillion Islamic finance industry.

But whether or not the way it is organised in modern banks contradicts sharia, or Islamic law, has triggered fiery debates between scholars as the industry is struggling with a decline in business during the global financial crisis.

The International Council of Fiqh Academy, a leading industry body based in Saudi Arabia, in April declared organised tawarruq "a deception" that carries elements of interest-based lending, prohibited under Islamic law.

"If proper procedures are implemented and checks and balances are put, then tawarruq is a useful tool and can be used," Yaquby told Reuters in an interview.

Widely used as a financing and liquidity management tool, tawarruq is an asset sale to a purchaser with deferred payment terms. The purchaser then sells the asset, such as a commodity, to a third party to get cash.

Under organised tawarruq, the transactions are organised through banks which are appointed as agents to sell off the asset, in what has been criticised as a mere paper trail circumventing Islamic law and blurring lines between the purchaser and the third party.

Yaquby said centuries-old Islamic finance tools needed to be reconciled with the procedures of the modern banking system.

"All these Islamic finance tools have certain amounts of organization and we must know that (given) modern contracts within the existing frameworks, legal structures, it is very difficult to do something which is not organized," he said.

LOWER TRANSACTION COSTS

Yaquby is globally recognized as one of the top Islamic scholars, and in particular wields influence in the Gulf Arab region, one of the industry’s most important regional centres.

He is listed by consultants Funds@Work as sitting on 46 sharia scholar boards, including at Islamic operations of BNP Paribas, HSBC and Standard Chartered.

Yaquby also said there were hardly any alternatives to tawarruq as a tool to satisfy legitimate financing needs, to which he gave more weight than how it is implemented.

He said the use of a bank in selling assets would help minimise the losses occurring from the additional transaction, which would be higher if the purchaser sold assets himself.

"How can sharia allow something which is burdensome on a person … and not allow something which is organised and well done, and this man who is in dire need for cash will not suffer a lot," he said.

He voiced support for the standards of Bahrain-based AAOIFI — the Accounting and Auditing Organization for Islamic Financial Institutions — which he said provided the necessary checks to prevent the abuse of tawarruq.

Source

London Sukuk Summit: 2008 London Sukuk Summit Awards Honour Islamic Bankers Past and Present

London Sukuk Summit: 2008 London Sukuk Summit Awards Honour Islamic Bankers Past and Present

desk

The Second Annual London Sukuk Summit Awards of Excellence last night honoured a host of regulators and bankers who have contributed much to the Islamic banking and finance movement over the last three decades.

The Awards ceremony was held during the Gala Dinner at the Royal Horseguards Hotel in Whitehall following the opening day of the 2008 London Sukuk Summit based on the theme ‘Gearing Up for UK Sukuk Originations’. The Summit is endorsed by the UK Treasury; UK Trade & Investment (UKTI), City of London Corporation; and the London Stock Exchange.

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Sheikh Nizam Yaquby answers common questions relating to Shariah-compliant halal mortgages

Sheikh Nizam Yaquby answers common questions relating to Shariah-compliant halal mortgages

To what extent do contemporary Islamic mortgages comply with Shariah Law: http://www.bbc.co.uk/religion/realmedia/islam/nizam_shariacomp.ram

How important is it for Muslims that their money comes from permissible (halal) sources:  http://www.bbc.co.uk/religion/realmedia/islam/nizam_halal.ram

Do Sharia mortgages really address the ethical concerns of Muslims about what is happening to their money: http://www.bbc.co.uk/religion/realmedia/islam/nizam_ethical.ram

Will Islamic mortgages lead to greater social inclusion: http://www.bbc.co.uk/religion/realmedia/islam/nizam_social.ram