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Symposium delineates Shariah role in banking

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Points of Essence:

  • Saudi National Commercial Bank recently held an Islamic banking event to chart the future direction of Islamic banking where the Shariah mechanism is concerned. It was proposed that there should be a Shariah decree issuing body which subscribe to the general accounting principles and Islamic banking to avoid any untoward conflicts between the principles. Industry players were also called upon to strictly formulate Islamic banking products based on the requirements of Islamic banking. The Saudi Gazette has the report.

By Saudi Gazette Staff

JEDDAH – As part of the National Commercial Bank’s strategy aimed at supporting Islamic banking and rationalizing its plans, the bank recently organized a symposium entitled “The Future of Islamic Banking” attended by a group of Islamic jurisprudents, economists and experts in Islamic banking from in and outside the Kingdom.

Abdulkareem Abu Alnasr, NCB chief executive officer, who inaugurated the event, said the objective of the symposium was to explore Islamic banking and its future especially where Shariah obligatory control is concerned.

He asserted that the symposium reflects the Islamic direction taken by the NCB’s strategy aimed at expanding tools to help this industry develop and grow. The symposium was in keeping with the bank’s path toward Islamic banking.

Abdulrazak Elkhraijy, NCB’s head of Islamic Banking Development Group, said the course of Islamic banking has gone through several stages until NCB managed to convert all its branches into Islamic.

The symposium came up with the following recommendations:
On Fatwa, the Islamic Judiciary Supervisory Committee is the only body to issue Islamic laws and ruling. They are responsible for handing down decree and agreeing on a decision. Whatever the committee decides on has to be carried out by the institution. The participants agreed that differences of opinion are a natural occurrence, hence members of the committee should tolerate them and advice one another without criticizing each other through public channels.

They also agreed that members of the committee should make their decisions according to their overall principles and goals of accounting and supervisory committees for Islamic banking and other judiciary branches.

Contradiction in laws has a negative effect on regional and national levels which weakens social trust in financial institutions and discourages them from choosing Islamic banking over traditional banking.

The symposium recommends that NCB coordinates with related parties to hold discussions to limit disagreements and define cooperative mechanism between religious branches.

On choosing Islamic over traditional banking, participants noted a surge in Islamic banking. They called for more efforts by Islamic committees and Islamic financial institutions to develop a banking model which reveals the true identity of Islamic banking. They must work more to innovate and develop new financial products and tools that follow Islamic laws as well as find and develop Islamic indicators based on Islamic principles that are not mere copies of traditional institutions.

On law changes, they noted that laws brought down by Islamic Committees are based on Islamic principles and objectives and on scholars’ opinions. Hence they should not be changed. In case of a member going back on a ruling, the following should be taken into consideration:

1: If a member goes back on a ruling and the majority maintains its opinion, then the ruling stays.
2: If the majority or all the members decide to change a ruling, it should change. The institution should be given ample time to adjust its system to prevent harm.

On members of Islamic committee’s conflict of interest, the symposium recommends that members of the committee commit to clarity and avoid issues which cause conflict of interest in their relationship with financial institutions. The symposium advises the accounting and review board of Islamic financial institutions to research this issue thoroughly and work towards issuing Islamic regulatory criteria.

On securing application of decisions of Islamic Council, it is recommended that financial institutions must strive to create a whole environment that assures application of Islamic council decisions on the scale of the institution through the following:

– The laws and decisions should include application steps and mechanism
– Establishing internal Islamic supervision specialized in providing complete independence, financial and human support to enable it to perform its duties completely.
– knowledge of policy evidence and procedures and incorporating them into Islamic operation and taking care in choosing employees who are knowledgeable and qualified to train human resources. Those who are concerned with Islamic banking industry should develop and model for external review. Through independent institutes responsible of external audit. Islamic institutions should enable them to perform their jobs as is the case at conventional banks.

The symposium moreover recommended that Islamic institutions and judiciary councils should support efforts to qualify Islamic students, encourage and prepare them to work for Islamic councils.

Source: http://www.saudigazette.com

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Written by Suapi Shaffaii

January 5, 2009 at 12:44 pm

Posted in General Issue

Tagged with ,

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