Wednesday, January 26, 2011

CORPORATE GOVERNANCE: "Building Blocks of IF - Regulation & Shariah in Perspective", Public Lecture Attended!

On 25th January 2011, Amirul HM attended a Public Lecture held at the Securities Commission(SC) of Malaysia under the SC-UM Visiting Scholar Programme. The Lecture titled " Building Blocks of Islamic Finance: Regulation and Shariah in Perspective " was given by Dr. Volker Nienhaus from Germany.

Points raised were good eye-openers for attending participants. Amongst them:-
1) Are the so-called "Building Blocks" for Islamic Finance - actually "BUILDING" or, "STUMBLING" Blocks?
2) CITIGROUP & AIG - Debate in the USA as to whether they(the US Government) should have supported "Islamists" movement when bailing out Citigroup and AIG as it contained the Islamic Finance operations as well.

3)LOW Retail Penetration. Examples:-
A. UK - After 5years of operations, the Islamic Bank of Britain (bailed out by Qatar), only had 50,000 out of a potential 2.5million customers in UK. Hence, a penetration rate of ONLY 2%.
B. Malaysia - 20% of deposits in the banking system is in Islamic deposits. However, ONLY 20% of the 20% are from private individuals.

4)Disturbing trend of using TRADE contracts (e.g. Commodity Murabaha, Tawarruq are a combination of trade/leasing contracts. Also sukuk) for FINANCING purposes.
5)Growth of IF is driven by NON-Islamic banks offering IF products.
6)Fatwa's change of opinion is NOT documented or, Updated. Thus, edicts are not accessible in this age of Transparency & Corporate Governance.

7)Conflicts of Interest in certain Financial Institution's Syariah Council.Examples:-
A. Brothers or members of the same clan sit in the Council.
B. Syariah Advisors sits on the Syariah Council of banks who are competing in the same market segment and/or competing to launch the same product first.
C. "Closed Door" Club.
Example:- A Syariah Advisor from Bank B2 will sit on the Syariah Council of Bank A1 in exchange for introducing one of Bank A1 Advisor to sit in Bank B2 Syariah Council.
D. Syariah Advisors sits on too many Syariah Council. Realistically, how much time can they spent for a particular institution.

At the end of the session, SC's Managing Director Dato Dr. Nik highlighted the difficulties the SC have been facing in collecting and collating the deliberations of the Syariah Council of the respective financial institution in endorsing or rejecting IF products.

I would like to put on record my appreciation to the Securities Commission-Islamic Capital Market(SC-ICM) and Mr. Wan Rahim for the kind invitation. It is my fervent wish that SC-ICM's invites me to future events and access to all the other Conferences and Forums as well.

1 comment:

  1. e-mail sent on 15/2(6:38 PM) by SW, an old banking friend.
    many interesting highlights!Please continue to build on these blocks!More talks rather than listens now? Also have a lot of good trips in this rabbit year.It is supposed to be year of plenty of hopping.Do shift your gear into the appropriate modes and become the real winner.Regards always.