Читать книгу Contracts and Deals in Islamic Finance - Kureshi Hussein - Страница 10

The modern phase of Islamic finance may have been the brainchild of political ideologists that saw the post–World War II world economic system built on the principles of interest. Efforts were made to develop in theory and in practice an economic and a financial system that did not depend on riba, but any such attempt could only meet with limited success when the currencies of each Muslim country were pegged to the U.S. dollar. The U.S. dollar system is based on interest. Had the Muslim world adopted a more isolationist attitude to international trade the results may have be different, and ironically two economies, China and India, that during the 1970s and 1980s had turned their back on international trade are now leading exporters on the global economic stage.

Nevertheless, the Muslim world developed institutions to collaborate, the first of its kind being the Islamic Development Bank (IDB), which possibly embodies the aspirations of many Muslims in fulfilling the goals of a Muslim society.11 The IDB is unique in that its capital is provided by its member states, which are Muslim countries, and it funds projects related to infrastructure development, poverty alleviation, access to education, and clean water and such. The IDB is dedicated to providing funding on a sustainable basis to various segments of the Muslim world to improve the well-being of the ummah in general. One may think of it as a world bank for Muslim countries. The existence of IDB created a unique problem of providing funds to member countries not on an interest basis but on shariah-compliant basis, and it is likely that within the halls of IDB meetings the first financial products were developed.

Institutions such as Accounting and Auditing for Islamic Financial Institutions sprang up when the idea of offering shariah-compliant financial products took germ as a commercially viable proposition for the private sector to adopt. Since 1971, when IDB was set up, other countries, like Pakistan, Malaysia, and Indonesia, also took the mandate to move their financial systems away from a riba-based structure to a more shariah-compliant alternative. Shariah advisors were placed within central banks and other regulating bodies to come up with a framework for “Islamic Banking and Islamic Insurance.” No other country took this task more seriously than Malaysia, which saw it as an opportunity to become a global hub for Islamic finance. Malaysia is surrounded by some of the major financial and business capitals of the world, such as Shanghai, Singapore, Hong Kong, and Tokyo, cities that are destinations of billions of dollars of foreign direct investment and international capital flows. Malaysia saw an opportunity to be the routing point for the flow of capital within the Muslim world and made great strides in making necessary changes in its regulatory system by acts of Parliament, changes in its taxation system and its legal system to bring Islamic finance in the mainstream of financial transactions. Capital markets were restructured and a methodology of shariah screening of asset classes was developed. The first shariah-compliant index was proposed in Kuala Lumpur.

The Malaysian government funded research institutions to develop the infrastructure of Islamic banking products and also to set up training institutes to train its own bankers and those around the world in what it believed was a viable alternative to conventional banking and insurance.

Bank Negara Malaysia, Securities Commission Malaysia, soon to be followed by Bank Indonesia, and Securities Commission Indonesia made formal announcements of issuing licenses to Islamic Banks, takaful companies, and Islamic asset management companies, and slowly the rest of the Muslim world followed.

Malaysia followed a prudent approach to developing Islamic banks allowing existing banks to first begin with Islamic windows. Windows operations offered customers shariah-compliant asset and liability products as part of a conventional banks framework. The window operation functioned with its own balance sheet, but shared the infrastructure of the conventional bank to save on costs. The Islamic banking window had to have a team of shariah advisors to endorse products and processes. These products had to be approved by a shariah board placed at the central bank. The window operation was phased into subsidiaries, which had to maintain separate economic capital and report separate financial statements. Foreign banks were given the leniency to maintain Islamic banking divisions where a limited product menu was on offer, and capital only had to be lien marked in the bank's balance sheet to fund the assets of the Islamic banking business.

Similarly, changes were made to the capital markets and rules were developed for screening asset classes and for offering shariah-compliant securities and products on the stock exchange. A shariah board at the securities commission was put in place to regulate the issuance and sale of shariah-compliant capital market instruments such as sukuk. Malaysia masterfully maintains a dual-banking system in which conventional banks and Islamic banks operate simultaneously.

Undoubtedly, Malaysia enjoyed the position of being a thought leader in the sphere of Islamic finance and generously shared its understanding of shariah-compliant products and principles not only with the rest of the Muslim world but with the non-Muslim world as well. Institutions such as J.P. Morgan, Citibank, Barclays, and HSBC all have Islamic banking divisions catering to either investment banking or wealth management. HSBC offers the brand of HSBC Amanah and Standard Chartered took pains to develop the brand of Standard Chartered Sadiq. International rating agencies such as Moody's and Standard & Poor's have worked with industry professionals and developed mechanisms of rating shariah-compliant institutions and financial instruments. International fund managers and hedge funds now have in place methodologies of screening asset classes for shariah-compliance for their clients. Dow Jones has in fact developed a shariah index for all the major indices it develops, including FTSE 100 and Nikkei 225 index, the BRIC index, and the GCC index, thus facilitating shariah-minded investors in guiding their capital in a manner that fulfills certain shariah guidelines. In post–September 11 times, for financial institutions to adopt the word shariah in their brochures is quite an achievement.

These are no minor achievements to say the least, but has Islamic banking provided a viable alternative to conventional banking? As many architects of Islamic banking were likely attached to the Islamic Development Bank, there is also a strain of disillusionment that Islamic banking has gone astray, or gone commercial. IDB was and is a public policy institute funded not by shareholders but by governments. Its aim is to fund projects and make a nominal return on the financing provided. The technology of Islamic banking was transferred to the commercial sector, and to compare an Islamic bank driven by the aims of maximizing returns to the IDB is like comparing J.P. Morgan to the World Bank. Both entities exist for different purposes. One can argue that there are not enough Islamic micro-finance banks, or Islamic venture capital firms, or Islamic SME fund houses, but that is not the fault of the concept of Islamic banking. Capital providers or investors must see the light and allocate capital to such enterprises; academics and scholars cannot do so.

Islamic financial institutions therefore offer financial products using shariah-compliant contracts. The “impact” of these products is the same on a client or an investor, in that if an Islamic bank facilitates the purchase of a new car, the beneficiary of the purchase must pay the bank back with profit. There is no free lunch. IFIs rely on the same model of financial intermediation that conventional banks, insurance companies, and asset management companies do, and that is the “pooling of funds.” Islamic banks collect funds from customers using shariah-compliant contracts, and use these funds to finance assets or make investments. The capital of the Islamic bank is not used to fund assets, but is used as a buffer to cushion losses. All profits generated are shared with depositors. Conventional banks absorb losses in entirety, whereas Islamic banks in some circumstances pass on losses to their customers.

Takaful companies also pool in funds of participants. Participants contract to contribute to a pool of funds that will be used to indemnify the participants if they suffer losses from specific events. Participants do not buy insurance policies from insurance companies; they seek to protect themselves and each other against adverse events. In practice no participant in a takaful plan knows any other participant, so such claims may only be interpreted as being cosmetic. Takaful operators are then hired to manage the underwriting process for a fee.

Fund managers also work on a contract of agency or wakalah and are compensated by investors for above-market performance by healthy commissions like in conventional firms. The road thus far shows the Islamic financial services industry converging toward the conventional industry and many critics feel this does not in any way fulfill any broader goals of Islam. Critics have a point, but we leave it up to the readers to determine that during the course of reading this book.

The Islamic financial services industry is built around 16 or so fundamental contracts. We first study these contracts and then later see how they are reengineered or modified to develop financial products. The criticism of the modifications is left up to the reader.