World Islamic Finance Law Reform?

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It has been undeniably witnessed by the applied world of socio-economy that, ever since 1963 when the first Islamic banking operation began in Egypt, the rapid growth of it had been being counted till today by securing a sustainable place with an achievement of almost 27 % of the total banking sectors across the applied world.

Today, at the commencement of the 21st century we shall satisfactorily be able to observe the well-establishment of Islamic financial industries with almost desirable product offerings, discovery of instruments and adapting innovative/strategic plan to meet the Ummatic need for today and the time ahead.

With the greater world’s appreciation to Islamic banking and financial offerings, it is proudly noted that, about 800 Islamic banking and financial institutions with a growth rate of about 18% p.a. by a total size in its value exceeds USD 1.3 trillions may easily be able to mark the world as a potential Islamic financial component alternative to the existing conventional ones.

Such a growth in Islamic finance is systematically regulated and well governed by Shari’ah justified Legislations, Codes, Decrees, Fatwas (Juristic Opinions) and the collective decisions of ‘Ulema (Islamic Scholars better known as Shari’ah councils).

Today, the market segment of Islamic banking and financial products and regulations are no longer confined within the limited territory, but are in the web of borderless world by having an appreciation from almost all groups of human beings with an utmost dreamed result.

The market mechanisms adapted by the potential marketers are with dynamic strategies and mechanisms of governance to match the applied global phenomena where both Muslim and Non-Muslim are equally participating to market the Islamic financial products with a maximum gear of micro-macro levels. Nevertheless, numerous market risks always await to hinder the smooth progress of the industrial movements, perhaps caused by lack of reasonable Shari’ah justified professional enrichment ought to be exist among the marketers.

These sorts of short comings could easily be overcome with due care and diligence, wisdom and mutual corporate respect and of course with right professionalism by performance supported by Shari’ah standards, Ethical paradigm, regulations and governance.

The promising arena of Islamic corporate application and governance caught the attention from both Muslim and Non-Muslims with equal participation in establishing and offering competitive and sound Islamic financial products. Resulting such a phenomena, besides having almost 300 entities of full fledged Islamic financial providers in to day’s world, almost all conventional potential players are also offering the desirable Islamic financial products through the establishment of segregated windows and divisions respectively by adapting suitable mechanisms of Shari’ah Compliance.

Numerous options as to the Shari’ah justified instruments are in fact applied by the relevant product specialists and technical experts in Islamic financial industries to develop competitive Islamic financial products with innovative culture and dynamic corporate outcomes. As a result, expected almost products considering investors, customers and bankers are designed to pave the right way of Islamic financial industries with utmost competitive achievement. The products are not only to satisfy the retail groups but also corporate levels.

 If such dynamism as to products innovation continues, the growth rate of Islamic financial business, upon considering the historical fact, may reach to 40% to 50 % by the year 2020. But for such an achievement certainly and rationally require rediscovery of mechanisms for the products innovations, culture of products review, review on professionalisms and improving the relevant policies, regulations and governing standard with ethical guidelines as these shall not be denied in any sector in the promising Islamic industrial movement.

Strategic planning for every move of Islamic financial industry is an utmost important to ensure a smooth growth of the industry with successful outcome. Strategic planning shall be consolidated with dynamic actions. For this exercise, it is essential to ensure the existence of right experts be in; Shari’ah, decision making, technical, operational or /and marketing avenues with proper professionalisms and rightful performance justified by Shari’ah Standard.

The modern growth of Islamic financial industry began in Egypt and the Arab world, while Malaysia caught the wave in early 80s and subsequently till today with a rapid gradual development by appreciation with achievement channel through both Muslim and Non-Muslim world, Islamic and Conventional players with utmost recognition by establishing an undeniable fact of growth.

Due to present phenomena of development and dynamic offerings of applied Islamic financial products in Malaysia, Bahrain and UAE play among the top ranking role in the global Islamic financial market. A part from the existing world players the next wave of industrial growth can consciously be predicted from the non-Muslim world with a reasonable participation. Among those countries may be listed like, Singapore, England, Hong Kong, Germany, Canada, Russia, Australia, China, Japan, South Africa and to name others.

 It may be anticipated that, in the next 7 to 10 years time the innovative designed Islamic financial products with required Shari’ah regulatory frameworks may be able to attract almost 60-65% of the total financial industries globally to offer Islamic financial products to both Muslims and non-Muslims with beneficial results.

Trade and finance arranged according to Islamic principles have gained increasing importance. Commercial transactions conducted under Shari’ah principles form a significant portion of international commercial activities today. The Shari’ah standard trade and finance has now developed into an important system operating parallel to the conventional system globally.

Despite this development, quality reference materials on Islamic law of trade and finance are not in abundance. My book “Applied Islamic Law of Trade and Finance” provides a clear and practical exposition of the current Islamic law of trade and finance. Comparison with civil law highlights the differences between the systems and greatly assists in the understanding of both systems. Regular quotation of Qur’anic verses and prophetic tradition with English translation, sets out the religious foundation underlying the applicable Islamic law of trade and finance in practical reality.

This book in fact, covers topics such as commercial contracts, sale of goods, partnership, stock market, Islamic currency, Takaful and the institution of Zakat. Islamic finance practitioners, bankers, lawyers, business owners and their financial and legal advisers may gain valuable information on the Islamic law of trade and finance with practical solutions.

Islamic finance has grown exponentially in the last few decades and has reached over 70 countries around the world. The Islamic financial system today comprises a sizeable asset base and there is evidence of sustained demand for Islamic financial products and services in the global market, with demand outstripping supply.

My forthcoming title “Applied Islamic Finance” provides a new source of reference to aid the understanding of the laws and practices of Islamic finance from a global perspective. Besides providing an overview of the regulatory structure overseeing the Islamic financial system, the book discusses the sources of law and the applied principles of Shari’ah governing Islamic financial instruments, products and policies. An entire chapter is also devoted to surveying the laws of several countries in the Muslim world that govern Islamic financial institutions.

As Islamic finance involves a wide array of global players including borrowers, lenders and their bankers, policy makers as well as legal and financial advisers, harmonization and rationalization are important to foster an efficient and dynamic system. To that end, the book discusses the Shari’ah standard of contemporary financial business, the roles and functions of a Shari’ah advisory body and the impact of fatwa in Islamic financial practices.

This book may be regularly consulted by banking and finance practitioners, in-house legal counsel, business owners, policy makers, participants, players, researchers and persons responsible for the further development of the Islamic financial system globally.
The understanding of Takaful (Islamic insurance) and modern insurance will be greatly enhanced by reading my book “Applied Takaful and Modern Insurance" with regulatory and practical consideration. This book makes available in clear and succinct language the principles and practices of Takaful and modern insurance with comparative treatment.

The comparison of these two systems brings up the differences between and coincidence of both systems to facilitate the better appreciation of the systems, which run in parallel to cover the various risks faced in life and reality today.

The topics covered in this book include subject matter at risk, insurable interest, good faith, insurance contracts, risk management, insurance intermediaries, nomination, beneficiaries, claims, distribution and legal formalities. The contemporary experience in Takaful operation is also discussed and recommendations are given for the future development of the industry in the contemporary world of advance economy.

The book has been useful for the Takaful, Re-takaful and insurance practitioners, business owners, in-house Shari’ah and legal counsel, takaful or insurance advisors and persons responsible for the risk management.
The increasing volume of Shari’ah-compliant business transactions backed by Islamic financial arrangements and the widespread use of the internet and information technology (IT) make a good understanding of Islamic e-commerce law and practices very important. Being a developing area, good literature is not in abundance and it is the aim of my latest book “ Applied Islamic e-Commerce” may meet the need.

This book gives a practical and enlightening account of Islamic law comparing with modern principles as it applies to the field of e-commerce with comparative treatment. Part I of the book sets out the general principles of e-commerce law, which include ethics in e-commerce and the sources of e-commerce law. Part II discusses from the Shari’ah perspective comparing with modern practical matters such as Internet marketing and advertising, virtual stores and payment systems as well as personal rights and the protection of privacy.

The practices of e-commerce law under Shari’ah comparing with modern principles are explored in Part III. These include the components of an e-contract, the principles governing data protection and the concept and practical application of digital signatures. Part IV surveys offences and liabilities in e-commerce, particularly the problem with hackers and torts in e-commerce dealings under Shari’ah comparing with modern principles.

Applied Islamic e-Commerce: Laws and Practices is illuminating and provides valuable guidance from the Islamic law standpoint comparing with modern principles on practical issues, which arise in the conduct of e-commerce. This is certainly a first book produced by considering Shari’ah standard comparing with modern principles that should not be missed by corporate lawyers, finance and business advisors, business owners, in-house legal counsel, marketers, IT professionals and those involve in e-commerce activities in the contemporary business reality across the world.

Indeed, the past of Islamic financial industry had been grown with hardship strategies while the present movement is with rapid achievement through dynamic strategic and smart applications with a potential alternative component to the global conventional players. If such a phenomenon continues, the Islamic banking and financial platform may undoubtedly secure a sustainable place in the world financial growing picture. Provided that, due professionalism, public awareness, review exercise and product innovations are strictly recommended to be observed with sustainable routine.

Furthermore, the dynamic mechanisms shall be discovered with continuous research habit to provide tools for the risk management in all levels of Islamic financial industry along with adequate applications of relevant tools of Information technology (IT) to facilitate in the smooth running of the hi-tech Islamic financial activities with an objective of best and competitive offerings for the present and the Ummah ahead.

'MLM' ? it's true holistic objective with humanity

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The conceptual objective of MLM is: "to create job or income  opportunities for the retrenchment or jobless communities, fresh grandaunts, single parents, low or under incomers & other potentials on socio-eco- humanitarian grounds, besides having an auto-opportunity of building friendly networks, brotherly cooperation & cultural solidarity among the human environment. This ultimately contributes to ease the socio-eco &cultural crisis faced by the families, communities or even by the nation".

The true objective of MLM may be achieved through: "a binary concept with fullest transparencies of every aspect of the transaction and of course its underlying subject matter shall be physically exist in its right legal capacity as to be transferred on a contract of sale".

In contrast, an MLM by selling of membership (by competition but not compliment) on a subject matter by imagination in paper only, may diminish the holistic objective of MLM, which may lead to misappropriation, destruction, threatening to peace & harmony besides giving unacceptable opportunities to some to gain at the expense of others.

Hence, an MLM with holistic approach of mutual cooperation, solidarity & brotherhood for the noble cause of socio-eco-cultural prosperity among mankind, is strongly encouraged by the Divine principles of al-Qur'an: ".......cooperate each other in righteousness & piety, but do not cooperate each other in sin & rancour....." (al-Maidah:02).

Islamic Barter Trading? an auto universal friendship..

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Enrichment of barter trading among the G2G, G2B & B2B may not only contribute to a quality production, standard pricing, fairness in demand & supply and threat to the unjust money laundering, but simultaneously it may pave a holistic way to an auto-universal-friendship with meaningful cooperation, brotherhood & solidarity among the parties & nations participate here in.

All are friendly invited to share your intellectual / professional views, comments, thoughts & recommendations for the common benefits of the global Ummah (humanity) through the following Link:

http://www.linkedin.com/groups/World-Islamic-Barter-Traders-Forum-4051132?home=&gid=4051132&trk=anet_ug_hm

LIBOR & The Reaction of Islamic Finance

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Issue 1: Can we delink sukuk & Islamic banking transactions from LIBOR?*

Comment: Definitely because, LIBOR involves RIBA (Usury), which is prohibited under Shari’ah Principles (al-Qur’an, 2:275). Sukuk as well as Islamic banking deals expressly oppose the element of Usury in any component of their operations. Thus, no justification for Sukuk or Islamic banking operation to link with LIBOR per se.

Issue 2: Would it be possible to have Islamic banks' fees higher, even in rare occasion, than the LIBOR Rates?

Comment: It is justifiable for Islamic bank to impose the fees higher than the LIBOR rates. Because, Islamic banking is (in current practice) liable to pay both income tax as well as Zakat, in contrast, the Conventional financial institution under LIBOR rate is liable to pay only income tax. Yet, Islamic bank offers better benefits to its customers than the conventional ones because, its operation is asset based with risk sharing leading profit sharing techniques, which is proven to have been more attractive to all than the one offered under LIBOR rates.

Issue 3: Could you elaborate on why many shari’ah scholars have been uneasy when it comes to returns on the ijara sukuk as they are typically benchmarked to LIBOR, an interest rate indicator?

Comment: There are several mechanisms of rating namely: FIXED rate, INDICATIVE rate, FIXED charge, INDICATIVE charge, FIXED income, INDICATIVE income. Some scholars perhaps fail to differentiate among all these categorization in the eyes of Shari’ah. Therefore, any rate FIXED by amount except the FIXED charge are within the ambit of the standard practice of LIBOR, which is opposed by the Spirit of Shari’ah. Thus, an INDICATIVE rate is totally different from a FIXED rate. A Fixed rate is approved by LIBOR but opposed by Shari’ah, which proposes alternatively the INDICATIVE rate. Hence, no confusion shall arise as far as the practices of INDICATIVE rate adapted in SUKUK al-IJARAH.

Issue 4: "Taqi Usmani has suggested a benchmark based on a common pool, which invests in Islamic instruments. If most of the assets are tangible, its units can be bought and sold based on their net asset value which is determined on a periodic basis", please justify your view if you are against Usmani suggestion?

Comment: I fully agree with Mufti Usmani. Because his idea provides INDICATIVE thought by deriving the outcome from the common pool, which is again sharing the above highlighted ‘INDICATIVE rate’ view.

World Economic Crisis & the way ahead

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Risk sharing techniques adapted in the modern Islamic financial paradigm has been empirically proven to stand with sustainable existence against any unexpected eco-financial catastrophe. To day’s unpredicted economic tsunami does not remain in the USA but shakes the world financial corridors. Through the close post-mortem on the existing world economic models it may be concluded that, the one with risk sharing techniques may contribute to fight the present critical scenario of financial chapter and that is Islamic financial model applicable globally with the true spirit of brotherhood, solidarity, cooperation, care and concern to every one regardless of one’s religion, race, color, nation and the status. It does not mean to deny the fact that, a deepest revision of all the existing eco-financial models with the holistic spirit of harmonization by considering the current socio-economic phenomena of the world may play a rescue role to the contemporary world-eco crisis.

Hence, US deputy secretary of the Treasury Mr. Robert M. Kimmitt’s recent concern is timely, which has been published in Arab News in Riyadh on October 26, 2008 on the possibility of Islamic finance, which may contribute to overcome the present world economic crisis and thus, has been studied carefully by the experts of US treasury department to re-discover the important features of Islamic Finance in reality.

Open investment policies, risk analysis with foreseeable test, research & re-discovery with product innovation culture and human capital enrichment with reviewed professional integrity, applied wisdom, mutual respect and natural harmonization structured under Shari’ah principles may be among the salient steps to design the way forward against the present financial upset.

Thus, for the eco-rescue, benefits and the way ahead for the contemporary Ummah (Global Community), the recent dynamic concern of the US leaders on the Islamic financial role is relevant, which shall be congratulated and be cooperated by all regardless of one’s nation, religion, race, color, philosophy or ideology to re-discover a right common avenue with the spirit of harmonization by way of mutual respect and common efforts towards noble achievement for all and that is already guided in the Holy Qur’an : “ ….. cooperate each other in righteousness and piety…” (al-Maidah 5: 2).

Hence, the forthcoming G-20 summit to be held in Washington on Nov. 15, 2008 may be the right platform to address the practical implication of Islamic finance to be the potential joint-force with the world eco-rescue consortium through effective cooperation among all in to day’s financial reality.
(view expressed on November 03, 2008)

Islamic Finance - an update in the context of Europe

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Sukuk (Islamic Bond):

Bond Issuer Companies issue Sukuk in order to raise capital in a form of Islamic investment on a definite project or venture says Prof. Dr. Mohd. Ma'sum Billah, a global renowned Islamic finance expert from the Middle Eastern Business World Group. In doing that, the company sells an asset to investors who lease it back to the company for a rental called Sukuk al-Ijarah. This rental is an alternative to the coupon of a traditional corporate bond. Leasing (Ijarah) leads to facilitate several categories of Islamic investment products in the contemporary reality says Prof. Dr. Mohd Ma'sum Billah, a global renowned Islamic finance expert from the Middle Eastern Business World Group. Sukuk in to day’s economic reality is adapted as security as in debt capital market of Islamic investment, and has reached the West. In March 2007, two of Kuwaiti investors have bought the British car company Aston Martin. They wanted to finance the deal according to Islamic principles, and hired the German West LB to finance the deal using the Sukuk (structure).

Islamic Debt Financing:

If a person plans to buy a house or Vehicle or any property or Asset and needs financing facilities under Shari’ah principles, and approach the bank. The bank will buy the subject matter first and resell it to the client at a markup. The client pays back the price in fixed installments. This type of structure is facilitated by Bai’ Bithaman al-Ajeel (differed Payment on long term basis by installments), al-Murabahah (differed Payment on short term basis by installments), Bai’ al- ‘Inaa’ (Buy back sale) and Tawarruk (Buy back Sale by Special Purpose vehicle @ SPV) says Ma'sum.

Corporate Banking with Diminishing Partnership (Musharakah Mutanaqisah):

If somebody wants to start a company and needs money, he doesn't receive a loan, but the Islamic bank offers capital and in return obtains ownership of shares under the structure of Musharakah Mutanaqisah (Diminishing Partnership) says Ma'sum. In this way, the bank acts a bit like a benevolent venture capitalist. But it doesn't have to search for an exit strategy as its share diminishes over time as the entrepreneur pays back the capital. As long as the bank is holding shares, it shares risk and revenue of the company. The details of this arrangements have to be worked out in great detail in the contract as Islamic banking does not allow uncertainty called Gharar.

Takaful:

Islamic insurance, called Takaful, which pools the premium (contributions) paid by the Participants. There are two types of Takaful schemes namely, Family @ Life Takaful (long term policy) and General Takaful (short term policy). In a Family Takaful scheme the money is distributed in to two different accounts, one account is for risk management (treated on the basis of Tabarru’ @ donation or Waqf @ charity or Hibah @ gift) while the other is Shari’ah-compliant investment account (treated on the basis of al-Mudharabah @ co partnership). The claims against the risks are settled out of both accounts. "If one does not make any claim within the policy period, shall receive money from the investment account only". In General Takaful the premium (contributions) paid shall initially be credited in to risk management account(treated on the basis of Tabarru’ @ donation or Waqf @ charity or Hibah @ gift). The claim shall be settled out of this account but if one does not make any claim with the policy period he or she may be satisfied out of surplus sharing. This general Takaful provides coverage against the risks of the sectors like, health, motor, accident ,property etc, explains Prof. Ma'sum. Moreover, Takaful is further backed up by Re-Takaful arrangement.

(view expressed in German Finance Time)

Islamic finance is with its universal characters for All

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islamic finance is not for muslim alone, but it with its universal characters offers benefits for ALL regardless of one's religion, race, nationality, gender or even status.

thus, the ownership, development, decision making, management, operation, marketing & distribution may not necessarily be confined among muslim only, but be enjoyed by non-muslim too, so long every components of islamic finance are assured in total compliance with the principles of Shari'ah.

hence, an unjustifiable discrimination may slower the spirit of the growth of islamic finance, despite being designed for the benefits of the humanity (Ummah) across the globe.

First Offshore "ISLAMIC BULLION BANK" in mind.

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Offshore Islamic Bullion Bank (IBB) is designed (at brain child idea) to offer money market by Gold Diner, global Asset (gold, silver & diamond) management, global Sukuk issuance, global capital market, Cooperative micro-finance, islamic micro-credit @ al-Rahnu & global equity (gold, silver & diamond) management in accordance with the standard Shari'ah principles. The Risk management of all these services shall be by Takaful providers.

The prime objective of IBB is to provide an effective Gold, Silver & Diamond management for the global Ummatic benefits in the spirit of Shari'ah by having not only commercial gains, but also added opportunities with socio-cultural, political-global and spiritual significance.

Furthermore, through the successful establishment and operation of IBB, the depositor / owner of asset (gold, silver or diamond) may not only hold the certificate of safe keeping, but also grand opportunities in legitimate profit making besides cooperating others towards required financial supports for the project developments, establishment of businesses & needed facilities.

For example: IBB may offer any guarantee with standard financial instrument backed by the ready asset in custody (gold, silver or diamond) to the party who requires financial support for the project, business or facility. A financing bank will offer the facility based on the IBB's issued instrument to effectively support the party towards one's end result. Through such a holistic cooperation, all four parties (including the owner of asset) will have the chance to share income in the project as per mutual understanding. Moreover, IBB may also be able to issue Sukuk guaranteed by the ready asset, participation in the equity market and other global opportunities, to generate income over the deposited asset, which will ultimately befifit not only IBB, but also the owner of the asset coplying the Shari'ah principles of profit sharing technique. In all circumstances the risk shall be minimized by the relevant Takaful coverage.
Though the brain child architecture of IBB of my humble effort had began its structure since 2002 and now may be the right time to be established as the first of kind in today's world of reality.

The establishment of IBB may open up long waited opportunities for all through the centralized management of gold, silver & diamond aiming a discovered effective benefit for the global Ummah, EnSha ALLAH (swt).

It is further clarified here that, though IBB has not been established yet in its capacity as an Islamic bullion bank with operation, but ready with its architecture by conceptual frame works, management structure, Shari'ah regulatory structure, products structure, strategies, Shari'ah instruments, business prospects, lead partners including investors, market zone & operational mechanisms, which may lead to formalization & operation effectively (all are depending on the fulfillment of legal requirements, approval by the relevant authorities & endorsement by the government concern) EnSha Allah (swt).

WORLD ISLAMIC INVESTMENT CORRIDOR (WIIC) - the right time for its establishment

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WORLD ISLAMIC INVESTMENT CORRIDOR (WIIC): the brain child idea with conceptual architecture of WIIC had been began since 2006 through my humble initiative & efforts with gradual effect by referring to the phenomena of wealth & investment management in different parts of the muslim and some parts of non-muslim world, desired by the respective owners to be structured under the principles of Shari'ah, which ought to be further standardised as to its system, operation & end results for the added benefit of the Ummah in reality.

The existence of fund alone may not be able to ensure the right achievement unless being integrated with the right system of offerings, genuine parties & relevant projects or avenues, all of which shall be pillared on mutual cooperation of the universal spirit of brotherhood among all fund owners, investors, manufacturers, industrialists, project owners, fund managers, technical group & other related groups.

As the today's world is experiencing the greater appreciation from the global community towards the attributes of Shari'ah structure of finance & investment portfolios with promising outcomes, which requires an urgent thought of a centralised global entity to offer required facilities to achieve the desired goal.

To date, no global entity (by uniting all Islamic investors, manufacturers, project owners & managers) yet to offer the centralised facilities for the global Islamic investment management hence, it is the right time to establish "World Islamic Investment Corridor (WIIC)" for the global ummatic (humanity) benefits by enjoying the discovered goal in the holistic spirit of brotherhood.

WIIC is designed with 18 expected components (by gradual implementation) namely:

1. world islamic investment hub.
2. world islamic manufacturers' hub.
3. world islamic barter trading hub.
4. world islamic venture capital development & management hub.
5. world islamic cooperative micro-finance hub.
6. world islamic micro-credit (al-rahnu) hub.
7. world islamic hedge fund structure hub.
8. offshore islamic bullion bank.
9. world islamic investors' club.
10. world halal shopping mall development hub.
11. world islamic commodity trade development hub.
12. world islamic mini-hospital development hub.
13. world islamic construction development hub.
14. world halal tourism development hub.
15. world islamic power plant development hub.
16. world islamic mono-rail development hub.
17. world islamic effective poverty eradication by enterprising plan through Zakat.
18. world islamic corporate human capital development hub.

World Islamic Investors' Club? its rationality & prospects...

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Because of so dominant debt based financing with risk transferring mechanisms, which eventually fail to ensure a sustainable achievement in the advance economic reality, resulting of which the fund owners (investors) of different sectors of the world had been suffering with uncertainty of the future of their respective funds.

Alternatively, many investors are kin to adapt asset backed financing with risk sharing techniques (recognized by the Divine principles of Shari'ah as a holistic package), aiming to achieve their integrated goals with utmost safe & security.

Investors from different background (with no issue of race, religion, gender, nationality & color) have been participating in the Shari'ah structured investment sectors (equity & capital markets) on their own micro-arrangements (mostly through introducers) by having no accurate access to sectorial data (investment groups with different goals, preferred projects, parties, management groups, locations & prospects), which ultimately may slower the growth of Shari'ah structured investment industries.

Thus, it may be the right step in uniting potential Islamic investors / fund owners accross the globe under a common but standard platform in view of establishing a strong investors' cooperation to drive the common vehicle in team with the spirit of brotherhood & soliderity towards miximizing their goal in reality.

Hence, to initiate the above thought it is timely to establish a first ever " World Islamic Investors' Club" to move rationally with a team spirit among the Islamic Investors of the contemporary world towards undiscovered goals & gains EnSha Allah (swt).

All are friendly invited to share your intellectual / professional thoughts, views, comments & recommendations for the common benefits of the global Ummah (humanity) through the following Link:
http://www.linkedin.com/groups/World-Islamic-Investors-Forum-WIIF-4052375?gid=4052375&trk=hb_side_g

WORLD ISLAMIC CORPORATE HUMAN CAPITAL DEVELOPMENT HUB ? its essence & prospects....

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Applied Islamic financial sectors have developed into a global dimension, which is highly dynamic and growing rapidly with utmost appreciated by all. There are almost 600 Islamic financial institutions worldwide with assets estimated at more than US$ 1.3 trillions, financial investments above US$900 b. and a growth rate is estimated to be around 18% p.a. Among the master players of Islamic finance in the contemporary world are the Middle East, Malaysia, Iran, Indonesia, Brunei, Singapore, North America, Pakistan, Bangladesh, South-West Africa and Europe. The cliental of Islamic financial institutions are not confined to Muslim countries, but are spreaded over Europe, U.S.A, South Asia, South East Asia, Asia Pacific and the Far East. Providers are not confined to local institutions as global players increasingly playing major roles in the industry today by aiming the global appreciation from all regardless of the issue of one’s religion, color, culture, nationality or status.

It is widely accepted that the adaptation of the Shari’ah compliant financial paradigm is one of the fastest growing areas of the banking, finance & corporate reality across the world. The forecasts predict that, there will be significant growth in this sector over the next five to seven years. However, this growth is dependent on successful professional development, risk management, professionalism, product innovation, regulatory frameworks, marketing strategies, research & discovery and customer satisfaction that all professionals, regulators, practitioners, customers and participants of the banking -financial industry must attend to. All these may be achieved only through an Islamic Corporate Human Capital development plan & its effective operation.

Thus, considering the above needs & prospects, it is timely to establish a first ever “World Islamic Corporate Human Capital Development Hub” to centralize an effective movement of Shari’ah standard of corporate professional development with a global coverage. The establishment of the hub may resolve the skill & professional crisis faced by the contemporary global Islamic financial & Corporate industries and environment. This may eventually contribute towards dynamic growth with sustainability and greater achievement in the Islamic corporate & financial sectors of the world.

"World Islamic Trade Centre (WITC)" in mind....

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Due to rapid growth of Islamic trade, finance & business sectors with greater appreciation from the contemporary world of advance eco-technology, it is utmost essential to touch the right time to unify with global standardization of the Islamic / Shari'ah compliant trade sectors by the establishment of "World Islamic Trade Centre (WITC)" towards further advancement of Shari'ah compliance affecting the global trade / barter trade (commodity, asset, equity and or others) be one G2G, B2B, G2B or B2G.

With the establishment & successfull operation of the WITC may contribute to globalize the Shari'ah compliance of trade sectors in terms of general policies, guidelines, mechanisms & communication besides attributing towards a greater friendship with the universal holistic spirit of brotherhood among the traders, producers, players, marketers, policy makers, trade professionals, Shari'ah scholars & the consumers.

By the establishment of the WITC may help to curb the common virus hindering the global trade sectors namely; money laundering, misappropriation, unlawfull gain, unhealthy competition, self-orientation & dishonesty.

The WITC may eventually boost the world economy by fighting the malpractices in the global trade environments while discovering the dynamic way forward for all humanity (Ummah) regadless of one's religion, race, color, status or nationality in their respective trade missions & practices.

To establish the WITC, the following steps are recommended:

(i) Identification of the entity location.

(ii) Office & its supports.

(iii) Data base (global traders / manufacturers).

(iv) System (Shari'ah compliance).

(v) WITC Policies & Guidelines and Plan (Shari'ah standard).

(vi) WITC Shari'ah board.

(vii) Communications & networks.

(viii) "world islamic traders' summit" for the global awareness.

(ix) Resolution among the Gs.

(x) Commencement of Operation as per plan.

LIBYA & EGYPT REVOLUTIONS? their eco-way forward....

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In response to a recent friendly concern raised by some experts from Middle-East is, the revolutions of Libya & Egypt & some thoughts towards their socio-economic way forward and duly achievements for the interest of the respective countries & their people are as follows:

(i) the process & the achievement was great & people of Libya & Egypt deserve enjoying prosperity & progress with dynamism.

(ii) Libya & Egypt are the countries, which have the right to hold their respective national pride with their uncompromised identity "Nation with Islamic Economic Reform" ever since from the ancient history of Islam thus, no alternative, but only "Islamic" in their belief, system, operation & achievement.

(iii) The revolution opened up the opportunities for Libya & Egypt to clear their undesirable haze and march ahead with their new economic model besides socio-political & cultural orders by complying and respecting the Shari'ah principles while adapting the modern operational mechanisms to reform Libya & Egypt respectively as an "Islamic Modern State" respectively to wake up along with the Globalization.

To achieve the dynamic goal, the following avenues may be recommended in the master plan of their respective Islamic Economic Reform:

1. Total Economic System shall be reformed with "Asset Based Economy with Risk Sharing Techniques" opposed to "Debt Based Economy with Risk Transferring Techniques".

2. Islamic Cooperative Principles shall be adapted iat all levels of Economic policies & Activities.

3. Increase Islamic Barter Trade (among G2G, B2B, G2B or B2G).

4. Implement Islamic Cooperative Micro-finance (on asset based with risk sharing) as opposed to Micro-credit (on debt based with risk transferring).

5. Creating an Enterprising & Entrepreneur based nation.

6. Increase issuance of SUKUK to help modern development of Libya & Egypt respectively.

7. Develop Islamic Micro-credit (al-Rahnu) to enrich Entrepreneurs nationwide among all levels.

8. Develop sustainable Islamic asset based MLM to fight the retrenchment while creating more job / income opportunities especially among the young generation / junior families / fresh graduand / low income group / unemployed.

9. All level of risks shall be minimized by appropriate Takaful operation.

10. Rating in all sectors (Government or Private, Commercial or otherwise) shall by by prioritying the public interest over corporate or otherwise interests.

11. Compulsory audit system (Shari'ah compliance) shall be implemented at all Public, Private, Corporate and other applied sectors to minimize unlawful gains, corruptions and abuse of law and orders. 

FRANCHING ISLAMIC FINANCIAL SYSTEM? a global reality....

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ISSUE 1:

The most profitable businesses exhibiting success under franchise are those that have an excellent record of profitability and those that can replicate Islamic financial services and products successfully. Some thoughts on the success of franchising in Islamic financial system.

SOLUTION:

Franchising is a holistic culture of mutual cooperation towards noble cause of progress & prosperity in the spirit of corporate brotherhood for the socio-economic benefit of all hamanity accross the globe, which is justified by the Qur’anic principle “…..help each other in righteousness and piety, but do not cooperate among you in sin and rancour….” (5:2).

Considering the contemporary phenomena in the rapid growth by 18% p.a. with global appreciation of the Islamic financial system, it may be the right time to enrich the franchising culture within the Islamic financial system for a common greater achievement by sharing the acceptable Shari’ah standard in terms of policies, system, talent, technologies, products, operation & culture.

Hence, with the dynamic slogan of “progress & prosperity in Islamic financial system for the common benefit of all by waiving the issue of one’s religion, race, culture, status, gender or nationality”, unjustifiable & unacceptable completion within the Islamic financial environment shall be avoided, which shall be replaced by justifiable cooperation with utmost wisdom, mutual respect, care, share & concern. This noble paradigm may successfully be facilitated by a Shari’ah compliance of Franchising culture among the Islamic financial industries across the world.

ISSUE 2:

Key franchising sectors in the Islamic finance and its future.

SOLUTION:

Prime franchising sectors in the Islamic financial engineering may include the followings:

(i) Policies & Guidelines.
(ii) System.
(iii) Talent.
(iv) Technologies.
(v) Products.
(vi) Operation.
(vii) Corporate Culture.

By the enrichment of the Shari’ah compliance of the franchising culture within the Islamic financial environment, may help the industrial growth of the Islamic financial system with greater significant results not only for the corporate players, but also for the customers including the innocent beneficiaries.

ISSUE 3:

The first step to franchising in acquainting regulators, operators, players, participants & customers with the Shari’ah principles.

SOLUTION:

There are ten components of the first step to franchising of Islamic finance in acquainting every involved one (be one regulator, decision maker, operator, player or customer with equal requirement from the respective counter part of the franchisor & the franchisee) with the basic relevant principles of Shari’ah, not only in mind but also in action, namely:

(i) Exclusive division (Shari’ah compliant / Islamic Finance).

(ii) Conceptual understanding of Shari’ah (Maqasid al-Shari’ah) affecting franchising of Islamic finance.

(iii) Regulatory frameworks (relevant Shari’ah rulings) governing franchising of Islamic finance.

(iv) Shari’ah approved Documentations (policies, guidelines, forms & procedures).

(v) Technical-know-how (with the Shari’ah standard) facilitating the franchise objective affecting Islamic finance.

(vi) Operational mechanisms (with Shari’ah compliance) for an effective management of franchise objective of Islamic finance.

(vii) Customers’ rights, obligations & behaviours as per approved by the Shari’ah principles in participating in, contributing to, cooperating with & benefiting from franchised Islamic financial operation.

(viii) Public awareness plan with franchising of Islamic financial system.

(ix) Establishment of a Shari’ah secretariat (Shari’ah compliance division with R & D). (x) Establishment of a Shari’ah council (for advising & decision making).

Global Commodity Trade & Shipping? its Shari'ah Standard...

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1. The Commodity trading or Barter trading is generally allowed in Shari'ah as enshrined in the Holy Qur'an: " ... Allah (swt) permitted trade and traffic, but prohibited Usury..." (2:275).

2. A Shipping arrangement & services affecting global commodity trade or barter trade is a form of cooperation with an intention of mutual benefit among the seller, buyer, trader, charter party, charterer & the ship owner. Hence, such a cooperation is justified by the Qur'anic principles "... help each other among you in righteousness & piety, but do not cooperate in sin and rancor..." (5:2).

3. In Practice, among the Shari'ah required Criteria applicable in the contemporary global commodity trade or barter trade & shipping are as follows:

* Commodities shall be recognized by the Shari'ah Principles (ie. alcohol, pork, stolen goods etc are not recognized as the valid commodity under Shari'ah).

* Ownership and duly consumption shall be secured only by way of mutual transaction / mutual consent.

* Transparency (disclosure) in all aspects of the transaction of any commodity shall be exist.

* Uncertainty in any component of a commodity deal is not acceptable.

* For the purpose of avoiding any future misunderstanding, any commodity deal it is advisable to be closed with relevant documentations save retail transactions, which is an option.

* Credit sale is allowed, but the payment shall be free from Usury (Riba).

* Issuance of LOD, LOR, LOI, SCO, FCO, ICPO, BCL, BC, SPA, NCNDA, IMFPA and the MT 799, MT 705, MT 760, MT103, BG, LC, DLC, RDLC, SBLC without Usury (Riba), TT, SWIFT & COD are all allowed provided that none of the documents or instruments or mechanisms adapted in any deal shall involve any clause or requirement, which is directly or indirectly contrary to the Spirit, ethics, public interest or the Principles of Shari'ah per se.

* Any commodity deal with CIF, CNF, FOB, Contractual, SPOT, Barter trading or traditional exchange are allowed provided that none of the aspects of the deal directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

* Any commodity deal with bartering is acceptable provided that none of the aspects of the deal directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

* For inspection of the agreed commodity, the procedures through SGS, CIQ or other mechanism are allowed provided that, no unfairness clause shall be adapted in those procedures nor shall use those procedures to find an excuse to default others.

* Transneft account, BL, Q88, other shipping or loading or unloading documents are also allowed provided that none of the aspects of the documents directly or indirectly contrary to the Spirit, ethics or the Principles of Shari'ah per se.

To conclude, any commodity deal & shipping services, shall be coupled with total holistic approach with standard ethics, practical mechanisms adapted and the good intention with mutual cooperation, care and concern while avoiding any form of unfair gain.

Furthermore, in any commodity deal, the gross income shall be subject to the settlement of the required standard ZAKAT.

Islamic Bond (Sukuk)? an alternative way out of global pro-Debt Crisis...

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Considering the fact that, the bond issuance and trading are important means of investment in the modern economic system, Muslim jurists and economists are trying to find the Islamic alternative.

 

To meet the various demands of investors Islamic bonds (Sukuk) certificates should be diversified. Among the Shari'ah justified Sukuks in operation in to day's corporate environment are: mudarabah or muqaradah, musharakah, Ijarah, istisna‘, salam and murabahah sukuks.

It should be noted that, although some of these instruments have been generally accepted as being in compliance with Islamic principles so that, they can be traded in the secondary market, the negotiability of certain others is still a point of debate and controversy due to their legal acceptablity or compliance with Shari‘ah.

Therefore, some of these bonds can be traded in the secondary market while the trade of others is limited to the primary market because they can be exchanged only at face value.

In Malaysia for instance, almost all of the domestic Islamic debt papers issued so far have been based on the principles of murabahah, bay‘ bi al-thaman al- ajil, bay’ al-’inah and bay’ al-dayn, despite the controversy surrounding the issuance of tradable bonds in the secondary market based on the above two contracts. At the same time, there is a perceptible increase in the willingness amongst Malaysian issuers of bonds to explore other Islamic principles of financing, namely the profit-oriented based musharakah as well as the asset-backed mode of ijarah. Hopefully, the future issuance of Islamic bonds will focus on the widely accepted bonds such as musharakah bonds, mudarabah bonds and ijarah bonds.

However, the problem with Malaysian Islamic bonds has been the application of bay’ al-’ina and bay’ al-dayn, which is not well accepted by the Middle eastern investors. The contract of bay’ al-’ina and bay’ al-dayn is seen as something similar to riba based financing. This will certainly pose a great challenge to the Malaysian companies seeking Islamic funds in the Middle-east via bond issues.

3 Principal Steps Involved in the Issuance of Sukuk:

i. Securitization

Asset securitization is the essence of Islamic bond issues, as a bond must assume the role of al-mal or property to qualify as an object of sale. An object of sale in the Islamic law of contract must be a property of value. When a bond certificate is supported by an asset as evidence via the securitization process, it is transformed into an object of value and therefore qualifies to become an object of trade whereby it can be purchased and sold in both the primary and secondary market. Investors then will have to the right to sell (haqq al- mali) these bonds. In the bay` al-‘ina asset securitization, the financier purchases an asset from the issuer and sells it back to the same party at a credit price. This buy-back agreement will ensure that the issuer will receive the money in cash while financier will be paid a prefixed or contracted amount in a future date. Debt payments will be made by installment through bond issues.

The difference between cash and mark-up price will represent the profit due to the financier. The underlying asset is therefore crucial in determining the Islamicity of these bonds. In the Malaysian experience these assets include factories, equipment, stock and inventory and even intangible asset such as a list including building and properties.

ii. Sukuk Issuance

Issuance of Islamic Debt Certificate ( Shahdah al-Dayn), which usually takes place in the primary market where in settling its debt, the issuing company will sell debt certificates or bonds to investors. As mention above, debt certificates issues are valid only when it is supported by an asset. In other words, the bonds must be securitized.

Here the underlying security is the BBA or al-murabahah asset. The underlying asset need not be BBA or al-murabahah alone. If the 1st stage involves a contract of Ijarah, then the debt certificate is called Sukuk al-Ijarah. If an Istisna’ contract is used, we can called it Sukuk al-istisna.

Islamic bond can be categorized into two, namely bonds issues with coupons and those with none. The former is known as the Islamic coupon bond while the latter Islamic zero coupon bond.

iii. Trading of Debt Certificate (Discounted Bay' al-Dayn)

For liquidity purposes, bond trading in the secondary market is crucial. However, almost all Islamic bonds today were bought for long-term investments. The lack of secondary market however should not imply that trading issues is no longer significant. This requires an illustration on the Islamic view of bond trading in the secondary market.

As mentioned earlier when a debt certificate is securitized, it now becomes property(al-mal), which is also an article of trade. As an article of trade, the bonds can be sold by investors to the issuer or the third party if a secondary market for Islamic bonds exists. The trading or sale and purchase of the debt certificates is called bay’ al-dayn.

In Malaysia, the contract is bay’ al dayn at a discount is acceptable while Middle-east 'Ulama’ consider it invalid even though the debt is supported by underlying assets.

Any profit created from the sale and purchase of a debt is riba as enshrined in the holy Qur'an:

"And whatever riba you give so that it may increase in the wealth of the people, it does not increase with Allah." [al-Rum 30:39].

Prophet Muhammad (S.A.W) said:

“That every loan entailing benefit is usury”.

The Nature of Bay' al-Dayn

The issue of bay’ al-dayn arises when the bonds are traded in the secondary market at a discount. We have to note that buyers in the secondary market are usually speculators, that those who do not intend to keep the bond for long-term investment purposes.

Their main objective is to make quick capital gains on the basis of market liquidity and interest rate movement. However, there is no indication that controversies exist in the bay’ al-dayn where bonds are sold or redeemed at par value. We may now discuss bay’ al-dayn to show its nature according to Islamic view.

According to al-Majallah, Dayn defines as the thing due i.e the amount of money owed by a certain debtor. So also a sum of money not existing is considered a debt, as also a certain sum of money from things which exist or are present, or from a heap of wheat which is present before it is separated from the mass. Al-Dayn can be either monetary, or a commodity, like, food or metal. Based on the aforementioned of al-Dayn, and the literal meaning of Bay’ al-Dayn we can define it as the sale of payable right either to the debtor himself, or to any third party. This type of sale is usually for immediate payment or for deferred payment (al-Nasi’ah).

Sale of Bay' al-Dayn to a 3rd Party

According to most of Hanafis, Hanbalis and Shafis jurists , it is not allowed to sell al Dayn to non-debtor or a third party at all. Such opinions are based on the forbidden sale of al Kali Bil al Kali, sale of a Gharar, sale which the seller does not possess.

Conditions:

As an exception Malikis, Hanafis and some Shafi’s jurists allowed selling al-Dayn to a third party. Since the creditor has the right to sell it to the debtor, as well as he has the right to sell it to a third party provided the following rules must be observed:

a) The Dayn must be Mustaqir (confirmed debt) and the contract must be performed on the spot, not deferred in order to avoid any relationship with the sale of a debt for a debt which is prohibited by Islamic law.

b) The debtor must be a financially capable, must accept and recognize the sale, in order that he will not deny the sale. This condition aims to avoid any dispute between the parties, and the debtor must be easily accessible so that the creditor knows whether he has the capacity to pay his debt or not.

c) The sale should not be based on selling gold with silver or opposite, because, any exchanges between these items necessitates the immediate possession, and if the debt is money, its price in another debt should be equal in terms of amount of quantity.

Furthermore, the selling of al-dayn must avoid the occurrence of Riba between the two debts, and must also avoid any kinds of Gharar which may be raised at the level of inability of the buyer from possessing what he bought, as it is not permitted that the buyer sells before actual receipt of the purchased item.

It is important to note that Muslim scholars have unanimously prohibited the trading of debt (bay` al-dayn) at anything other than face value. Where the price paid for a debt is not the same as the face value of that debt, the transaction would be tantamount to riba al-Nasi’ah and is therefore prohibited. It is noteworthy that trading in bonds is a subject of dispute on two counts:

First, the bonds are normally sold at less then their nominal values. Second, the state or the issuer would use the mode of Bay` al-` inah and Bay` al-Dayn and these both sales transactions are regarded as riba by the majority of Muslim scholars. This is the very reason for the controversy about the legitimacy of Malaysian Islamic bonds which renders it to be unacceptable by individual Islamic jurists and institutions outside Malaysia and the Middle-Eastern countries. Islam does not allow the legal devices to be treated as a justification for transactions, which Islam regards unjust and against Islamic belief.

The bonds would have been acceptable from an Islamic point of view if the application of the mode of financing would be based on the legal maxim of al-Ghunmu bil ghurmi meaning that no person is allowed to invest in a way that generates profit without exposing himself to the risk of loss. It would expose both parties to the outcome of their deal, be it a profit or a loss, and thus avoid of usury as as matter of Islamic principle.

Categories of Sukuk:

Sukuk al-Ijarah

Ijarah is a contract according to which a party purchases and leases out equipment required by the client for a rental fee. The duration of the rental and the fee are agreed in advance and ownership of the asset remains with the lessor. Hence, the relationship between the parties differs from that of a debtor-creditor relationship since it is based on buyer-seller of an asset. Ijarah bonds, on the other hand are securities of equal denomination of each issue, representing physical durable assets that are tied to an ijarah contract as defined by Shari‘ah.

Sukuk al-Istisna'

Istisna‘ is a contract to sell a manufacturable good with an undertaking by the seller to present it manufactured from his own material, according to specified description and at a determined price.The suitability of istisna‘ for financial intermediation is based on the permissibility for the contractor in istisna‘ to enter into a parallel istisna‘ contract with a subcontractor. Thus, a financial institution may undertake the construction of a facility for a deferred price, and sub contract the actual construction to a specialized firm.

Sukuk al-Musharakah

Musharakah bonds based on the musharakah contract are relatively similar to muqaradah bonds. The only major difference is that the intermediary will be a partner of the group of subscribers represented by a body of musharakah bondholders in a way similar to a joint stock company while in mudarabah the capital is only from one party. It should be noted that almost all the criteria applied to mudarabah bonds are also applicable to the circulation of musharakah bonds.

Musharakah Certificate vs Conventional Bond

A Musharakah Certificate represents direct ownership of the holder in the assets of the project. If all the assets of the joint project are in liquid form, the certificate will represent a certain proportion of money owned by the project.

A Conventional Bond on the other hand, Has nothing to do with the actual business undertaken with the borrowed money.The bond stands for a loan repayable to the holder in any case, and mostly with interest.

Sukuk al-Muqaradhah is an alternative to Islamic Debt Certificate

The Islamic financial system is a set of rules and regulation that govern the flows of funds from the surplus-spending unit to the deficit-spending unit. These rules and regulations are strictly governed by Shari’ah principles where there is neither a possibility nor a need to apply usurious financial instruments such as the debt related bonds.

Hence, the solution for Islamic financial system dilemma lies in the development of financial instruments in which the Shari’ah rulings are not violated. One such instrument is the Muqaradah bond. A Muqarada bond is an Islamic bond in which no interest is earned, but whose market value varies with the anticipated or expected profits. It is the product of Muslim scholars and thinkers who developed and designed the financial instrument where interest or similar forms of returns which Islam has unequivocally prohibited are excluded.

The Council of the Islamic Fiqh Academy of Organization of Islamic Countries (OIC) during its fourth conference in Jeddah, Saudi Arabia from 18 to 23 Jamadul Akhir 1406H/6 to 11 February 1988, approved the mode of Muqarada by issuing Fatwa after having reviewed various studies on Muqarada bonds.

The meaning of Muqarada bonds and its salient features is given in the following: Muqarada bonds, as the term denotes, are based on the conclusion of lawful “Muqarada” (the mudaraba) with capital on one hand and labor on the other, and the shares of profit are determined (securitized) beforehand by a definite proportion of the total. It is called a bond because it is terminal in nature that its maturity is determined by the tenure or project completion date.

Final Remarks

Indeed, the conventional bond market comprises of primary market and secondary market. The primary bond market is where the bonds are initially issued, while the secondary market where the bonds are resold to other investors. Islamic bonds are also having primary and secondary markets. The main difference, however, is the way the bonds are issued and traded afterwards. In the process of Islamic bond issuance bay’ al-‘Inah is used to securitize the instrument in the primary market, while in the secondary market, bay’ al-Dain is used in order to legalize reselling of the bonds. Such process is mostly used in the Malaysian market, while most of the Middle-Eastern countries do not accept it. The proposed alternative is Islamic bonds based on Muqaradah.

It is thus, concluded here that, an effective issuance & appreciation of Sukuk may discover a potential way out of global debt-pro crisis by enjoying the following achievements:

(i) raising the required capital.

(ii) development of expected projects.

(iii) settlement of outstanding debts.

(iv) maximize the soci-economic achievement both in public & corporate sectors.

(v) nation with future prosperity.

Today- the World Economy is in Danger: Does Capitalistic Style Need a Re-think?

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The global economy stumbled deeper into crisis as stock markets slumped further yesterday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession, according to international news agencies. Even as Asian equity markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy.

The worsening market trauma has piled pressure on the US Federal Reserve to announce fresh measures of support for the US economy at a regular policy meeting yesterday, but analysts said its options are limited. Investors fear that, with confidence in the global economy's prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism. As of Monday, stock losses had wiped some $3.8 trillion from investor wealth globally in the recent rout as buyers rushing for perceived safety in the Japanese yen, the Swiss france and gold, which hit another record high yesterday. (source: editorial asia post dacca – august 2011).

MSCI's all-country world index was down 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a "bear market". As the flight from risk continued in Asia and Europe yesterday, there was more bad news, this time from China, the stuttering global economy's main engine room. Official data showed China's industrial output grew at a slower pace and its annual inflation rate unexpectedly quickened to 6.5 percent in July. The inflation pressure puts the country's central bank in a bind as it tries to keep prices in check without dragging down an economy that already faces increasing threats from abroad.

It may not be in a position to reprise its 2008 role of lifting the global economy. When the Lehman Brothers bankruptcy triggered a worldwide slump, China implemented a stimulus package that helped buffer its own economy and buoy the world. However, some analysts called on Beijing to act."It's time for Beijing to announce to the whole world that it will try to stimulate domestic demand again," said Tang Yunfei, an analyst with Founder Securities in the Chinese capital. Global leaders have failed to reverse sliding markets since a blow was dealt to investor confidence by Standard and Poor's downgrade of the US sovereign credit rating last week. (source: editorial asia post dacca – august 2011).

The downgrade heightened concerns that the twin-pronged crisis of a worsening euro-zone debt problem and a faltering US economy raised the risks of a double-dip recession. The European Central Bank (ECB) swept into the bond market to buy Italian and Spanish debt and sling a safety net under the euro-zone's third- and fourth-largest economies on Monday. But bickering has persisted in Europe over a longer-term rescue plan.ECB chief Jean-Claude Trichet defended his institution's decision: "It is the worst crisis since World War II and it could have been the worst crisis since World War I if leaders hadn't taken the important decisions," he said in an interview with the French radio station, Europe 1. (source: editorial asia post dacca – august 2011).

Major indexes in Asia slumped in early trade following a drop of more than 6 percent on Wall Street on Monday, and although some staged a sharp rebound, Hong Kong shares recorded their biggest one-day decline since the 2008 crisis.European bourses put in a short-lived attempted at gains at the open, but succumbed to the bearish mood. The FTSEurofirst 300 index of top European shares lost ground for the eighth session in a row, hitting a two-year low. Concerns mounted that Asia would inevitably feel the cold wind of the West's slowdown."This is the first time in several years that all three major economic regions are feeling economic distress at the same time," said Keith Ducker, chief investment officer of Tora, a dark pool operator. (source: editorial asia post dacca – august 2011).

The world economy is in deep crisis. The question is why it is so? We have no answer ourselves. But something is wrong with current capitalism. The economists need to look into this affair seriously. Capitalism has sponsored irresponsible consumerism, greed for more enjoyment. This has put pressure on world resources, apart from rising population. The role of uncontrolled markets and derivatives require to be re evaluated. (source: editorial asia post dacca – august 2011).

To day’s global eco-crisis perhaps attributed grossly by the historical debt-based economic or financial system with risk transferring mechanisms as as had been so dominant in the world of economy, which gave an opportunity for certain group of capitalists to gain at the expense of others.

This eventually ruined not only the backbone of the global economy, but also developed an uncertainty in the future of the world humanity. Resulting of such an undesirable phenomena, the world is encountering grievous soci-economic catastrophe by retrenchment and or other disasters that the innocents are compelled to accept. (source: editorial asia post dacca - august 2011).

To rescue the world of economy & humanity the alternative platform may be suggested and that is, “ASSET BASED ECONOMIC & FINANCIAL SYSTEM WITH RISK SHARING MECHANISMS” within the holistic universal spirit of brotherhood, solidarity & mutual cooperation with utmost share, care and concern among all humanity by waiving the issue of one’s race, religion, color, status or nationality.

Such a holistic economic paradigm with universal call is indeed enshrined by the Divine principles of Islamic economy as ruled out in the Holy Qur’an: … cooperate among you in righteousness and piety, but do not cooperate among you in sin and rancor…” (5:2).

Global Achievement in Islamic Finance? its rational & result...

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Applied Islamic financial sectors (Banking, Finance, Investment, Takaful & Capital market) have developed into a global dimension, which is highly dynamic and growing rapidly with utmost appreciated by almost every major sectors of the contemporary world of advance tech-economy.

There are more than 450 Islamic financial institutions worldwide in operation with asset size estimated at about $ 1.3 trillions, financial investments are above US$ 800 billions and a growth rate estimated to be around 18% p.a.

Among the master players of Islamic finance in the contemporary world are the Middle East, Malaysia, Iran, Indonesia, Brunei, Singapore, North America, Pakistan, Bangladesh, South-West Africa, Germany, Central Asia, Egypt, India, Srilanka and the U.K.

The cliental of Islamic financial institutions are not confined to Muslim countries, but are spread over Europe, U.S.A, South Asia, South East Asia, Asia Pacific, Central Asia, Africa, Russia and the Far East.

Providers are not confined to local institutions as global players increasingly playing major roles in the industry today by aiming the global appreciation from all regardless of the issue of one’s religion, color, culture, nationality or status with holistic universal value for all humanity. ……… (ma’sum billah @ 2011).

The above achievements are due to an effective appreciation & operation of Islamic finance by adapting the principle of "asset backed risk sharing techniques" in its capacity as the approved theme.

Gold Dinar?... an alternative currency for ALL.

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Money plays a vital role to the economy of any country, not only for providing a medium of exchange but also for the basic survival of the economy of the country. Traditionally, many things have been used by man to accommodate trade and be used as money such as sea shells, gold, silver, special type of stones and so on. Currently the world is using the paper money as the official medium of exchange between individuals and institutions. So far the system has managed to survive many financial crises and it seems to be in use for many years to come. Unfortunately, the paper money system does have its flaws including some that make it an unacceptable medium in the eyes of Islam. These flaws are shared here along with an alternative system (Gold Dinar) that can be used by the world communities as a sustainable one for all. This new system is one that is sure to be just and also in accordance with the Shari’ah standard.

 

Shari'ah Response to Fiat Money

 

• The introduction of paper money has led to the problem of instability of currency that did not exist with the usage of the gold standard. The The production of gold was quite stable and it then automatically guaranteed stability.

 

• Paper money unfortunately can be created anytime based on the decision of the government. This is what makes it so unstable unreliable as a medium exchange. With an ounce of gold could buy the same amount of goods over an extended period of time whereas with a twenty dollar note may not be able to enjoy the same privilege.

 

• The government decides the money matters of a country and is also responsible for increasing or decreasing the value of its currency. For example, a country may require more money to finance all of its programs. On the other hand, the country might be spiraling into a depression, which will result in reduced public spending.

 

Significance in Gold Currency (Dinar) 

Most Islamic scholars asserted that, the usage of fiat money as a medium of exchange should be replaced by another medium that would be fair and just;preferably gold. One advantage would be that the government will not be able to exercise total control over it as is the case of paper money. The government will no longer be able to issue more gold than is available as was the case with the paper currency where the government can print as much currency as it wishes. After all, how much will it cost to print a piece of paper? The value of gold will only change when a new gold mine is found, but that too will not be a severe change. Moreover; the value of gold will eventually stabilize after a period of time.

• A second advantage of gold is that, there will be no Riba al- Fadhuly (interest with extra commodity) as the government will no longer be able to fully influence the circulation of gold or its creation. However, the chance of exploitation will still occur because the gold coin may be debased. Debasement of a gold coin would mean that, it will have less gold in it than is stated on the coin.


• This form of exploitation was quite common during the days when the gold coin was in use. The prince or king of a place would reduce the amount of gold in the coin and cheat his people. He would then keep the extra amount in the royal treasury for his own personal use and comfort. Hence; if a coin stated that, it was a 1.00 ounce coin, in reality it may have contained about 0.8 of an ounce.


• This issue must be resolved before we decide to use the gold Dinar again as it is not much different from the exploitation that one suffers at the hands of paper money. Moreover; the whole purpose of Dinar or gold coin would then be destroyed.

• A solution to this could be an auditing body that would inspect the gold coins to check whether they have the stated amount of gold in them or not. This is just like the quality control department in some firms, which check whether the quality of their goods is up to the standard or not.

• The Muslim countries will be using a currency that will be acceptable to all. The countries dealing with the Muslim countries will know that the gold in itself has value and will not worry about its depreciation or vice versa. This will result in a lot of trade among the Islamic countries and also the rest of the world.
• It will encourage trade and commerce among the Muslim nations. Even though there are many Muslim nations in the world, who have a very low level of trade and commerce exist among them. A single currency will make it easier for the Muslim countries to trade with one another and thus bring them closer in line with the broad principles of Ukhwah (brotherhood).
• By fostering closer ties among the Muslim nations and also better trade relations, the Muslim countries will no longer be as dependant on other non-Muslim countries as they currently are.

• Presently, some Arab countries sell oil in US Dollars as they feel secure knowing that it will not lose as much through depreciation than other countries. These countries can then revert to the Islamic Dinar and ask for payments in that currency. At one hand, they will benefit because, there is a very low chance that the gold coin will lose value. On the other hand, it will help the Muslim countries as a whole by ensuring that the rest of the world will use their currency. Hence, the Islamic Dinar will make the Muslim countries financially stronger and will alleviate their current plight.

Final Remarks

The concept of Islamic Dinar is not new and was in use long before the paper currency came into existence. The inherent flaws in fiat currency makes it unsuitable for the use as a medium of exchange and hence needs to be rejected.

A viable alternative would be to revert to the gold standard and use gold coin that we can name the “Islamic Dinar”. There are numerous benefits associated with the usage of this mode of currency if implemented successfully. Those of importance for the Muslim world are the factors that it will help the Muslim countries unite; make them stronger financially and also aid in increase trade between them. The Muslim countries will have to join hands in this effort to create the Islamic Dinar which will not only provide the world with economic stability but will also be responsible for bringing the Muslim world closer together. Although, Malaysia together with few other Muslim Nations struggle hard to make the dream comes true, but may not be accurately possible unless all Muslim nations are united to achieve the goal and hence, the unity among Muslim countries is essential or rather the foundation for success.

Islamic Common Market Global?

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A step towards the formation of Islamic Common Market (ICM) was taken to bring about a global Ummatic unity among the Islamically trading countries so that they would be able to achieve maximum eco-goals with standard, progress & prosperity. But after years what had actually brought such awareness again? Is it the 11th September attack on the WTC?

After this incident, Muslims are being attacked on a very large scale as they are being blamed for this tragedy. Whosoever caused it, is the whole population of Muslim going to suffer the consequences?

Moreover, the Muslim in different countries have now come to realize that, their position in the world has been tarnished greatly. They are being heavily oppressed and controlled by the foreign powers, especially the Western. This oppression is well evident in the murderous killing of the Palestinians by the Jews. It was the cry of these pitiful people and other Muslim victims that there should be a need to re-identify the position of the Muslim in the world.

Whatever the case may be, the Muslim countries have now realized that they need to rebuild their identity and reposition their eco-political status in the world and save themselves from the yet coming potential harassment and oppression.

Islamic Common Market (ICM), which is the first step towards the reawakening of the Muslim Ummah. This proposition will have to deal with, such as globalization and to create an utmostphere to fully make people aware the need of an Islamic Common Market to strengthen the ties between Muslim countries and establish a Shari’ah based trading and commerce system.

It is to help people vision as prospectus and a means by which the Muslims can prosper and live with dignity without being picked at by the non-Muslim countries. It also aims to show the economic prospects of the proposition.

Islamic Common Market may contribute towards a readiness to take away the carpet from underneath the legs of the ICM. furthermore, Muslim all around shall appreciate the importance of their contribution to ICM in reality.

The economic level we need to accelerate the process of taking practical steps toward the realization of economic integration of Member States. Such integration should take the form of an ICM.

Due to the continuous economic and political competition between Muslims and non-Muslims nations, the concept of “Islamic Common Market” (began at the 12th Conference of Foreign Ministers of OIC in June 1981) emerged to actualize the need to materialize the economic unity of Muslim Ummah through economic integration.

The chief objective of the ICM is to provide the perfect banking, finance, marketing, trading and other economic related system necessary for the Ummah to progress smoothly in its Islamic role, to furnish it with the essential powers and faculties for its proper functioning and to clarify its vision and its methodology.

In a nutshell, Islamization of Common Market means an Islamic framework of transaction for human life and civilization. It determines every human activity, struggle and action in Islamic way. Islamic Common Market aims to enrich the followings with sustainability:

1. Relation between Eco-Politics.
2. Sovereignty.
3. International Society and Order.
4. Shari'ah Standard Ideology.
5. Specific Operational Mechanisms.
6. Ummatic Unity Global.
7. Ummatic Mutual Cooperation, Respect & Understanding.