3rd WORLD DEVELOPMENT STRATEGIES? a "Debt-Free Mechanism".

"Cooperative Micro-finance" & "Cooperative Micro-Bond" may be among the right alternative Moves to facilitate a Sustainable “Debt-free 3^rd World National Development” with result oriented achievement by creating the Nation and it’s People Self-reliant, Matured, Esteemed, Peace, Proud, Progressive and Prosperous in the Contemporary World of advanced Socio-economic Reality.

Corporate Personality in Islamic eco-Reform

Holistic Directions to Corporate Personality......

What is disapproved business conduct? It is the absence of any or all f the aforementioned constituents in one’s business conduct. Generally speaking, Islam prohibits all such transactions which results in litigations; which depend just on chance and speculation; those in which the rights of the contracting parties are not clearly defined; and which enables some to amass wealth at the expense of others.

No matter what the form, the essence of disapproved business conduct comprises unjustified consumption or appropriation of other’s wealth and right. This is exactly what Al Qur’an has strictly forbidden by calling it either akl bi al-batil (unjustified consumption) or zulm (injustice). Since injustice lies at the root of all undesirable business conduct, therefore all the Qur’anic injunctions focus on the elimination of this basic evil.

 In some cases the injustice may not be apparent, yet it is always there. In order to nip the evil in the bud, Islam seeks to block all those channels that eventually lead to injustice. For the purpose of elaboration, it is proposed to divide the subject into three main categories; namely , (a) riba, (b) fraud, and (c) other disapproved practices.

RIBA

Riba literally means increase or addition. Technically, it refers to the addition in the amount of a loan in consideration of the time for which it is advanced or of the time for which the payment of loan is deferred. Juristically, however, riba signifies the additional money that is given or taken in a dollar-for-dollar exchange and uncompensated increase on one side when a commodity of the same kind is bartered.

The jurists have divided riba into two categories, which are riba al nasi’ah and riba al fadl. Riba al nasi’ah also known as riba al-jahiliyyah is the one expressly prohibited in the Qur’an while riba al fadl was prohibited by the Prophet (p.b.u.h) in order to block all channels of riba’.

It is the additional amount sought on loan, usually on the basis of time. This addition, irrespective of its rate or percentage, is the riba prohibited by Al Qur’an. It makes no difference whether such a loan was sought for the purpose of consumption or that of investment. Riba al fadl occurs in bartering commodities of the same kind without equality in their quantities.

Basically, the process of riba enters when someone adds or demands an addition from the same quantity. In order to get clear understanding of the meaning of riba, let us consider the following ahadith and the opinion of the great authorities of Islam.

Any loan that brings profit is riba. (Hadith) Anyone who recommends a person and then accepts a gift from him has committed riba. (Hadith) Acceptance of a gift from one’s debtor is riba (Ibn Mas’ud) 1.Eating in the house of one’s debtor is haram ( Hasan Al Basri)

Danger in Riba

Riba is definitely involves unlawful consumption of other’s wealth. It is, therefore, abhorrent and evil. According to Sayyid Qutb, riba is evil because the lender receives an additional amount over and above his capital, “extorted from the labor or flesh of the debtor”. Riba is directly opposed to the cooperative spirit of Islam. A wealthy person is required to pay off the right of the poor attaching to his wealth by paying the zakat due thereon and the supererogatory sadaqat in addition. Mawdudi has enumerated the following vices of riba:

(i) It gives rise to greed, excessive parsimony, selfishness, hard-heartedness, tyranny and money worship.

(ii) It promotes hatred and enmity instead of sympathy and cooperation.

(iii) It encourages hoarding and accumulation of wealth and discourages its direct investment in productive enterprise. Investment, if ever made, is invariably focused on personal gains and in total disregard for the needs of the society.

(iv) It prevents the circulation of wealth by concentrating it into the coffers of the capitalists. Riba is danger because it contradicts the vital principle of al-ghurm bi al-ghunm (i.e liability must go hand in hand with advantage). Even from a purely economic standpoint, riba is plagued by several disadvantages.

According to Anwar Iqbal Qureshi, interest is the fountainhead of all economic evils and is responsible, by and large, for the concentration of wealth.

FRAUD

al-Qur’an disapproves of fraud and cheating in whatever form they might be. Cheating is described as the predominant characteristics of the hypocrites for whom the Islam requires its adherents to be honest and trustworthy. One who is intent on resorting to frau and cheating does not deserve to be counted a genuine member of the Muslims ummah despite one’s verbal assertion of being a Muslim. Some specific forms of fraud expressly prohibited by Al Qur’an and the Hadith are discussed below.

Tatfif (Engaging In Fraud)

Tatfif literally means stinting, scrimping and niggardliness. A mutaffif is he who diminishes from the due share of others for whom he measures while paying to them or receiving from them.

The term is used in Al Qur’an with special reference to the practice of diminution in weights and measures, thereby depriving others of their due rights. Al Qur’an warns and condemned those who give short weight and measure to others and receive from them in full and promised a severe punishment.

Some scholars, like Yusuf Musa maintains that a worker who does not do his work sincerely and efficiently is a defrauder, cheater and dishonest person. In other words, the worker who receives his wages in full but does not perform his duties honestly and efficiently is also denoted as mutaffif.

Dishonesty

Dishonesty is one of the worst forms of fraud. A dishonest person is always prone to defraud others whenever and wherever possible. Islam forbids any misuse or misappropriation of an employer’s property by his employee, who is entitled to the mutually agreed wages only.

Appropriation of anything beyond the stipulated wages is either dishonesty or stealing, both of which are expressly prohibited.

Falsehood and Breach of Pacts or Promises

al-Qur’an is strongly opposed to falsehood. False assertion, unfounded accusations, concoctions and false testimonies are severely condemned and strictly prohibited.

al-Qur’an curses the liars and the Prophet (p.b.u.h) describes lying as one of the three signs of a munafiq. Falsehood is harmful in everywhere and in every case. In the realm of business, its damaging effects are enormous and can never be overemphasized.

Misstatement about merchandise not only harms the customers but the producers and traders as well. Dependability of the product and reliability of its trader play a key role in the establishment and enhancement of any business concern. Prophet (p.b.u.h) also prohibits al-najsh, the practice of offering a higher price with intention of persuading others to raise their price offers.

Clearly, falsehood and deception are condemned in all their various forms. Breach of one’s pacts and promises is another evil practice strongly opposed by Islam.

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)