ISSF 2015 sets out resolutions for strengthening the Islamic finance industry

The International Shariah Research Academy for Islamic Finance (ISRA) has organised its 10th annual International Shariah Scholars Forum (ISSF 2015) in collaboration with the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank in Jeddah.

The main theme ISSF 2015, held in Malaysia, was Strengthening the Global Connectivity of the Islamic Finance Industry: Reality and Prospects. At the end of the event, Sheikh Dr al-Ayyashi Feddad, Senior Researcher representing IRTI, read out the resolutions of this year’s forum:

First, for ISSF

• ISSF 2015 proposes to set up a committee to evaluate the past ten years of ISSF, and to put forward a plan for the next ten years. 
• Coordination with relevant parties, including individuals and organisations, to further strengthen the ISSF. 
• Open more collaboration with other parties in organising the ISSF. 

Second: Regarding differing fatwas and their effect on strengthening the global connectivity of the Islamic finance industry

• Differing views and fatwas are positive phenomena if they are based on the principles of ijtihad in the shari'ah. 
• It is advisable to work on closing the gaps in fatwas in order to prevent contradictions in practical application and also to harmonise between the fatwas and the financial products. 
• Efforts are needed to further develop and strengthen shari'ah governance in the Islamic finance industry. 
• ISSF 2015 also recommends the establishment of a supreme council by supporting organisations such as the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), IFSB, IDB and CIBAFI, together with the International Fiqh Academy and IDB. This council would have its own shari'ah board and other technical boards. Its resolutions would be endorsed by the International Fiqh Academy in its position as the highest shari'ah reference for Muslim countries. 

Third: Regarding research institutes on Islamic economics and Islamic finance
effort should be made to cooperate on major projects and to plan research for the next ten years by identifying gaps that need to be filled and prioritising them.

• There is a need for cooperation in appraisal studies and in developing mechanisms to rate research on Islamic economics and finance. 
• The forum calls for the establishment of new research institutions for Islamic economics to pursue objectives and study areas that the existing research institutions are not dealing with in order to bring added value to the academic research. 
• Mechanisms should be established for competition among research institutions within a cooperative framework with the objective of improving their end products. 

Fourth: Regarding roducts

• Innovative solutions should be found for the Islamic finance industry, especially in the area of sukuk and working towards partnership-based financial instruments. 
• The forum calls for the study of successful international models of financing that are close to Islamic financing based on partnership or any interest-free financing modes. 
• Special attention should be given to Islamic sukuk as they are the most effective financial instruments in realising global connectivity at the supervisory level and in the capital markets. 
• Special attention should also be given to the products of the charitable sectors, particularly the zakah and waqf institutions. It is recommended that next year’s Forum be about establishing an international institution to coordinate between zakah organisations. 
• Work should be done on binding terms of reference for the members of shari'ah boards of Islamic financial institutions. 
• A working committee should be formed to lay down the principles of fatwa to ensure its stability and its linkage to other relevant areas such as legal, accounting and risk management. 
• Work should be done on a mechanism to coordinate between shari'ah boards in order to establish rules regarding governance of the boards and conflict of interest. The ISSF 2015 invites ISRA, IRTI, AAOIFI, IFSB and CIBAFI to propose a mechanism for its implementation.

Interested?

Read the Suroor Asia blog post about the ISRA-Thomson Reuters Islamic Commercial Law Report 2016, which was launched during the event

Scholar calls for global shari'ah compliant dispute resolution mechanism

Islamic finance scholar Professor Dr Akram Laldin from Malaysia has said there is a need for a global shari'ah compliant dispute resolution mechanism at the eighth Shari'a Scholar session hosted by The Waqf Fund, a Bahrain-based special fund to support Islamic finance training, education and research.

Dr Laldin is a board member on Bank Negara Malaysia's Shari'a Advisory Council, AAOIFI and a number of Islamic financial institutions in Malaysia and globally.

Dr Laldin also stressed that shari'ah scholars hold heavy responsibility and should be proactive in developing themselves through continuous training, not just in shari'ah but also in relevant areas such as economics, finance, banking, accounting, and law in order to be able to give a religious verdict after full knowledge and understanding of the matter.

According to Dr Laldin, several key challenges are seen in shari'ah compliance, suggesting the need for a global dispute resolution body, which does not exist at this time:

• Conventional mindset of key decision-makers and a lack of conviction and belief in what they are doing
• Not following the right process
• Copying conventional products without due consideration to shari'ah
• Implementation challenges in the absence of understanding of shari'ah
• Lack of understanding of shari'ah by the auditors
• Advertising and promotion not in line with shari'ah
• Restructuring products or transactions without ensuring shari'ah compliance

Eight-point plan to move halal industry forward

The World Halal Conference 2014, themed Global Food Security-the Halal Perspective, closed on 10 April with a raft of resolutions for growing the halal industry. Thought leaders and industry players alike have pledged to move forward on providing halal products and services on a sustainable basis. 

Delegates recognised weaknesses in the halal supply chain, including an imbalance in food production and distribution, and the inability for suppliers to meet global demand for halal products and services. 

"It is envisaged that over the next few years there will be a phenomenal 70-100% demand-increase for food, causing a mismatch between agricultural production capability and global demand.

"In our perspective study of this depleting supply of halal provisions, the countries affected are not just Muslim-dominated ones but includes non-Muslim countries as well. The global halal market is supported by 1.8 billion Muslims but the countries involved in the halal food production and export trade are only a handful and amount to a mere 20% of food production. What happens to the remaining 80% is also now our immediate concern," said Dato' Seri Jamil Bidin, Chief Executive Officer of Halal Industry Development Corporation (HDC).

Countries engaged in the production of halal food, products and supply include Thailand, Indonesia, China, Turkey and Malaysia. The halal supply chain is most active in the food and beverage sector (47%) but also includes a complete range of other products and services, such as pharmaceuticals, personal care products, cosmetics, alternative ingredients, shari'ah-compliant banking products and services, and logistics.

"To my mind this situation could be more heart-warming if more countries could join in the food production fray and close up the gaps in the food supply picture," added Jamil.
Delegates recognised the next steps required to centre-stage the areas of improving and fortifying the halal production and supply chain, and concluded the conference with an eight-point resolution plan:   

1. Affirm Malaysia's commitment to the application and implementation of halal standards and promoting it as a holistic way of life;
2. Enhance awareness and realisation on the interrelationship between 'halal' and food security;
3. Recognise the integral role of halal practices in food waste reduction, biodiversity enhancement, and safety of product consumption for a sustainable global food security system;
4. Exchange of experience and innovative ideas from various countries and reflect upon the approach taken in these countries to develop a seamless point-to-point supply chain;
5. Address the issues of food security through a normative framework as the essential reference to ensure an effective food distribution system;
6. Link Islamic asset-based and asset-backed banking instruments to the financing of the halal industry to realise true convergence of Islamic principles throughout the industry;
7. The power of branding should focus on the people's needs, for example, addressing nutritional needs, safety and wholesomeness; and
8. Recognise the continuous need for research and development and innovation to develop halal alternative ingredients which can fulfil the food supplies requirement for the halal market.

The World Halal Conference is organised by HDC and hosted by the Ministry of International Trade and Industry (MITI) of Malaysia. The two-day conference had attracted close to 1,200 participants and international delegates from 52 countries. The event is part of World Halal Week, which runs from 9 to 12 April. 

Photos of the conference can be viewed here.