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ISLAMIC FINANCE PAKISTAN

I S L A MI C FIN A N CE IN D US T RY N E WS L ETT E R V O L UM E 3 IS S U E 1 1 DE C EM BE R 2 0 12

State Bank of Pakistan (SBP) has recently issued the instructions for Profit and Loss Distribution and Pool Management for Islamic banking institutions in November 2012
Comments on the instructions by industry expert Mr. Omar Mustafa Ansari
These instructions on Shariah compliance for profit and loss distribution policies are actually a step forward towards an improved, more compliant with Shariah and near to ideal system of Islamic finance. Profit and loss sharing is an area which is very much neglected by Islamic financial institutions throughout the world. Till very recent, proper guidelines and standards were also not available on this area. SBP had started this initiative a few years back and certain studies, surveys and training sessions were conducted by SBP. This process took some time, but however, the document that came out is a very good document of its kind and probably can be termed as the only comprehensive guidelines on this area issued by any central bank. SBP needs to be praised for this initiative. These instructions have been developed taking into consideration the Shariah requirements, as well as the risk management requirements including clues taken from the IFSBs standards. While no such regulations can even be termed as perfect, yet these cater to the most of the Shariah compliance and risk management issues that these IBIs are facing. It can generally be concluded that if an IBI follows these instructions in their essence, it will have to face some difficulties in the initial periods but the new system would evolve as a more Shariah compliant and more risk averse system of profit and loss sharing with depositors. Coming on the views from the industry, which particularly were echoed during the time when the draft was under discussion at various forums; it can be noted that the industry is not-so-happy on this move. They feel that these are too strict guidelines and SBP is trying to get smarter (and difficult, as well) as compared to other regulators and supervisors. However, the Shariah Advisors and scholars are generally praising these instructions as a step forward. The effects of these instructions will inter-alia include improved internal controls and mechanism of pool creation, asset transfers and earmarking, reduced reliance on ( as well as permissibility of) Hiba, reduced difference between haves and have-nots by having controls over the weightages assigned and transfer of assets from one pool to another. IBIs will be required to maintain appropriate accounting records for each of the pools and shall maintain Profit Equalization Reserve (PER) and Investment Risk Reserve (IRR) for improved risk management and decreased reliance on Hiba. As in past, a verification by the Shariah Advisor, as well as, the auditors will be required to validate the workings. This is important to note that at the same time the Islamic Financial Accounting Standards (IFAS) 3 on the same subject is being finalized at ICAP, and once it is approved by ICAPs council and notified by SECP, this will add relevant accounting and disclosure requirements. Their combined effect is expected to improve the overall system in many ways.

Ayat of the Month Wealth and children are the embellishment of the worldly life, and the everlasting virtues are better with your Lord, both in rewards and in creating good hopes. [Al-Kahf: 46]

Inside this issue


Inside Story Editors Message Moves and promotions Industry Progress and Events - 2012 Local and International News Get a glimpse of what is happening in the world of Islamic finance In the Spotlight Ask US By Mufti Ibrahim Essa and Mufti Javed Ahmed Upcoming Events

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Editorial
LIBOR rigging is, now a days, appeared to be the most burning issue in the financial markets all over the globe. It was revealed just few months ago that some leading European banks, including Barclays, had been understating their offered rate for inter bank transactions during 2005-07. This was followed by investigations which led to the penal action and resignation of Barclays CEO Bob Diamond. The stability and integrity of European financial market is shaken by this catastrophic jolt. The funds and players in the derivatives market are still in shock by knowing that they had been paying more than what they were suppose to and that they paid more, for hedging lesser risks. I am not intending to highlight the issue of LIBOR rigging, rather here I want to drag the attention of readers towards the spider-web nature of conventional banking system which, truly, seems to be a paradox by first sight but weakest of all in real. This banking system is called the backbone of any economy. The conventional banking system represents an economy where rich is called rich for the numbers stored in a computer of bank under his name. Despite knowing the fact that this water-bubble banking system is like the water which is only clear from its surface and can turn grimy if touched in bottom, real asset markets linked their financial decisions with the preferences of non-real asset market. If someone argues that this was a fault of few people not the system as a whole, my reply is that this was an inevitable event which is a minor part of consequences of conventional economic system, and if we persist on it, we should wait for more. Dick Bove, a well known financial analyst, concludes his analysis on this issue by saying: This problem is not one that will disappear instantly. Not only it is required to discover who else is involved in this scandal, but a whole new system must be developed for pricing loans that is not dependent on bank inputs. This will take time. In the interim, who can believe the rates in the loan markets? The need of real asset-backed banking system is being realized globally. The time for Islamic banks has now come to surface to make the world financial intellectuals believe that the only salvation lies beneath the adoption and promotion if Islamic banking system as the stand alone banking system. But first we are needed to bring ourselves out of the influence of conventional banking system and dig out the solutions from our own earth.

Advisory Board
Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Mohammad Aslam Mujeeb Baig Syed Shahjahan Salahuddin Faizan Memon

Editor-in-Chief
NusratUllah Khan

Associate Editors
Muhammad Shahzad Hussain Arshad Hussain Zubairi Ammar Khalid Rima Farooq

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Summary of instruction issued by SBP on Profit and Loss Distribution and Pool Management for Islamic Banking Institutions (IBIs)
SBP has exclusively mentioned in the instructions issued about the key features that an IFI or IBI should comply in order to ensure proper profit and loss distribution among the depositors and the IFI or IBI as a manager of funds. Some of the key instructions and features are summarized below. enlighten and stipulate objectives, investment strategy and risk characteristics. Afterwards it should be approved by the Shariah Advisory and Board of the Directors (BOD) of the IBIs and suitably approved copy should be submitted to Islamic Banking Department of SBP within three months of issuance of these directions.

Foreign currency deposits


It is preferable for IBIs to create separate foreign currency (FCY) deposits and they will be managed as according to the instructions of SBP Foreign exchange manual.

Creation of pools
Deposits which are based on Mudaraba comprises of IBIs deposits mix. In the deposit mix the IBIs requires allotment of profits in placements, financing and investments. The depositors are elaborated as Rabbulmal and the IBIs are regarded as Mudarib by the deposits as funded. Percentage of their investments will be borne by the

Identification and allocation of pool related income and expenses


The allocation of income and expenses to different pools shall be made on a pre-defined basis and accounting principles / standards. The direct expenses shall be charged directly to their respective pools while indirect expenses will be borne by IBIs as Mudarib as well as the provisions,

Smaller sized IBIs can approach SBP for extension in time frame for development of the IT system

Every pool has its own segregated sources of funds, income, expenses and rights of particular assets
depositors in case of loss. One or more pools are being set in for the depositors funds, and each of the pool has its own separate risks and rewards features. The profit and loss divisions have an impact considerably from the practices and policies of IBIs pool management. Every pool has its own segregated sources of funds, income, expenses and rights of particular assets. IBIs must have a discrete and a very well defined framework that elaborates profit, loss distribution and pool management framework that is being financed by diverse types of Mudaraba based deposits for the creation of novel pools. The framework of every pool should include every phenomenon that
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The pools that are being created should have a compliance with the aforesaid framework that is being formed through an accord signed by the certified senior executive. The pool shall be recognized and ensured at the occasion of accepting and allotment of such deposits to the particular pool. IBIs are also allowed to create treasury pools as according to pool management frame work for interbank transaction. However they shall be maintained separately due to its nature. i.e. liquidity management.

The losses on financings and investments due to negligence / breach of contract by IBI shall not be charged to the pool
either specific or general created against non-performing financings shall also be borne by the IBIs as Mudarib. However, write off of financings and loss on sale of investments shall be charged to their respective pools along with other direct expenses as well. The losses on financings and investments due to misconduct / negligence / breach of contract by IBI shall not be charged to the pool; the IBI as Mudarib shall be considered as responsible for absorbing such losses.

Adequate IT based system


IBIs are required to have an adequate IT based system which is specifically designed according to the requirements of allocation of deposits to their respective pools. And any limitation shall be addressed within a year, but smaller IBIs can approach for extension in time for the development of IT system.

Profit / loss allocation between depositors fund and IBIs equity


In case of combine investment i.e. IBIs equity with depositors fund in a pool, the net income / loss of the pool shall be allocated between IBIs equity and the depositors fund in proportion to their respective share in pool. Profit
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Investments
The IBIs shall invest the Mudaraba based deposits in earning assets like financing, investments etc and the IBDs can also invest its own equity with the depositors fund in a pool.

Continued Summary of Instruction issued by SBP on Profit and Loss Distribution and Pool Management for Islamic Banking Institutions (IBIs)
and loss on the Mudaraba based deposits shall be computed and distributed on the basis of average balance in the depositors account during the profit computation period. as reserve. For managing PER the profit sharing ratio for IBI as Mudarib should not be more than 10% though the funds of PER should only be invested in the Shariah compliant SLR Securities. The funds of PER to a total extent or to a limit, may be used by the IBI to improve the returns of the allocators depositors on the basis of these directions shall be focused to

Profit Sharing Ratio (PSR)


Depositors and IBIs shall determine the profit-sharing percentage between them and declare within three working days of the opening period concerned. In case where reconsideration is vital in the PSR the depositors should be allowed to take out their investment with no deduction and penalties. From the pools profit the Mudarib share is

The Profit Equalization Reserve (PER) sustain by IBIs from the net income of pool

In case of lower than market returns earned by the pool, IBI may forego up to 60% of its Mudarib share as Hiba to meet the market expectation

verification / audit which will be jointly conducted by Shariah advisors and External auditors.

From the pools profit the Mudarib share is permitted plainly on profit to the depositors

permitted plainly on profit to the depositors. Moreover, the distributable profit shall not exceed over 50% of Mudarib share.

eventhough the profits of the pool are somehow inferior to market prospects. In case of lower than market returns earned by the pool, IBI may forego up to 60% of its Mudarib share as Hiba to meet the market expectation. Nevertheless, the IBIs sustained PER will only shrink their Mudarib share if the PER is inadequate to improve the profits pay outs to the depositors.

Weightages
In the pool management framework the weightages to different class of deposits in a pool should be based on parameters / criteria as defined. The Mudarba based deposit of any ,nature, tenor and amount shall have the maximum weightage of not more then 3 times of the weightages assigned to saving deposits.

Investment risk reserve (IRR)


In order to shroud the future investment losses, IBIs may create the investment risk reserve (IRR) to devour the losses. The resources of IRR shall only be invested in such a way that it must comply with the regulations of the Shariah SLR Securities and the funds allocated will be attributed in the IRR account. In order to manage the IRR the profit sharing ratio for IBI as Mudarib shall not over 10% mark. For instance there is a loss induce by the pool it should cover up from the available resources of IRR.

Profit smoothening
Profit equalization reserve may be maintained by IBIs from the net income of the pool i.e. the gross income less direct expenses and losses. In the books of the IBI 50% of the balance in PER is elaborated as liability and the remaining 50% is considered
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Verification / Audit
The allocation of profits / loss to the

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Moves and Promotions


Muhammad Adeel Siddiqui Shariah Compliance Manager at Burj Bank Limited
Muhammad Adeel has joined Burj Bank Limited as the Shariah Compliance Manager. Previously he was in Meezan Bank Limited.

Mufti Muhmmad Imran - Shariah Coordinator at Burj Bank Limited


Mufti Muhammad Imran has joined Burj Bank Limited as Shariah Coordinator.

Mr. Allam Muhammad Arshad - Junior Shariah Coordinator at Burj Bank Limited
Mr. Allam Muhammad Arshad has joined as a Junior Shariah coordinator at Burj bank.

Mufti Abdul Rehman - Shariah Advisor at UBL Ameen


Mufti Abdul Rehman has joined UBL Ameen as Shariah Advisor.

Mr. Arbab Riaz Ahmed - Head of proposed Islamic Banking Division at BOP
Mr. Arbab Riaz Ahmed has joined BOP as Head of proposed Islamic Banking Division.

Mr. Abdul Razaq - Group Head of Corporate and Investment at Al-Baraka Islamic Bank
Mr. Abdul Razaq Husain is promoted as Group Head of Corporate and Investment of Al-Baraka Islamic bank. Previously he was the Head of Credit.

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Industry Progress And Events 2012


February 2012 2nd International Conference on Islamic Business (ICIB- 2012)
Two days 2nd International Conference on Islamic Business (ICIB- 2012) was held at National Institute of Banking & Finance (NIBAF) Islamabad on 28-29 February 2012 to discuss the practices and prospects of Shariah compliant businesses. The event provided a platform for discussions to researchers, academics, policymakers, corporate leaders, and practitioners of Islamic finance. The conference participants deliberated on challenges of managing the modern day businesses in accordance with Shariah principles.

May 2012 Pakistans first International Islamic finance expo and conference held at Expo Centre
Pakistans first International Islamic finance expo was held on May 18-19, 2012 at expo center Karachi. The event was organized by Publicity Channel with the support of State Bank of Pakistan and Ernst and Young Ford Rhodes Sidat Hyder was the technical partner for the conferences. The event showcased products and services of Islamic banking industry. The exhibition was followed by a conference on growth of Islamic finance industry with its strategic outlook.

July 2012 SECP launches new Takaful Rules


The existing Takaful Rules were issued in year 2005. During the course of business activity and implementation of these rules, a number of practical issues were highlighted by the stakeholders. To address these concerns, the Securities and Exchange Commission of Pakistan (SECP) constituted a committee in year 2007 with a mandate to review the existing Takaful rules and recommend the possible enhancements. The new rules were launched at a local hotel in Karachi where chairman SECP, Muhammad Ali officially announced the promulgation of the new Takaful rules, 2012. These rules will also be available on the official website of SECP.

August 2012 Draft Takaful Rules challenged by the Takaful companies


Five Takaful operators Takaful Pakistan, Dawood Family Takaful, Pak-Qatar Family Takaful, Pak-Qatar General Takaful and Pak-Kuwait Takaful Company filed a petition in the court in Sindh, the countrys second-largest Islamic banking market, to protest the rules which allow conventional insurers to offer Takaful services. Takaful Rules, 2012 would make Pakistan the second country after
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Industry Progress And Events 2012


Indonesia to officially allow Takaful windows, which enable the organizations to offer Shariah compliant and conventional products side by side.

September 2012 IFN Road show 2012


Supported by the State Bank of Pakistan, the Islamic finance news Pakistan Road show 2012 was held on 4 September and featured prominent players from around the world to share their knowledge and expertise within the Pakistani market. The event had renowned speakers from various banks and other organizations.

Silk bank launches Islamic banking


Silk bank is pleased to announce the commencement of Emaan Islamic banking (division of Silk bank) subsequent to approval of State Bank of Pakistan (SBP) in the beginning of the year.

October 2012 SECP issued draft Sukuk regulations


In order to develop the Sukuk (Islamic bond) market on a stronger footing, the Securities and Exchange Commission of Pakistan (SECP) has issued the draft Issuance of Sukuk regulations, 2012 to elicit public comments. SECP statement said that the regulations are aimed at facilitating the issuers and to provide comfort to the Sukuk investors. The regulations broadly cover eligibility and conditions for issuance of Sukuk, disclosure and reporting requirements, and appointment of trustee and Shariah Advisor.

November 2012 SBP released Instructions on Profit and Loss Distribution and Pool Management for Islamic Banking Institutions (IBIs)
SBP felt that there was a need for the Islamic banking industry to have well-defined, transparent and standardized policies profit and loss computation and distribution due to the peculiar nature of the relationship between depositors and IBIs, where income earned by the IBI has a direct impact on depositors return. In light of the above, SBP recently released the Instructions on Profit and Loss Distribution and Pool Management for IBIs, applicable on all the Islamic banks effective immediately.

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Islamic finance house opens its new main branch in Abu Dhabi
It has been reported that Islamic Finance House Pvt. JSC, (IFH) has announced the grand opening of its new main branch, which is located at the heart of the capital city, Abu Dhabi. Committing to grow across the UAE and serve customers' seeking Shariah compliant financial services through its wide and diversified portfolio of Shari ah co m pli an t p ro du c ts including, personal and business finance.

opportunities available within the Islamic finance.

Entrepreneurs 2012
Entrepreneurs 2012 held at the Excel Centre, from 13th 16th November 2012 incorporating the Leaders First Conference & Gala Dinner. President Clinton team at Global Islamic Finance magazine attended Entrepreneurs 2012 in London. It is said that the conference was held to promote Islamic finance and business to all entrepreneurs and not only those who already know the concept of ethical financing and banking.

18 months and is structured as a revolving Murabaha facility, was provided by Qatar Islamic bank in a capacity as sole mandated lead arranger.

World Bank MD sees Islamic finance asset growing 10%-15% annually


The size of global Islamic finance assets is expected to grow between 10% to 15% annually over the next three years buoyed by strong demand and supply factors as well as effective regulation and quality of services that will sustain growth, according to a top official of the World Bank.

Malaysia continues to lead in Islamic banking development


Malaysia will continue to be the global leader in developing and promoting Islamic banking systems, according to Roland Berger Strategy Consultants. Its senior partner, South East Asia, Markus Bohme said Malaysia will face competition from member countries of Gulf Cooperation Council (GCC).

BankDhofar ready to launch Islamic Banking Services


BankDhofar is ready to launch Maisarah Islamic Banking Services subject to the Central Bank of Oman (CBO) approval. It will be a fully serviced Islamic window which will enable customers to access Sharia'a compliant products and services through its highly skilled Islamic banking division..

Qtel agrees $500m debut Islamic financial deal


It has been reported that Qatar Telecom (Qtel), one of the Gulf Arab region's largest telecoms firms, has signed its debut Islamic financing facility, the operator said . The US$500m deal, which runs for

Emirates Islamic Bank partners with RTA to launch credit card with special city transport features
Emirates Islamic Bank , the Islamic banking arm of Emirates NBD Group, and Roads and Transports Authority (RTA) on 20 November 2012 announced the launch of a new Shariah-compliant visa credit card that is packed with special city transport features, and targeted at car drivers as well as metro commuters. The new Emirates Islamic bank RTA Credit card combines the features and benefits of a credit card and the proprietary Nol transit application, used for making payments on the RTA transit network and at parking meters. The unique product, which is fully Shariah-compliant, is the result of technical integration and careful planning in choosing meaningful benefits that provide customers with added value.

Womens career path in Islamic finance


An open day seminar to introduce the Women Islamic Finance industry and present the career opportunities available to all ladies on 29th November Umex Securities, a financial services company operating in the Islamic Finance space, held an open day for women to explore the

Disclaimer:
The news included here is on the basis of information obtained from local and international print and electronic media sources. IFP team does not accept any responsibility about their bona-fide.
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Indonesia prices $1 billion, 10-Year Sukuk at 3.3 percent


It has been reported that the Government of Indonesia has priced a US $1 billion, 10-year Islamic bond at 3.3 percent, 20 basis points tighter than the initial price guidance of 3.5 percent provided before the sale. "The offering achieved the tightest pricing for a US-dollar issuance by Indonesia in the international capital market," said by the Ministry of Finance.

Sri Lanka launches first Shariah-based Income fund


The Islamic finance industry in Sri Lanka achieved another milestone in its fast evolving history, with the launch of Sri Lankas first-ever Shariah based income fund recently. Structured as a unit trust, the Comtrust - Adl Mudarabah Fund is the second unit trust to be launched under the combined expertise of Adl Capital Limited and Comtrust Asset Management (Pvt.) Limited.

actions by regional countries, Asian Institute of Finance (AIF) board member Tan Sri Azman Hashim said. He said regional financial and economic integration within Asia will continue to take centre stage and countries within Asian must work together to sustain growth and close inequality in its diverse society.

CIMB Australia plans to leverage on Sukuk market


CIMB Group Bhd, Malaysias second largest lender, hopes to use its expertise in Islamic finance to distinguish itself from the competition when it formally opened its Australian operations in 2nd week of November, company executives said. That may include bringing Australian companies to the Malaysian Sukuk market as issuers for the first time. Malaysias liquid Sukuk market has already attracted interest from international issuers including those from Saudi Arabia, Bahrain, Kazakhstan and Hong Kong.

Barwa bank launches banking facilities


It has been reported that Barwa Bank, Qatars fastest growing Shariah compliant banking service provider, formally launched its private banking at an event held at the Museum of Islamic Art on Tuesday 13th November 2012.

The growing importance of the Islamic finance market


The General Authority of Civil Aviation of Saudi Arabia achieved the distinction to issue the single largest Sukuk worth US $ 4 billion in January 2012. The Kingdom's Sukuk market is now considered the third largest in the world, after Malaysia and the UAE, and is expected to continue to climb up the issuance ladder moving forward.

Hong Kong Sukuk bill developing


It has been reported that Hong Kong's bill to facilitate the issuance of Sukuk, or Islamic bonds, is expected to be ready early next year but initially at least, it may attract little interest among issuers. In March, the government asked for industry feedback on the subject and this month, it said it aimed to introduce a bill in early 2013.

IFFA Conference 2012


The first ever IFFA Conference 2012 will be held this year on 15th December 2012 at Masjid Sultan. With 400 participants, it will be Singapore's largest English-language Islamic Finance event for the public this year.

Asia continues to lead Global Financial and Economic growth


It has been reported that Asia will continue to be the centre of global economic and financial growth in 2013, with stronger collaborative

Disclaimer:
The news included here is on the basis of information obtained from local and international print and electronic media sources. IFP team does not accept any responsibility about their bona-fide.
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AAOIFI - World Bank Annual Conference on Islamic Banking and Finance to be held early December
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) will host the the AAOIFI - World Bank Annual Conference on Islamic Banking and Finance on 3 and 4 December 2012 in Manama, Kingdom of Bahrain. The conference will be held in cooperation with the World Bank and under the auspices of the Central Bank of Bahrain.

in the wake of challenging global economic landscape. While opening and chairing the 2nd meeting of central bank governors of the D-8 countries in Islamabad, Anwar said there was aneed for exploring sustainable models to promote Islamic finance in the D-8 economies.

Korangi, Karachi. The meeting was chaired by world-renowned Islamic scholar and Chairman of Meezan Banks Shariah Supervisory Board, Justice (R) Mufti Muhammad Taqi Usmani.

New Islamic products

finance

Meezan Banks airtimebased Sukuks approved


The Shariah Supervisory Board (SSB) of Meezan Bank Limited has approved the concept for the first ever airtime-based Sukuks to be issued in Pakistan. The Board has also approved detailed guidelines for Islamic banks related to sharing of security with other banks for long term Islamic project and structured financing. These decisions were taken during the 19th meeting of the Shariah Supervisory Board (SSB) of Meezan Bank held at Darul Uloom

Al Baraka Islamic Bank is not only going to introduce new Islamic financial products but will also open new branches in Pakistan to facilitate the consumers of Islamic financial products. CEO of Al Baraka bank Adnan Ahmad Yousaf said that Islamic banking is in fashion today and has earned a shine that continues to attract funds. He said that Islamic mode of banking and all its tools are fast gaining ground in Pakistan when compared to conventional mode of banking, though it is a highly untapped market as yet.

BOK Raast Islamic Banking inaugurated in Battagram


The Bank of Khyber (BOK) Raast Islamic banking branch was formally inaugurated at Battagram. BOK is committed to cater the banking requirements of all segment of society, providing Islamic banking & financial services in order to encourage the economic developmental activities in the region.

Second National Islamic Microfinance Conference held


Speakers at a seminar said that State Bank of Pakistan should develop a new policy instrument to take care of the financial needs of the small businesses. They said that phenomenal growth of 20-25 percent was witnessed in the world Islamic banking system. These views were expressed by them in the second National Islamic Microfinance Conference jointly organized by the State Bank of Pakistan, University of Veterinary and Animal Sciences (UVAS) and Farz Foundation. They also said that we need skilled people in the Islamic micro-finance industry and suggested that Wafaqul-Madaris should induct Islamic microfinance as a subject so that after studying Islamic finance they would be helpful in guiding the banks who are working in this sector.

Need to explore ways to promote Islamic finance


Stressing the need for continued collaboration amongst the D-8 central banks, on 21st November, Governor State Bank of Pakistan (SBP) Yaseen Anwar said the member countries need to explore ways to promote Islamic financing

Disclaimer:
The news included here is on the basis of information obtained from local and international print and electronic media sources. IFP team does not accept any responsibility about their bona-fide.
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Book in the Spotlight


Islam aur Jadeed Maashi Masail (Fourth Volume) By Justice Mufti Muhammad Taqi Usmani
Reviewed by
Mufti Haseeb Ahmed
The volume under discussion is the fourth volume of the 8 volumes book set. This volume is titled Makhsoos ashiya ki khareed -ofarokht aur unke ahkaam (Buying selling of specific goods / commodities and their rulings). This volume is more than its title it not only discusses rulings about trading of supplies and products under discussion but also discusses other Shariah related matters about their nature whether using these supplies or products being Haram or Haram. In the very beginning articles relating to a number of ingredients used in everyday products like alcohol, gelatin etc. which were either not prohibited with their typical nature or they are made from components w hich are not acceptable under Shariah principles. The writer describes the nature of such supplies as he is well known for his research of several things to find out their true contemporary c o m p o n en t s , p ro c e ss e s a n d application so that his research assisted scholars a lot in developing an opinion in respect of their Holy Prophet (P.B.U.H). Eventually topics relating to the actual title of this volume come into view that is Shariah ruling about selling and buying of different kinds of stuff traded in the conventional market. These include pork, dog, wine etc. Moreover income generating from services provided in different scenarios also comes under review under the light of Islamic juri s pru den ce. Th is volu me concludes with the articles which discuss about nature of paper currency and different types and forms of transactions under taken by and between two currencies in modern ways with respect to their Shariah stance. Published by: Idara-e-Islamiat, Lahore Available at: Kutub Khana Mazhari, Karachi Price: Rs. 2,200 /- (full set)

Shariah rulings. This debate is followed by another debate highlighting what Shariah has to say about some professions i.e. if they were mentioned in Ahadees of the

About the Author


Mufti Muhammad Taqi Usmani is one of the leading Islamic scholars living today. He is an expert in the fields of Islamic Jurisprudence, Economics, Hadith and Tasawwuf. Born in Deoband in 1362H(1943 CE), he graduated par excellence form Dars e Nizami at Darul Uloom, Karachi, Pakistan. Then he specialized in Islamic Jurisprudence under the guidance of his eminent father, Mufti Muhammad Shafi, the late Grand Mufti of Pakistan. Since then, he has been teaching hadith and Fiqh at the Darul-Uloom, Karachi. He also holds a degree in law and was a Judge at the Sharia Appellate Bench of the Supreme Court of Pakistan. He has been writing on various Islamic topics and is author of more than 60 books and numerous articles. Presently he is the Vice-president of Darul-Uloom, Karachi, Pakistan, where he teaches Sahih Bukhari, Fiqh and Islamic economics.

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Ask Us
By Mufti Ibrahim Essa and Mufti Javed Ahmed
Question
In the case of bank guarantee, if the bank (as guarantor) or the debtor is discharged from the debt by the creditor, will the other party be liable for the debt? Likewise, if the bank is receiving any discount from the creditor, will he be entitled to charge full amount of debt from the debtor? Kindly guide us in the light of Shariah ? the original debt, the guarantor is entitled to recover only the amount he has actually paid to the creditor; he cannot demand that the debtor pay the assumed to be a genuine sale. And we know that in a usual sale, the customer can return the subject matter due to suspected defect (s). How an Islamic bank can manage this risk within the circle of Shariah?

debt in full ignoring the discount. This rule is intended to


prevent a procedure being used that potentially leads to riba. However, if the guarantor reaches an agreement with the creditor to settle the debt using as consideration a commodity of a different type from that in which the original debt was designated, the guarantor is entitled to recover the exact amount of the commodity provided as consideration for the debt, or the exact amount of the debt, whichever is less.

Answer
It is permissible for the institution to stipulate in the contract of Murabaha to the purchase orderer a condition that the institution is free from responsibility for all or some of the defects of the asset. In the case of stipulating such a condition, it is preferable that the institution should assign to the customer the right of recourse to the supplier to obtain compensation for any defects that are established, which would otherwise be recoverable by the institution from the supplier .

Answer
If the creditor discharges the debtor from the debt, the guarantor is also discharged automatically from his liability. However, if the creditor discharges the guarantor from liability, the debtor remains in debt. If the guarantor secures a discount that results in paying an amount less than

Question
Murabaha to the purchase orderer is

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Upcoming Events
NIBAF - Islamic Banking Certificate Course # 24
NIBAF has have arranged a training session on Islamic Banking Certificate Course # 24 from 03 December to 22 December 2012 at NIBAF; H-8/1; Pitras Bokhari Road: Islamabad. Banker, non bankers and individuals are invited to participate in this course. Fee for attending this course is Rs. 70,000 per participant.

Conference on Islamic Wealth Management and Financial Planning 2012


On 19 and 20 December 2012, the 2 days conference is taking place in Kuala Lumpur on Islamic Wealth Management and Financial Planning 2012 at Grand Seasons Hotel, Kuala Lumpur, Malaysia. Individuals, investors and corporations can participate in this conference to learn and understand more about the Islamic wealth management and financial planning from industry experts. To attend this conference, US$ 800 would be charged as a registration fee per participant.

Workshop on Profit and Loss Sharing Distribution and Pool Management for IBIs.
SBP has introduced new guidelines for profit and loss distribution and pool management in Islamic banking institutions (IBIs). Keeping the significance of this in mind, Ernst & Young Ford Rhodes Sidat Hyder (EYFRSH) Islamic Financial Services Group (IFSG) has arranged a 3 day workshop, which is to provide an understanding related to Profit and loss distribution and pool management mechanism in light of new SBP guidelines. The workshop is expected to benefit audience from a variety of corporate and banking professionals from: Finance; Treasury; Shariah Advisory; Regulatory Authorities; Internal Audit; and Compliance.

This Workshop will be conducted from 22 January to 24 January 2013.

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An initiative of IFP forum

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