MAKKAH: The International Islamic Fiqh Academy (IIFA) is currently striving to formulate a clear-cut stand on the issue of securitization (tawriq) from an Islamic perspective, according to its Secretary-General Abdul Salam Al-Ebadi.
The controversy still continues over the issue because many scholars are skeptical of securitization, the process by which debt is converted into a traded instrument, like a bond, and is then bought and sold. Investors are paid dividends on a regular basis as debt-holders make payments on the principals plus the fees involved in obtaining loans.
Islamic banks ostensibly securitize only debts considered permissible in Islam (such as Islamic credit cards that impose flat lending fees rather than interest-based charges) but the question remains as to whether the act of securitization itself is permissible.
“The participants in the international Fiqh conference last week discussed the securitization issue for the first time with the aim of removing ambiguities surrounding the issue,” Al-Ebadi told Arab News in an interview on Thursday after an international Fiqh conference wrapped up in Sharjah.
“We decided to study the issue meticulously, complying with a request made by the Muslim World League. Many banks offer securitization services to customers notwithstanding texts that ban it. Our stand is that the financial institutions should act on the basis of interpretations that enjoy consensus of the Ummah.”
With regard to the commitment of Islamic banks to implement the recommendations made by the IIFA on various financial matters, Al-Ebadi said Islamic banking operations should be on the basis of the academy’s decisions.
“The academy informs Muslim institutions about its decisions officially or through the media,” he said. “I would like to assure you that its decisions enjoy credibility in the Muslim world because they are made collectively by eminent scholars from different parts of the world.”
He said the role of the academy is to give accurate solutions to issues confronted by the Ummah.
When asked about his view on some scholars issuing fatwas (religious rulings) on the basis of their personal views, Al-Ebadi said the fatwas should be issued after careful studies and on the basis of most reliable texts.
He, however, said he did not believe that the academy should take steps to end the differences of opinion between various schools of thought (madhabs).
“Our aim is not unifying the differing schools of thought,” Al-Ebadi said.
“We only aim to bring the followers of various schools closer. They should respect each other as they are part of the same Ummah and abandon fanatical attitudes. We do not seek to abrogate a madhab nor do we want to create a new madhab,” he said.
