Since its establishment in 2008 with the vision of
becoming "the Premier Shariah Research Centre in Islamic Finance",
ISRA has lived in the shadows of its sister organization INCEIF (the
International Centre for Education in Islamic Finance), the Islamic finance
education arm of Bank Negara Malaysia, which has assumed a much higher and
aggressive profile. ISRA even shares the same e-mail domain address as INCEIF.
Now it seems that ISRA is finally cutting off that
umbilical cord from INCEIF and forging its own distinctive identity. The academy
is poised to move to its own campus and headquarters in Petaling Jaya, just
outside Kuala Lumpur, in early 2012 which will give it a much-needed breathing
space.
ISRA's core objectives include spearheading and
conducting applied Shariah research in Islamic finance; enriching resources of
knowledge in Islamic finance; providing avenues for the development of Shariah
practice in Islamic finance; and propagating the harmonization and mutual
respect in Islamic finance practices.
Armed with a trust of RM200 million and led by Shariah
scholar and executive director, Mohammed Akram Laldin, ISRA is fast making its
mark in an industry segment hitherto not known for its convergence or purpose
of unity. ISRA's annual International Shariah Scholars' Conference on Islamic Finance
(ISSC), for instance, is now perhaps emerging as the premier global platform
for dialogue between Shariah scholars, advisories, academics and researchers.
It is threatening to overtake even the annual meetings of the International
Islamic Fiqh Academy in Makkah and the Albaraka Shariah Symposium which is held
in Makkah during Ramadan.
One GCC scholar who wished to remain anonymous stressed
that the ISSC has the potential to become the Shariah authority of last resort
for the global Islamic finance industry, because its is administered by ISRA, a
well-established and well-funded organization. At the same time both ISRA and
ISSC is located in a country whose government is fully supportive of Islamic
finance and where there is transparency and open debate about Shariah matters
relating to Fiqh Al-Muamalat (Islamic law relating to financial transactions) -
a situation which you do not necessarily have in most Muslim countries for
various reasons.
The ISSC is an annual event jointly organized by ISRA and
the Islamic Research & Training Institute (IRTI), a member of the
Jeddah-based Islamic Development Bank (IDB) Group, in collaboration with the
Department of Fiqh and Usul-al-Fiqh, International Islamic University of
Malaysia (IIUM) in Kuala Lumpur.
Yet, there is a feeling among some market players that
ISRA has still some way to go to becoming the completed article. Is it an
academic institution or is it a pure research academy or a bit of both? Is it
overdoing its outreach by signing too many agreements with institutions and
organizations without being too discerning about the fit with ISRA's
aspirations, ambitions and standing? Is its structure too diffused which gives
the impression that its research focus is not exhaustive or defined enough? Is
it merely reactive to events and developments in the Islamic finance industry
rather than being proactive and setting the agenda in Shariah research in
Islamic economics and finance?
There are those who rue the lack of research toward
developing Islamic economic, monetary, fiscal and banking theories based on the
Shariah and also using mathematical and econometric modeling. This they argue
would boost the standing of the Islamic banking and finance industry and
enhance the acceptability of its potential contribution to global growth and
financial stability both in the West and in the Muslim world itself.
Nevertheless in 2011, ISRA says that it has had a busy
year conducting 27 new research initiatives; and seeking to complete 14
research projects initiated in 2010. Some of the research initiatives include:
a) “Cost of Funds as a Part of Ta'widh (compensation for actual loss)” whose
aim is to determine whether the cost of funds should be deemed as an actual
loss that could be declared as income by Islamic financial institutions; b) The
Issue of a Guarantee by Mudarib in Mudarabah Contract with special reference to
SMEs; and c) Zakat Implementation for Islamic Financial Institutions, which
examines the obligation of Zakat on legal entities in civil and Islamic laws.
The scope of the research on cost of funds as part of
Ta'widh is limited to default on debt settlement and does not include early
settlement clients, and according to ISRA, concluded that the cost of funds
should not be considered as actual loss that could be declared as income though
it recognized the importance of the cost of funds as a stabilizing factor in
Islamic financial institutions, more so to manage the consumers' behavior that
is skewed towards a lack of understanding about Islamic finance instruments.
On the issue of guarantees on Murabaha, ISRA stressed
that among the constraints of Islamic banks in applying partnership-based
financial instruments like Mudarabah contracts in providing finance to
customers, is the issue of capital guarantee. "This is because, according
to the principles of Mudarabah, capital guarantee rests basically on the
shoulders of the rabbul maal. This complicates the banks as long as the
phenomenon today witnessed many financial customers, especially from small and
medium industries do not show satisfactory performance, leading to early
bankruptcy," added the academy. In brief, it proposed for the shifting of
the burden of proof from the capital provider to the mudarib. Under this
proposal, the mudarib shall bring sufficient evidence that the loss is not due
to his negligence, infringement or violation of condition.
On the obligation of Zakat on legal entities in civil and
Islamic laws, ISRA research showed that the differences of the scholars over
the obligation of Zakat upon a legal entity is due to the difference of opinion
about two conditions of the wealth upon which it is due, i.e., whether its
ownership is full and whether the wealth is of a type that grows. There is,
however, no difference of opinion among scholars that corporations and Islamic
financial institutions that are entirely privately owned must pay Zakat. The
only difference is over who is originally required to pay it.
"The wealth that the government invests and which is
owned by shareholders may be in the form of loans (current accounts), in which
case, the shareholders must pay the Zakat themselves or delegate the financial
institution to pay it on their behalf. When the government mixes its wealth
with the wealth of shareholders (rabb al-mal) Muslim scholars agree that Zakat
must be paid on the shareholders' portion. Scholars differ about Zakat on the
wealth of the state (public wealth) that is commingled with the wealth of
private shareholders in investments. The research team also favors the view
that Zakat should be taken from Islamic financial institutions owned by
non-Muslims when they operate in Muslim lands," the research further
concluded.
An important new contribution by ISRA to the literature
of Islamic finance is the publication of two textbooks “Islamic Financial
System: Principles & Operations' by ISRA staff and 'Fundamentals of Islamic
Finance”, by Professor Monzer Kahf.
According to ISRA, “Islamic Financial System: Principles
& Operations” is a 19-chapter book on Islamic financial markets which took
one-and-a-half year to be completed and is the first textbook of its kind in
the world and is expected to assume a crucial role in fulfilling the need for
more literature on Islamic finance which is necessary for readers to grasp and
appreciate Islamic finance. Quality textbooks on Islamic finance, is a major
deficiency in the market.
This latest book is a comprehensive guide to Islamic
finance and it offers tools which are necessary for readers to grasp and
appreciate this industry. The book outlines Shariah rules and theoretical/
philosophical aspects of Islamic finance, explains the conceptual tenets upon
which Islamic finance is built such as Mudarabah, Musharakah, Murabahah, Ijarah,
Wa'd, etc. ISRA confirmed that a number of institutions of higher learning in
Malaysia and overseas are now using the book either as a textbook or a major
reference book.
ISRA is currently also updating two important research
papers including “The Framework of Maqasid Al-Shariah and its Implications for
Islamic Finance' and “Application of Wa`ad in Equity Based Sukuk Empirical
Evidence”.
