11 - shariah mind

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CHAPTER ELEVENWHAT IS MY WISH LIST AS A SHARIAH SCHOLAR?

Relatively speaking, this is the easiest chapter to write. It is always an easy task to list down what ought to be done instead of facing the realities as they are and dealing with hard data, which cannot lie or mislead. I will list down a number of items on my wish list, which could help Shariah scholars perform their task better, as well as push this industry forward from both the Shariah compliance and Shariah innovative mind perspectives. It is worth mentioning that this wish list does not necessarily reflect the frustrations of Shariah scholars, but more of their constructive hopes for the betterment of Shariah supervisory work in this challenging world and more so in challenging prevailing regulatory framework. It will also be crucial to put a disclaimer from the very beginning that this chapter does not seek to find faults on anyone or any party in the Islamic finance landscape. Fault finding or laying an accusation or even mere insinuation or cynicism is not a productive and constructive way for this young and nascent industry. The whole idea of having this chapter is to say loudly to the whole world; “We (referring to the Shariah scholars) have contributed considerably and sometimes, our efforts are even ground breaking, but things can be done better if certain matters

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Shariah Minds In Islamic Finance

are made possible or better facilitated”. How to improve the industry is the proposition of this chapter, though it will be limited from the eyes of a Shariah scholar. In suggesting ways to make this industry a better place to work and contribute in, naturally, the regulators or lawyers or even the tax experts may look at the issues facing Islamic finance differently. Each of these professionals will submit what he or she feels best from his or her own professional intuitive emotions and instinctive thoughts. My contribution will be skewed towards my own personal views, though this may overlap with the wish list of other stakeholders. The fact that my wish list may overlap with other people’s wish list reinforces the importance of this particular item, which appears on the wish list of more than one stakeholder. This in turn deserves an accelerated plan of action to make it a reality, instead of it being a mere dream.

Pre-Consultation and Regular EngagementsLet me start with the first item on the wish list. My personal wish list, to be precise. Islamic finance stakeholders should not present any product or regulation or policy or bill of law for the Shariah board’s deliberation and approval when the decision has already been made by the relevant financial institutions, agencies and authorities. This will present a very awkward situation. As much as the Shariah scholars would like to facilitate this request, there could be some fundamental issues or matters which the Shariah scholars have no liberty, from the Shariah scholarship viewpoint, to approve. While some of the issues could be resolved by some Shariah solutions from the rich literature of Islamic law (to support and justify the already decided product or point of law, where relevant and applicable), other issues could be too alien to Shariah interpretation. The fact that this could be later justified by the Shariah scholars is beside the point. What is fundamentally wrong is to tie the hands of the scholars tight and to expect them to produce ’Shariah magic’ to make black things look white.

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Chapter Eleven: What Is My Wish List As A Shariah Scholar?

Pre-consultation with the Shariah scholars reflects the highest cardinal respect to the Shariah board, even in the case where the scholars, after the pre-consultation, are not able to resolve the point that the financial institutions, agencies and authorities are seeking to resolve. Having said that, if those issues prove to be crucial and hypersensitive, especially from the market prudential practices perspective, and to avoid systemic risk, the Shariah board, I would submit, would probably have no objection to approve this matter, perhaps on some Shariah maxims of necessities (daruriyyat) and needs (hajiyyat), as the case may be. The Shariah argument of either necessities or needs can be invoked in this extreme situation to render impermissible matters permissible on the merit of extreme necessity and needs of the society. As the mantra goes, extreme conditions require extreme measures. On the contrary, if these scholars are taken by surprise to endorse something without pre-consultation, the scholars would be very unhappy, if not frustrated. It also reflects the poor observance of Shariah governance, as well as poor planning and management by these institutions, agencies and authorities, as regards to the Shariah board. In many cases, if the matters were to be brought to the scholars’ attention earlier, there could be some innovative solutions from the minds of the scholars to address a particular sticky point that the institutions, agencies and authorities are trying hard to propose for the betterment of the industry.

Business Development and Marketing ActivitiesThe next item on the wish list is about the expectation of some Islamic financial institutions of their Shariah board members. The Shariah scholars would normally wish that these institutions do not expect and hope or sometimes put pressure on the scholars to perform marketing activities for these financial institutions. Any aggressive and dedicated marketing exercise can only be done by the institutions themselves. It will be unethical and improper for the scholars to do the hard selling of the products of the financial

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institutions in which they function as Shariah board members. As a matter of fact, if they do it anyway, it will not only dilute the integrity of the scholars but also the integrity of the respective financial institution.

They need to respect the function of their Shariah board, which is primarily the fatwa issuing organ at their institution, to the fullest. The Shariah board cannot issue Shariah pronouncements and at the same time, market products based on those pronouncements. The best practices of many standard setting bodies of the world aim to create the firewall between these bodies and other commercial-based agencies and activities. It is a prudent practice that is easily understood.

For instance, a central bank, i.e. the body that manages the monetary and fiscal policies of the country, cannot be seen to be involved in any commercial activities, what more to compete with the private sector. This would apply to all organs and subsidiaries of the central bank, i.e. in order to uphold to highest degree of integrity and prudential practices. In short, policy setting bodies and supervisory oversight agencies shall not have any affiliation with any profit making initiatives, either through their own subsidiaries or third party agencies to compete with any private initiatives, companies and agencies.

In the case of Islamic finance, AAOIFI for example, being the Shariah standard setting body for global Islamic finance, is not in a position to issue any pronouncement to support any product in the market. It is very obvious that the endorsement by the Shariah board of AAOIFI, if that happens, will be the best rated fatwa of the universe, as the Shariah board of AAOIFI is the highest Shariah board in the world by affiliation to AAOIFI and to what AAOIFI has done for the industry. The Shariah board of AAOIFI, to their credit, is also comprised of highly reputable Shariah scholars who represent, to a large extent, the best Shariah minds of both the

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Islamic world and Islamic finance at present.

If the Shariah board of AAOIFI were to do that, the credibility and objectivity, as well as integrity of AAOFI and other similar bodies, which are principally entrusted to issue the guiding fatwa, standards and policies, will be questionable and diluted. Stakeholders would lose trust and confidence in these entities, due to the fear of conflict of interest. The same holds true to Shariah board members of a bank or a fund. These scholars cannot be seen as performing marketing roles to hard-sell the products that have been endorsed by them. It is crucial to note that the Shariah board is a third party organ to provide checks and balances on compliance and supervisory oversight functions to a financial institution. The Shariah board is not and will never be an agent of this institution.

In practice, there was unfortunately one case where a fatwa was given on a commercial product, namely Islamic core banking solutions by an agency that is also entrusted to formulate Shariah standards. Fortunately, this fatwa has now ceased to apply to this product. But this should not recur in the future, irrespective of whatever the reason may be, compelling or otherwise. A clear demarcation on this matter is of paramount importance, one which cannot be impressed further to safeguard the integrity of Shariah compliance and to make the white whiter at all times.

Having said that, there is no harm, it is respectfully submitted, for the scholars to be involved in marketing, through an education programme or anything similar to that effect. The scholars are in the best position to explain the features of an approved product and how this product is different from other products from a Shariah structuring perspective. The Shariah scholars cannot cross the line between soft educational activities and hard marketing efforts. Even if the scholars were to be involved in a roadshow for a sukuk placement exercise, their job is only limited to take any Shariah query on the sukuk structure and to make the sukuk

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structure easily understood from the Shariah point of view.

Higher Learning Institutions and Islamic FinanceWhat do the Shariah scholars usually expect from higher learning institutions? The worst scenario for any education system is that not only does the education system fail to produce the right graduates for the workforce, but in fact, it actually ‘helps’ to produce more unemployed graduates. Under the latter scenario, the employability traits of the graduates – referring to both Shariah and Islamic finance graduates - will not be evident and apparent. The versatility of these graduates is also not vibrant. The desired scenario for any education system is that it should produce graduates who are strong in their foundational and technical knowledge in their respective area of specialisation, as well as having a vibrant personality.

In the context of Shariah and Islamic finance graduates for the Islamic finance markets and as regards job opportunities, the graduates should keep themselves updated of the important theories and market practices. The assessment of this aspect of understanding and appreciation can be easily quantified and measured. The respective higher learning institutions should compile the learning outcomes of all their modules and compare their list of learning outcomes with the prevailing practices in the Islamic financial markets.

If the mismatch is found to be more than 50%, then their graduates, to my mind, will likely belong to the above unlucky group of graduates; graduates that lack the necessary employability traits, as explained earlier. In this case, did these educational entities actually plan for their students to be technically unemployed? Out of curiosity, how do we describe an Islamic finance academic programme that does not correlate with the current practices at all? How are these young graduates going to be employable then?

Ideally, the coverage of the learning outcomes, as well as

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the assessment techniques (italics for emphasis) should at least be 50 - 70% correlated to the market practice. In my own personal experience dealing with some higher learning institutions, the problem basically lies in the level of knowledge of the teaching staff, as well as in the way both the teaching and assessment are conducted. As for the quality of the teaching staff, they can find all the ways and means to upgrade their knowledge of both the foundational and technical knowledge of Islamic finance as a living industry.

Having said this, in my overall assessment, the level of knowledge amongst the teaching staff is quite satisfactory, though there is always room for improvement. The more fundamental challenge is how to make the academic theories and knowledge taught in the classroom linked to industry practice and how to critically assess the students’ comprehension of the market practices. The market practice here also includes Shariah standards and many well established fatwas in the world of Islamic finance.

More often than not, the teaching staff tends to provide information about the industry as it is, without providing the various contexts of the probable applications of this information. In this case, the learning outcomes for every section of any course outline must be detailed out to relate the market practices to each and every important principle and theory in Islamic finance. To put it another way, every section of the course outline must be 50 - 70% correlated to the market practice, no matter how small or insignificant that practice is.

The whole objective is to instil the skills of creating the link between the theory and practice on almost every aspect of Islamic finance, as well as Shariah studies. After a few years or perhaps a few hundred contact hours of learning, the Shariah and Islamic finance graduates will internalise the skill of practical knowledge in themselves, built on a strong foundation of knowledge. This

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is the skill that most Shariah and Islamic finance graduates are struggling with.

I am adamant to make my point more visible on this aspect, so that the relevant stakeholders could take this aspect more seriously, as this will determine the quality of future Islamic finance practitioners. Quality is a state of living. It has many facets and it has to be approached from many directions, and no approach is insignificant. I am not in any position yet to confidently say that having Shariah graduates who master both the theoretical foundations of the Shariah and the market practice would be satisfactory to drive the industry further. I must impress that we also need urgently to produce a pool of Shariah graduates who are able to think as both futurists and strategists, in addition to their solid knowledge of every single aspect of Islamic finance.

The development of a strategic mind must also be imbued in the syllabi. Students must be challenged all the times to think strategically on all fronts of Islamic finance. This is the heart of knowledge really. We have seen good quality strategic and innovative minds in the area of IT and other courses, such as creative arts, marketing or even engineering and architecture. Why can’t such minds be the product of Islamic finance courses? I am encouraged to challenge the status quo of the self-proclaimed achievements and accolades by many dedicated higher learning and research universities or agencies of Islamic finance educational institutions, until and unless these accolades are verified by the industry players and perhaps by some employers’ satisfaction index (and not just the graduates’ employability index). The old trick of producing testimonials from the alumni in special featured reports or bulletins is not credible enough to attest and validate the real quality of the graduates. The production of a ranking system for all educational initiatives on Islamic finance, by an independent party, which is globally screened and featured, is very timely and impactful.

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In discussing the Islamic interbank money market, for example, it will not be sufficient to confine the discussion to a few products that are available at both the domestic and global scenes, which most lecturers would normally do. The discussion would need to go beyond this level of knowledge, in order to see the elements of efficiency of each of these products, in terms of costs and market efficiency. More importantly, the students must be trained to think on what they need to do if they are hypothetically put in certain conditions of a particular market landscape to manage the interbank money market. Many potential market conditions can be easily simulated to challenge the strategic mind of the students (as well as the lecturers).

Here, the students need to be exposed to some markets that do not have a structured Islamic interbank money market to see how Islamic financial institutions, which are operating in that environment have been seamlessly managing their surplus and deficit requirements over-the-counter. They also need to see how a particular Islamic money market contract is more efficient than other contracts. Above all, we go to the university to learn how to think. But we are seldom told that this is the most important part of the curriculum. To learn how to think is the most important aspect of human development. A wise man once said, “Most men would rather die than think. Many do”.

Junior and New Scholar Development and the Future of Shariah Scholarship in Islamic FinanceWhat are the expectations of senior scholars towards the junior scholars or those who have just joined Shariah advisory or anyone who has a strong interest in joining the membership of any Shariah board, either at the local or global level? We always hear from the market that the senior scholars must pave the way for the junior scholars enter into this practice, and for them to have more participation. Sometimes, the junior scholars themselves have raised the same concerns that they have been deprived of

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the opportunity to join the Shariah boards, because all the seats have been taken by a few and the same scholars. These few names are also the members of most of the Shariah boards in the world. Actually, almost everyone hopes and expects the senior scholars to play an important role in paving the way for junior scholars to serve as Shariah board members.

As far as I am concerned, senior scholars may have some opportunities and privileges to recommend the names of young scholars to be considered by the management of Islamic financial institutions. Nonetheless, the ultimate decision lies with the respective financial institution. To that effect, be mindful that the senior scholars would not simply recommend anyone whom they know. They will only recommend those who have impressed the senior scholars in terms of both knowledge and attitude, or rather emotional intelligence and more so, the willpower of these young scholars.

I can say with confidence that the voices of the junior scholars have never been ignored. Indeed, it is the duty of the senior scholars to develop and prepare new scholars to take up the responsibility and perhaps leadership of Shariah advisory in the future. There is a set of young scholars who are always keen and willing to walk the extra mile to put themselves on the radar. They are working from the ground-up to meet all the requirements - both hard and soft skills - and more importantly, to earn the confidence of all the relevant stakeholders, including the senior scholars. They have walked long and hard to be where they are today.

Another set of young scholars are unfortunately behaving in the opposite direction. They are keen to be in the centre of the action but they give less time, focus and hard work compared to the other group. Their personality is not convincing and impressive at all. They are not flexible enough, in terms of time and travelling requirements, to the extent that the industry must follow their diary, and not the other way around.

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For this group of scholars, the weekends are always dedicated to them and their families, so much so that there is a separation between work and leisure. They even expect to be considered for the job without having an impressive resume. Their resumes and credentials show no signs of exceptional performance. So, are they up to the task? I don’t think so. They need to attend to this structural problem first before embarking on the Shariah advisory flagship.

Perhaps too many people spend their lives waiting for their “ships to come in”. The reality is that it probably never will. You have to go out and get it. A ship that is in the harbour is not taking much risk. Ships are not built to stay in the harbour. But setting out into the open sea can be a very risky venture too, if you don’t have a proper guide and a seasoned captain at the helm. Young scholars must do both things: spend more time to prepare their scholarship personality and at the same time, try to understudy an experienced scholar or at least, be in some kind of contact with them. Follow this advice and you are less likely to drown or be lost at sea. And with lots of discipline and hard work, you will be able to get your ship into a safe harbour. This is exactly what the senior scholars expect from junior scholars.

Having said that, the same expectation is also applicable to senior scholars. In building one’s knowledge, there is no such thing as winning and stop running. You cannot simply say to any scholar, “You have run the race and won. Stop running”. This is not the culture in Islamic scholarship. If the senior scholars stop reading and investigating, then they could also be irrelevant and obsolete one day. No one is superior to the knowledge.

The focus has been metaphorically laid on junior scholars thus far, just to create the urgent need for them to enter into the race of Islamic finance knowledge and the Shariah advisory world. It does not mean to imply that the senior scholars must stop running. Indirectly, this is also an expectation and the wish towards the

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senior scholars. This wish is definitely achievable. If every scholar were to be super active in doing what they are good at, Islamic finance will be flushed with great ideas and great breakthrough products and achievements.

Dedicated Coaching for Junior and New ScholarsThe above communique prepares a good foundation to the next item on the wish list. Having attained a lot of experience and exposure, as well as an exponential learning curve, the senior scholars should dedicate some of their time and resources to look into developing the up-and-coming potential cohort of good Shariah scholars across the globe. This can be mobilised via relevant international agencies or associations or even on individual basis by the scholars themselves, both the senior and junior scholars. The notion of localising the Shariah experts from within the community is something that only the senior scholars of international standing can do. As Islamic finance started to spread its wings to China, Australia or the Balkan region, or even Brazil and the whole African continent, a few local scholars in these respective regions should be trained with special care by the leading senior scholars. There is no fixed arrangement for this dedicated coaching. But there must be some progress on this aspect of training young and new scholars from one year to another. A report card on this Key Performance Indicator (KPI) must be presented with full transparency and any shortcomings must be acknowledged and rectified. I am willing to do my part. As a matter of fact, I have conducted two dedicated training programmes for scholars in Singapore and Brunei respectively. Both worked well to prepare these new scholars in an accelerated format. The success of this training did not last long however, as these scholars, after being equipped with all the relevant knowledge and skills by the senior scholars, did not get the chance to practise these newly acquired skills in any Shariah advisory opportunities and platforms. If these graduates

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cannot put their acquired knowledge into practice, the skills and insights that they have acquired will eventually evaporate. They will end up being de-motivated.

In the past, the Companions of the Prophet Muhammad (PBUH) traversed the entire world, with the sole purpose of propagating the message of Islam to other regions. This would not have happened if the Companions were confined to the city of Medina or the Arabian Peninsula. There is however, some good news for these leading contemporary scholars. You don’t need to travel as the Companions did in the past. Use and leverage on modern communications and perhaps the social media to reach many potential young Shariah scholars around the globe. The coaching can be done at a lower cost or perhaps at no cost at all.

How would this be effective? Let us first try by using new techniques via the social media and improve upon that as time goes by. It will be good to start sooner rather than later. A global integrated platform for training Shariah scholars (as well as other professionals), built with analytical capabilities, acting as a real master and teacher with artificial intelligence (AI), derived from the mind of a particular scholar of choice will make many imperfect things almost perfect for this powerful portal of training and coaching.

The virtual master will think as close as possible to the real scholar, i.e. by incorporating the scholar’s scholarship traits into the system, using both AI and avatar technology. There is a new revolution of smart learning through avatar technology. In other words, all fatwas and resolutions, and even the technical writings and reports by any Shariah board or Shariah standard setting bodies can be transformed into a coherent and powerful web of knowledge, which could technically think like a scholar. This could be done quite easily, as many of the fatwas and Shariah standards are already available in an organised manner. This data can be converted into the thinking process of a system, which can

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reproduce what has been already stored, and interestingly, will be smart enough to analyse the Shariah opinions based on the logical and systematic principles and arguments embedded in those fatwas and Shariah standards. The students will surely benefit from this smart system in their learning activities. After all, the coding or algorithm of this system can be adjusted to suit any specific reference of a particular fatwa collection or Shariah standard, or even the opinion of any selected individual scholar. Most likely, many people would be in the state of denial of this forthcoming technology. But seeing is believing. I must say that this technology is not yet available for Islamic finance. But the same system capabilities have been developed for many other disciplines, such as architecture and interior design courses. Will this avatar technology in Islamic finance be forthcoming? I don’t know the answer but I cannot simply rule out this possibility. It will be unwise to underestimate this technology, as we highlighted earlier in this book. I mentioned elsewhere in this book that men in the past and even the experts amongst them have underestimated the technology advancements post their time. They were wrong. The rest is history by now.

Career Path for Shariah ProfessionalsThe next wish item is something about the lack of proper and clarity of career path planning and development for Shariah qualified personnel working in Islamic financial institutions. This is quite obvious but no one seemed to highlight this aspect in the past. I am bringing up this issue, since this matter relates to the Shariah community in one way or another. It is not an overstatement to mention that the Shariah community, by any standards, should be recognised as one of the critical stakeholders in the Islamic finance ecosystem. Many have failed to incorporate the Shariah community - both the Shariah scholars and Shariah professionals - into the fabric of Islamic finance stakeholders. If we really want to see the value of this Shariah community in the development of the

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industry, this needs to change in the near future. On the issue of career path planning and development, it is regrettable to put the remark here that those Shariah qualified personnel who have joined Islamic banks in the Shariah department may not have a clear career path for them beyond this department. This is the prevailing set-up under the human resource planning of (all) Islamic financial institutions. This implies as if these Shariah-based employees are expected to work in that department until they retire or die (whichever is earlier). Was this intended by Islamic financial institutions or by the human resource consultants who devised this scheme of employment during the formation of the organisation? Irrespective of the answer (i.e. whether the absence of this policy is intended or overlooked), the fact remains that the possibility of allowing a Shariah-based professional to be eventually considered as a potential CEO of Islamic financial institutions has slipped through the minds of the organisation, from shareholders to board of directors to management, and even the employees themselves. In this case, the highest position attainable by a Shariah-qualified person is the Head of the Shariah department. On the other side of the coin, there is also no clear direction whether this Shariah-qualified person, after attaining the highest post in this department, can go up all the way to becoming the CEO. On the other hand, there is also a need to relook the salary and promotion scheme within the departments of the Islamic financial institutions. I have come across a Shariah-qualified employee, having another degree in IT, was offered to join the IT department of the same bank for a better salary package. He simply took the offer without any hesitation. Indeed, he should not hesitate. That was a wise decision. What was unwise is to create many levels of salary schemes, which could downgrade the Shariah-qualified employees in terms of the total package of salary and prospects of promotion. It would be more damaging when the highest salary

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package, as well as the seniority in the Shariah department is actually inferior to the highest post in other departments of the same organisation. This fact, if it is true, clearly reflects that the Shariah department or rather Shariah-related work did not receive any significant thought and attention by either the shareholders or the management of the organisation or both.

This scenario is quite unusual compared to other professionals working in Islamic financial institutions. In market practice, almost anyone working in the bank can be a potential candidate for the CEO position. Whether he is a lawyer or an accountant or an engineer or even a historian by training is irrelevant for him to be considered for this post. If a person can show that he has all the necessary ingredients and qualifications to become an effective CEO, he should be considered as the potential CEO by the board of directors and shareholders, in competition on arms-length basis with other potential candidates, either from within the organisation or otherwise.

At the time of writing this book, I am not aware of any Islamic financial institution that would seriously consider Shariah-qualified personnel working in their Shariah department to become their future CEO. The Shariah department tends to behave like a bank within a bank. It seems that there is no higher position beyond this department. Assuming that the CEO post may be a bit challenging to Shariah-qualified employees (which I still cannot appreciate the logic of this line of thinking), for argument’s sake, can the Shariah qualified personnel also be considered to work in other departments, such as audit, marketing or finance, either on the basis of promotion or for a normal assignment or exposure or job rotation policy within the bank i.e. the policy of an organisation to subject each of the employees to work in all departments to get the integrated exposure and skills? There could be some Islamic

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financial institutions that do have an internal job rotation policy. In fact, this is beneficial for the bank, as each and every employee can learn the whole value chain of the Islamic financial institution. This policy will indirectly provide opportunities to any qualified employee, which also includes Shariah-qualified personnel, to go through the learning curve of the whole operations, thus be technically prepared for the CEO post in the future. However, these policies and practices are not that visible and perhaps, were never thought of by the management when they recruited Shariah-qualified employees. I wish I am wrong on this contention.

Some may try to defend this current practice. They may contend that the pool of Shariah qualified professionals is rather limited and it would be better then, from an optimisation of talent management perspective, to restrict the mobility of these Shariah-qualified employees to only the Shariah department of the bank. This defence has some merit to it, if this pool of talent refers to well qualified and well trained Shariah employees to deal with Shariah board members and highly technical issues of Shariah compliance, as this task requires specific knowledge and experience, as well as a high duty of care and diligence in dealing with Shariah matters.

However, from a high level human resource planning and recruitment perspective, any fresh graduate of any field of specialisation may be considered to join the bank in the many departments of the bank. This includes graduates of science, economics, finance, as well as history, engineering, IT and even zoology and botany.

Why can’t a Shariah graduate be allowed to work in other departments other than the Shariah department? I don’t think there should be any restrictions. The policy of inclusiveness will create a new positive and promising impact to the Shariah community as a whole. Inclusiveness should exist at the entry level of employment, as well as for intra-departmental mobility and more

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importantly, for the highest possible career path opportunities in an organisation. A new policy on this career path planning would make the Shariah agenda of Shariah-based career development in Islamic financial institutions more prominent. This matter is long overdue.

Wish list towards Muslim EconomistsAmong all stakeholders, perhaps Muslim economists are the one who have been interacting closely with many Shariah scholars on many intellectual discourses and debates. This is a healthy discourse and engagement. As for the wishlist towards the Muslim economists, perhaps my personal wish is for Muslim economists to learn a bit more on the Shariah legalistic thinking process. Although some Muslim economists tend to emphasise on the study of the objectives of the Shariah as the governing policy and direction, a certain degree of understanding of how a Shariah opinion is extracted or constructed will help them to put their whole perspective in a more balanced point of view. I have also heard that some Muslim economists have commented that the Shariah scholars have been highly trained to be too legalistic and judicial, thus are unable to see the high objectives and value propositions of the Shariah. I think I have already offered some responses to this perception, held by some Muslim economists in the earlier chapters, and I will continue with another dimension of the response in this chapter. As for now, I really need to emphasize that it is incumbent on Muslim economists to learn the essential parts of Islamic legal theory (usul al-fiqh) up to a level where they can appreciate how the jurists in the past have dealt with sources and techniques of law to arrive at a ruling in any given case. Also, I am wondering now whether all the great scholars in the past who have elegantly articulated the notion of high values of Islamic law i.e. maqasid al-Shariah, such as al-Ghazali, al-‘Izz ibn al-Salam and al-Shatibi were not essentially trained as jurists? Were

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they not the great jurists in their own time, in addition to their special interest in maqasid al-Shariah? Was maqasid al-Shariah not part of the study of Islamic legal theory?

To put it another way, these great scholars have mastered all the technicalities of Islamic legal theory first before they articulated another dimension of Islamic legal theory, which is the study of the objectives of the Shariah. Here, we need to pose a relevant question whether someone could intellectually be in a position to extract and validate an objective of the Shariah, while he has not even mastered the basic technicalities of the Islamic legal theory. If any person can do this, I doubt that his methodology of extracting the objectives of the Shariah would be technically sound and robust. Most likely, his conclusions on any of the objectives of the Shariah could be arbitrary, if not left-brained.

When I started my career as a young Shariah advisor in 1994, I had read many books on Islamic economics. Many Muslim economists claimed that profit and loss sharing is one of the most salient features of Islamic banking, and that equity-based financing can be done easily. Everybody seemed to accept that proposition without any questions. I was equally impressed and convinced with this proposition, as at that time, my mind has not been exposed to the real working ecosystem for an Islamic bank, i.e. in terms of risk management and other regulatory requirements, not to mention asset-liability management. In short, I was so naïve back then, not knowing the many layers of the actual working machinery of an Islamic bank, particularly the Islamic commercial banks as deposit taking institutions, as well as the bank’s legal duties towards these depositors. After some time, my mind was fine-tuned and refined, guided and influenced by the prevailing banking requirements by the respective regulator. My mind is now right-brained, reflective, as well as contextual. With this, I have revisited most of Islamic economics books which I read many years ago. Amazingly, I have

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discovered, under the influence of this new mind set that not many Muslim economist authors and writers have brought into their discussion the technical aspects of risk management, as well as asset-liability management and operational risks when they offered their extrapolation of Islamic economic theories and broad policies relating to Islamic finance.

Thus, the time has come for these Muslim economists to re-write some of their books, taking into account the new regulatory policies and hard data on many aspects dealing with the cost of funds, asset-liability management, non-performing financing (equivalent to NPL), moral hazard cases, loan (financing) to value (LTV), capital adequacy ratio (CAR), etc., which are applicable and peculiar to Islamic banks.

Sometimes, I do come across some writings, in which some Muslim economists base their unique Islamic economic theories relating to Islamic finance on startling and sensational concepts. These concepts, in my personal opinion, are not very prominent and sometimes, do not have any origin or legitimate basis in many established sources of Islamic teachings. However, these concepts have been articulated by some Muslim economists in such a way that they look very prominent and monumental. One of these concepts is the requirement of ‘iwad or consideration to make any Islamic contract of sale valid. Consideration is generally understood as the price you pay to get the countervalue of either the ownership right under a sale contract or right to use or usufruct under a lease contract.

However, it is astonishing to find an articulation by some Muslim economists that ‘iwad means something else. It means that the seller cannot enjoy the payment or rather the increase in the sale price paid by the buyer in a deferred payment sale, such as in murabahah sale, if the seller does not take the corresponding risk in this transaction. In short, the seller should take an extra risk in a murabahah sale to satisfy the requirements of ‘iwad, as the price

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increase under a deferred payment scheme is not compensated by, and correlated to the corresponding risk taken by the seller, thus not meeting the requirements of ‘iwad.

Following this thesis, there have been many criticisms levied on murabahah sale financing, as the financier never assume the market risk or storage risk or even delivery or transportation risk in purchasing the goods from the vendor, prior to on-selling the same goods to the customer. This type of articulation, which used a special way of making it very immense and prodigious, has helped some Muslim economists come across as being knowledgeable, informative and well researched, especially when they are not.

Yes, new theories or new findings are critical for the development of knowledge, such as the theory of ‘iwad. But ascertaining and nailing its basis and its grounds of legitimacy and authoritativeness is much more critical in any academic investigation than the new theory itself. Islam always stresses the importance of a valid epistemology in building up any theory of knowledge.

In Islamic legal theory, before we can accept any source of law, even in the case of ijma’, which is the consensus of all the Muslim jurists as a valid and authoritative technique of law, firstly, the Muslim jurists need to lay down what are the grounds and epistemology of the ijma’ to be qualified as a source or technique of Islamic law. This set of knowledge is always systematic and coherent to avoid any element of haphazard law making process, not to mention whims and fancies. Otherwise, any person can simply prescribe or dictate almost anything upon the Islamic community, as far as Islamic teachings and Islamic techniques of interpretation are concerned.

Such left-brained arguments have no place in Islamic legal theory, which is essentially (referring to Islamic legal theory) the structured set of knowledge to discover rulings and laws in Islam. Surely, these techniques could not be personalised or arbitrary.

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Otherwise, the rulings of Islam would be turned upside down, based on the absolute discretion of the Muslim jurists and more so of non-qualified persons in navigating the Shariah bearing. Similarly, I have found a published statement by one Muslim economist that a contract is only valid if it meets the requirements of a valid contract, as well as maqasid al-Shariah. I wonder since when fulfilment of maqasid al-Shariah has been part of the requirements to make a contract valid or invalid. Maqasid al-Shariah are the broad policies of Islam in all aspects of life, and they should be argued as such, to influence some policies and regulations in Muslim communities. Maqasid al-Shariah cannot create or induce any law on its own, without the intervention of the state or relevant authority.

To put it differently, maqasid al-Shariah was never intended to be a specific evidence to base a Shariah ruling on that particular evidence. Only a student of Islamic law will appreciate this schematic orientation of sources or techniques of Islamic law vis-à-vis specific evidence of Islamic law.

Don’t get me wrong. I am not relegating the importance of maqasid al-Shariah and no one is, for that matter. Maqasid al-Shariah is neither part of the sources of Islamic law nor the techniques of Islamic law, with the exception of the juristic techniques of maslahah (public interest) or maslahah mursalah (unrestricted public interest, which receives neither approval nor condemnation by the Shariah) or istihsan (juristic preference) or ‘urf (established customary practice). Although these aforementioned juristic techniques of arriving at the Shariah opinion in a particular case are related to some aspects of maqasid al-Shariah, such as the element of public interest or prevailing customary practice, each of these juristic techniques is based on a foundation that is different from how and why maqasid al-Shariah was formulated in the first place.

In a nutshell, maqasid al-Shariah cannot make a contract valid or invalid. It can only persuade or influence particularly the policy

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makers to make a policy which eventually, could not only provide the basis of a specific Shariah ruling but could also overrule any specific evidence of the Shariah. How powerful maqasid al-Shariah is when it comes to providing legitimacy to broad policies of the state or official authority of the state.

It is evident that only an argument of maqasid al-Shariah being the policy of a state can do the above, i.e. to take precedence over the specific evidence of the Divine texts, in favour of the collective, cumulative and compounding objectives and meanings of many and multiple Divine texts or a public interest, which is more overwhelming compared to one specific Divine text or meaning. In the case of a conflict, an ordinary specific evidence in the Quran and the Traditions of the Prophet Muhammad (PBUH) cannot overrule another specific evidence in Islamic law tradition. However, maqasid al-Shariah can do that, as maqasid al-Shariah are backed by the collective and cumulative effects of the Divine texts.

For example, the application of maqasid al-Shariah may render the registration of legal title in a sale contract or registration of marriage contract to be made obligatory and compulsory in a modern society, though registration of the title of an asset or marriage contract has never been made obligatory in any specific evidence in Islamic teachings. The critical need for this registration is essentially grounded on many and cumulative insights and meanings of the Divine texts, so much so that many good objectives of the Shariah may be adversely affected if the registration is not made compulsory in our modern society.

Obviously, no one can find the basis or any specific evidence for the requirement of the registration of the legal title of an asset and the marriage contract. This new requirement is actually supported by the collective, cumulative and compounding meanings, insights and purposes of Islamic law in many of its specific evidence, instead of relying on the implication of one (and

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isolated) specific evidence. This is the very structure and function of maqasid al-Shariah.

Allow me to to bring up one good classical case to highlight the above contention. This relates to the classical case of Caliph Umar, the second rightly guided Caliph, in not distributing the conquered lands amongst the soldiers, but instead kept the lands in the ownership of their original owners for a special tax called al-kharaj. This was clearly driven and motivated by maqasid al-Shariah. No specific evidence was available to support this “out of the box” policy to keep the military establishment intact. It was also clear that this maqasid argument had also overruled the clear cut and specific Quranic text on the distribution of the booty amongst the soldiers. The conquered lands are part of the booty.

To the mind of Caliph Umar, if the lands were to be distributed to the soldiers, the military workforce will be dismantled, as the soldiers would be motivated to work on their own lands. This is a public interest that Caliph Umar was seeking to achieve by not distributing the conquered lands to the army. The policy did very well and served best the noble and long term objective that the administration of Caliph Umar was seeking to realise.

A more fundamental question is what would be a particular objective of Islamic law in any given case? This is the first thing that needs to be determined. Everyone needs to know who extracted this objective and how this objective was formulated, and what is the opinion of the other scholars towards this culmination? Ignoring this basic foundation would simply mean that anyone could claim that a particular act or conduct is of maqasid al-Shariah or otherwise. This is not the right and proper way of dealing with Islamic law to reflect the intended objectives of the revelation. The Shariah deliberations in Muslim communities have been driven by collectivism to avoid any absurd type of fatwa or a top-down and

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imposed fatwa by someone. As alluded to by Imam al-Ghazali, an argument of maslahah (public interest) is always of two sides: it could be deemed by someone as good and beneficial and, at the same time, it could also be construed by another as bad and detrimental to the society.

As an example, developing and issuing Islamic credit cards might be seen as beneficial by some and detrimental by another. One of the proponents’ reasons for supporting this is because Islamic credit cards could facilitate many online transactions and will free modern society from the risk of carrying cash. This is one side of the argument. However, it may also spur the culture of excessive consumerism in the community, which may lead to an excessive debt-strapped phenomenon. Obviously, there are two sides to it. If the real problem lies in excessive consumerism, then tackle this issue independently from the Shariah judgement on the position of Islamic credit card.

Do not allow the negative consequences caused by human behaviour to dictate or affect the quality of the Shariah argument. Surely, you should not attempt to kill a mosquito by using a canon. I wish I can elaborate further on how maqasid al-Shariah have been wrongly appreciated, even by some of the experts to support what they think should be the required or ideal practice in our contemporary Islamic finance, albeit influenced by their own and personal intuition. We really need to put an order in dealing with maqasid al-Shariah. Otherwise, maqasid al-Shariah will be a loose cannon, if not properly managed and wisely used.

In Islamic legal theory learning and education, maqasid al-Shariah as a subject matter is normally taught either in the final year of the first degree programme or at the postgraduate level. Maqasid al-Shariah is not a flexible mode of discipline, as many people may tend or have been lured to believe. One needs a strong and solid foundation in Islamic legal theory first before he could attempt to extract the right policies and philosophies of Islamic law to serve

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the community better. Muslim economists should seriously start considering enhancing their knowledge of both the technicalities of Islamic legal theory and maqasid al-Shariah to make their efforts to discover the great theories of Islamic economics perfect. What other solutions could there be? At the current moment, the industry is very fortunate to have a few great scholars who were not educated initially or primarily in the Shariah, but their mastery of the Shariah is very striking. This is because they have endured all the pressure (as well as enjoying all the pleasures) to equip themselves with the highest technical Shariah knowledge, sometimes exceeding the level of knowledge that an ordinary Shariah-educated scholar has. When he is in action, one cannot easily tell whether he is a Shariah scholar or a Muslim economist or a lawyer by training, as their knowledge of both the Shariah and their core technical knowledge are interwoven, imbued and blended nicely and neatly. I would urge Muslim economists to emulate these few colleagues of theirs who are exceptionally great in blending the principles of the Shariah and economic theories, where relevant and applicable. It is an open secret that they can use it to their advantage. Study and learn the Shariah principles by heart and try to see through the workings of the Shariah principles in Islamic law discovery as good as you master quantitative mathematical modelling. It will be a long, arduous process but you will be repaid handsomely. There is a saying that, “If someone can do it, surely everyone can do it”. If you do not like this dictum for whatever reason, consider this (Japanese) one; “If no one can do it, it is you who have to do it”.

Media and Islamic FinanceThe media is certainly an important stakeholder of Islamic finance. The media can do a lot to either propel or impede the development of Islamic finance. We wish that the Islamic finance journalists would roll their sleeves up to study and learn Islamic finance from

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the ground-up to get some basic foundational knowledge which everyone must have before writing about anything, including on Islamic finance structures and their related issues. A few hours of structured training will be more than enough to prepare the minds of the journalists to appreciate the working knowledge and behaviour of Islamic finance products, as well as the thinking process of the Shariah minds.

The journalists, due to their robust training and intellectual capabilities, are the most intelligent people to understand the various complicated issues and data in no time, as they are always at the forefront of all news and debates. Thus, if they were to devote a few hours of their time to study and learn Islamic finance in a structured way, their work will be more outstanding. I know some Islamic finance journalists who have enrolled into a proper academic programme, though on a part-time basis. Not only have their writings been well received, but more importantly, their reporting has always been grounded on solid academic theories, which makes the readers intellectually enlightened.

However, the art of journalism is closely associated with a sensational approach to make the articles that the journalist writes punchier and more appealing – either for a good or bad reason. Sensational reporting is not bad and not necessarily harmful. The problem arises when some journalists have gone overboard and have crossed the limit of decency in putting their story across. This irresponsible way of reporting and narration has caused a lot of tension, sometimes between a scholar and another scholar or between a scholar and his regulator and other stakeholders. I got caught a few times in this awkward situation, so much so that I tend not to be interviewed by any media anymore, unless I know that I would be interviewed by a journalist of high integrity and responsibility. To be fair to the journalists, I need to put a remark here that it could be the scholars themselves who are not well trained and

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prepared to face the way the journalists conduct their interviews. Journalists would have their own unique ways to solicit information and the views that they want to hear and not necessarily the views that Shariah scholars want to impress on them. If you think you are not up to the mark to have face-to-face interviews with the media, then it is better to have the interview via e-mail or better still, to shy away. The harm will be more than the benefit if Shariah scholars were to underestimate the harm that some journalists can cause. The blame cannot be put entirely upon the journalists, as they have their own way of interviewing almost anyone on any subject matter. The Shariah scholars must not be naïve and must be highly intelligent and alert to foresee what is forthcoming from the series of questions that the journalists have prepared. Be informed and cautious that these journalists, in many cases, have deliberately casted their lines of questions in such a way to help them to get the story that they may prefer and not necessarily what the scholars want to share and contribute. I am tempted to share many other items on my wishlist with the readers. But in order not to lengthen this chapter, I need to resist this temptation. Resisting to temptations is hard. However, resisting the temptation of recapitulating as many items on the wishlist as possible (especially when Shariah scholars have occasionally been painted with a black paint) is even harder. Last but not least, if you had only one wish for the Islamic finance industry, what would you wish for? I would reserve my response to this open question to the last section of this book.

11 - shariah mind

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