Many are wondering, “Why do we need a Shariah discipline and Shariah scholars to be involved in the whole Islamic banking perspective?”.
This is a very valid question, to be honest.
Shariah is needed to guide the activities of a banking system, from taking deposit as well as from providing the financing and the treasury management between the asset and the liability of a bank.
Shariah is very much required to ensure that each and every action taken by a bank in terms of taking deposit and the contract between the bank and the depositor in various categories of the account, saving, current as well as investment account, as well as how does the bank manage their treasury management in order that they are liquid, they are solvent, they are able to meet the requirement of the liabilities, the deposit and the asset of the bank, according to Shariah principle in terms of currency hedging, in terms of risk mitigation, between the asset and the liability.
Of course, the most important function of a bank – it provides financing to the customer, both the retail as well the corporate sector. In this case, Shariah would be relevant because Shariah would provide the necessary: number one, valid contracts; number two, an oversight of the banking activities so that the management of the bank, most of them are not well trained in Shariah, so they are looking for the help of the Shariah scholars and the Shariah mind to come in to guide them in order to put the right contract, the right behavior, the right activities, and to ensure that the bank, as it is called Islamic Bank, would be guided by the Shariah, in each and every term, condition, contracts, practices, in normal case as well as in the difficult time, in the restructuring, rescheduling, default, foreclosure. From the very beginning of the offer letter, marketing, offer letter, all the way to, if you like, the default and the foreclosure of the asset and the mortgage and the pledge and the collateral. So this is how the Shariah is looked at – it’s very dynamic, is able to provide the right guidance for the: number one, the shareholders and of course the management of the bank for them to be guided, to be supervised, by the relevant Shariah contracts, terms and conditions, so that when they go out to the market, the market will know that each and every product that the Bank is offering has the Shariah flavour, has the Shariah placing, has the Shariah DNA in each and every product being rolled out in the society.