In this era where the knowledge is easily transmitted from one end to another, many Muslim investors are aware about how important it is to actually invest their money in the Shariah compliant funds.

Some of them still do not know or do not have access to the Shariah investments that the Islamic Finance industry has to offer. A lot of people have been asking and searching to find out about the Shariah investments.

What is relation of Shariah investment and Shariah compliant funds?

Shariah investment would mean to invest in a Shariah compliant funds which have been structured in accordance to the Islamic rules.

The funds that the Muslim investors want to invest need to be in line with the Shariah principles although the companies that manage the fund do not necessarily have to be Shariah compliant. Shariah funds can be managed as mutual funds, ETFs or hedge funds.

What makes an investment Shariah compliant?

For the funds to be Shariah compliant, there is a few obligations and restrictions that need to be looked at.

For a certain stock to be considered as compliant to Shariah, the stocks have to undergo a screening process.

Malaysia in particular, the Shariah screening methodology that has been widely used for the Shariah compliant companies that are listed or to be listed on Bursa Malaysia, is the one established by the Shariah Advisory Council of the Securities Commission Malaysia.

Other methodologies that can be adopted in carrying out the screening process are the S&P, Dow Jones, MSCI, AAOIFI and many others.

The Shariah screening process would involve quantitative assessment which are the business activity benchmarks and also the financial ratio benchmarks.

Companies that involve in prohibited business activities cannot be part of a Shariah fund strategy.

Business activities that are related to alcohol, tobacco, gambling, pork processing and pornography are strictly prohibited.

The business activity and financial ratios of the companies must be within the benchmarks set for the different methodologies in order to be considered as Shariah compliant.

In addition, investments in many financial companies are excluded due to the prohibition of interest in the transaction.

Muslim investors need not to be worried if they are dealing with the fund manager that have prominent and trusted Shariah Advisor, such as Amanie Advisors.

This is where Amanie as Shariah Advisory company comes in the picture to offer help to this asset management company and fund manager to obtain Shariah compliance certificate.

The Shariah advisor would usually monitor the operations and investments of the fund in accordance with the Shariah Investment Guidelines.

The Shariah advisor would also review the fund’s operations and investments every month to ensure the compliance with the Shariah principles.

What do we know about SRI Sukuk?

The SRI Sukuk, or the Sustainable and Responsible Investment Sukuk, is another investing platform which the call for the Sukuk proceed is to be used for the preservation and protection of society.

The SRI Sukuk opens a new era for the Islamic Finance and complements the arising of green bonds and social impact bonds that also promotes the sustainable and responsible investing, globally.

What is the difference of normal sukuk and SRI Sukuk?

The SRI sukuk is very much similar to the normal sukuk, where there’s issuer raise sukuk to get capital while the investor will receive coupon payment.

The only difference is that the issuance of SRI Sukuk is meant for social impact projects such as education, green energy, or health program.

In Malaysia, the Securities Commission (SC) had on August 2014 released its Sustainable Responsible Investment Sukuk Framework to facilitate the financing of sustainable and responsible investment initiatives in order to promote socially responsible financing and investment.

It is part of the SC initiatives to create the conducive ecosystem for the investor and the issuer of the sukuk. Allow me to talk a bit about Sukuk Ihsan.

Sukuk Ihsan by Khazanah Nasional Berhad

Khazanah Nasional Berhad in Malaysia, has on May 2015 launched the first ringgit denominated sustainable and responsible investment sukuk called Sukuk Ihsan to raise funds for its trust school program under Yayasan Amir.

Amanie Advisors is proud to be part of the team, together with CIMB Investment Bank, as the joint Shariah advisor in structuring the Sukuk Ihsan.

The structure is in accordance with the Islamic principle of wakalah bil istithmar with at least 33% of the sukuk proceed is invested in tangible asset.

The Sukuk Ihsan is designed as a pay-for-success structure which is measured by a set of predetermined Key Performance Indicator, or KPI, which are assessed over a 5 years observation time frame.

If the KPIs are fully met at its maturity date, the Sukuk holders agree to forgo or contribute up to 6.22% of the nominal value due under the sukuk as part of the sukuk holders’ social obligation in recognizing the positive social impact generated by the trust school program.

On the other hand, if the KPIs are not or partially not met, the sukuk holders will receive up to the nominal value due under the sukuk as agreed at the issuance.

Another interesting feature of the Sukuk Ihsan is that the sukuk holder has the option to convert their investment in the sukuk into a donation at any point in time during the sukuk tenure.

The SRI Sukuk is indeed a noble yet powerful concept that invites awareness and responsiveness of the corporate sector to participate in the development of the wellness of the society especially in several major areas such as education, environment, health, power energy, and more.

We hope that Sukuk Ihsan will be the opening of more SRI Sukuk, not only in Malaysia, but globally.

Perhaps, soon, there will be a SRI Retail Sukuk where more parties are able to participate in such a noble project.

What is riba’?

As the Islamic finance industry is growing exponentially for a several decades around the globe, the term of free-interest banking is always being touted as a key feature of Islamic banking which make it dissimilar from the conventional practice which dominantly practicing the Riba in its all transactions over the years.

Riba can be translated into English as usury or interest. Regardless of the amount paid, any interest charged on money borrowed is identical to Riba.

What is Riba? In its simplest term, Riba is refers to a benefit or gain obtained by a party from another without any consideration.

Types of riba in Islamic finance

Syariah addresses the issue of Riba in two types of transactions, specifically in a loan or currency exchange contract as well as in a barter trading contract or Riba in loan and sale contracts. Muslim jurists have consistently agreed that there are two categories of assets which are associated to Riba and known as ribawi items, namely currency or money and a few commodities, mainly food items.

The same requirements need to be fulfilled for the exchange which involved in these two types of assets whereby an exchange of one currency for another currency and also the exchange of a food item for another food item, whether it is the same or of different types and kinds.

It is reported that the Prophet Muhammad said:

“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, like for like, equal for equal, hand to hand, if the commodities differ, then you may sell as you wish provided the exchange is hand to hand.”

Based on the above hadith, it is clearly mentioned that the exchange of the same class of ribawi item for example gold for gold, need to be conducted in spot or simultaneous delivery and with the same value or amount irrespective of whether the golds are the same or different types.

Any delay in the delivery will trigger the exchange to be equivalent to Riba, known as Riba al-nasiah, that is, Riba by virtue of deferment in the exchange or delivery of these two counter values.

The failure to observe of the equality of the amount or the value exchanged would lead to the practice of Riba called Riba al-fadl, namely Riba by an excess of one of the counter values.

However, the requirement to have the same quantity is not applicable if they are of different types such as gold for silver (or RM for USD) or barley for dates.

The above hadith is the substance of the permissibility of currency exchange, which should be done based on the prevailing rate of exchange and it is done on a spot basis, for example to exchange RM1,000 for USD200.

On the other hand, the practice of conventional banks in imposing the interest on the borrower as a requirement for the repayment of the loan offered to the customers is an example of riba which is based on loan.

Modern Riba

Other than that, the dividend granted to the depositors of the Banks is also considered as Riba. This is because money which is deposited into the depositors’ account is treated as a loan for the Bank by the customer which will be used as a source of funds to the Banks for their investment.

This practice of modern Riba in the banking sector relates to both Riba al-nasiah which is Riba by deferment and Riba al-fadl (Riba by excess) because the borrower is obligated to pay more than he borrowed and repayment will take place in the future.

This is the reason why conventional saving accounts and fixed deposit accounts, as well as all financing modes based on loan-for-interest are not compliant to Shari’ah principle.

As a Muslim individual we have to keep away from dealing with any financial activities which exposed to the riba transactions. Allah s.wt mentioned in the Quran in Surah Al-Baqarah verse 279.

فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مِّنَ اللّهِ وَرَسُولِهِ وَإِن تُبْتُمْ فَلَكُمْ رُؤُوسُ أَمْوَالِكُمْ لاَ تَظْلِمُونَ وَلاَ تُظْلَمُونَ

In this verse Allah sternly warns and threatens who those persist in dealing in riba after having been warned.

The Prophet Muhammad s.a.w also cursed the one who consumes riba, the one who pays it, the one who records it and the ones who witness it, and he said: “They are all the same.” May Allah protect us all in this world and in the hereafter.

In this world, we have two options, basically.

We could be very much of big picture mentality or we could be very much focused on small, small things; technical aspect of things.

We can be very technical, we can be very literalist, or we can be a bit above the board to see the issues at hand from the overall perspective – if you like, from the 360-degree perspective, helicopter view of any issue that we are faced with.

Some people, they like to be very literalist and very technical and they are very much motivated to examine, to argue and debate on the very technicalities of things; 1+1 should be 2.

This is not wrong, to be honest, but in some cases, we have to be above that kind of mathematics because mathematics does not solve all the problems.

We have to bring the art and the science to the whole discussion.

Big picture mentality in Islamic Finance

So, having a big picture mentality would help a lot Islamic banking and finance; a government issuing a sukuk, for infrastructure financing, for 10 years or 20 years – and of course technically speaking, this infrastructure financing will not be able to generate instant cash flow and profitability to the sukuk investors, so how could we issue sukuk for project financing which is long term financing.

But this is very much technical, but from the bigger and from the wider perspective, this is good for both the issuer, the government issuing sukuk and the investor because the investors are putting their money to help the government to perhaps manage the budget deficit as well as to allow the government to tap into Islamic liquidity in the local market as well as at the international market.

This is the big picture mentality helping both the stakeholders, the government, the sovereign and the Islamic investor coming in to support the project financing because that will help the government to get the money though they might put some cashflow, somewhere, somehow, from different project, to pay back the coupon of the sukuk.

Don’t look into the technicalities and try to be above the board and try to have a big picture mentality to support the Islamic finance agenda, in some of the relevant cases to push the agenda and to make sure that we are having the winning agenda all the time.

A small mind cannot solve all the problems – you have to have a big picture mentality to put the right policies and the right strategic mind to make the Shariah finance the mainstream of Islamic finance for the whole world.

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.

Working across the globe in my heavy travelling schedule, one aspect which is more challenging would be the time management.

As you know, we cannot manage the time, we have to manage ourselves in relation to time.

So, I have developed a deep observation of how I could manage my own time, not only to save the time and to salvage the time, but also to create new units of time and this is very, very crucial because in order for you to take more assignment, to take more work and to take more activities and to achieve your own dream, personal or otherwise, you have to have more time in your lifetime.

25 Hours in a Day

In my book, 25 Hours in a Day, I have been able to share my own real experience as a father, as a husband, as a CEO, as the Shariah scholar, as a writer, of how I have been able to meticulously plan the time so that I can suit the expectations and can achieve the expectations of so many stakeholders in the ecosystem.

So, the book is very much real, is very much human, is not beyond our human understanding and apprehension; I’m also human, we are not superhuman, we have to be real in our articulation and the book is about the real articulation of the real life of me and I hope the book can also benefit you.

No matter how busy are you in your profession, the book should be able to give you some tips and some motivation that you can do the same thing – you can salvage your time, you can create units of time and you can feel that the time is always flowing with you.

You can control the time, you can make the time as your good friend and you could be able to see that the time is under your control.

The moment you can do that, you are the king of the time and you are the game changer for your life, for your industry, for your profession, and Insya’Allah for the whole world.

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.

Pengertian Bank Syariah

Apabila kita menyebut berkenaan pengertian Bank Syariah sudah pasti terlintas di benak fikiran kita bahawa secara umumnya ia merupakan sebuah institusi atau organisasi perbankan yang mana transaksi dan urusniaganya adalah berpaksikan kepada prinsip Syariah.

Oleh itu, tiga prinsip utama yang menjadi tunjang muamalat maliyah yang digariskan dalam Islam adalah ia haruslah bebas daripada sebarang elemen riba, gharar dan maysir.

Pengertian Riba

Riba bermaksud penambahan nilai ke atas sesuatu pinjaman yang disyaratkan oleh pemberi pinjaman atau dijanjikan oleh penerima pinjaman manakala dalam pertukaran sesetengah barangan dan matawang, ia bermaksud perbezaan nilai akibat kuantiti yang berbeza ataupun perbezaan waktu pertukaran.

Dalam konteks ini Allah s.w.t berfirman dalam Surah Ali Imran ayat 130 yang berbunyi.

يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافاً مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ

Yang bermaksud: Wahai orang-orang yang beriman, janganlah kamu memakan riba secara berlipat kali ganda dan bertakwalah kepada Allah semoga kamu beroleh keberuntungan/kejayaan.

Pengertian Gharar

Gharar pula merujuk kepada kesamaran yang berlaku dalam sesuatu akad yang dijalankan atau penipuan serta tidak mengetahui akan kandungan sesuatu akad yang mana di dalam akad tersebut wujud unsur-unsur yang dihitung tanpa pengetahuan atau kerelaan pihak yang berakad.

Pengertian Maysir

Maysir pula merupakan.. bermaksud memperolehi sesuatu dengan mudah atau memperolehi keuntungan tanpa usaha. Islam melarang semua bentuk urusniaga di mana keuntungan kewangan diperolehi hanya berdasarkan kepada nasib dan spekulasi dan bukannya dengan usaha gigih untuk mendapatkannya.

Dalam isu ini Allah s.w.t berfirman dalam Surah Al-Maidah ayat 90 yang berbunyi:

إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالْأَنْصَابُ وَالْأَزْلَامُ رِجْسٌ مِنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ

Sesungguhnya meminum arak, maysir berjudi, ansob iaitu berkorban untuk berhala, azlam iaitu menghitung nasib menggunakan panah, merupakan perbuatan-perbuatan yang termasuk dalam perbuatan syaitan. Maka Allah memerintahkan manusia untuk menjauhinya agar kita beroleh keberuntungan.

Prinsip bank Syariah

Produk dan perkhidmatan perbankan syariah tersebut harus menggunakan prinsip Syariah yang ditetapkan bagi mualamat maliyah seperti antara contohnya Mudharabah, Musyarakah, Wadi’ah, Murabahah, Salam, Wakalah dan lain-lain lagi.

Selain itu, bagi memastikan keutuhan patuh Syariah bagi sesebuah Bank, penubuhan Lembaga pengawasan dan kepenasihatan Syariah adalah amat penting bagi memastikan proses menasihati, memantau, mengawasi tadbir urus dan pengurusan sesebuah bank dapat dijalankan dengan baik.

Penubuhan Lembaga tersebut adalah tidak lain tidak bukan bertujuan untuk memastikan pematuhan Syariah dapat dilaksanakan dengan mapan dan sewajarnya. Adalah menjadi suatu kemestian bagi sesebuah institusi bank Syariah untuk menubuhkan Lembaga Pengawasan Syariah yang terdiri daripada ahli jawatan kuasa Syariah serta kakitangan yang mempunyai kompetensi, reputasi dan kepakaran dalam bidang Syariah dan kemahiran tertentu sebelum ia dapat diiktiraf sebagai sebuah bank Syariah yang sebenar.

Matlamat utama bank Syariah

Selain daripada merealisasikan matlamat kewangan bagi menjana keuntungan melalui transaksi yang dijalankan, Bank Syariah juga haruslah berupaya untuk melestarikan kemaslahatan dan kesejahteraan umat sejagat melalui pelaksanaan produk dan perkhidmatannya kepada para pelanggan.

Ia berfungsi sebagai landasan untuk memahami pelbagai transaksi yang dilarang dalam agama Islam yang berkaitan dengan aktiviti ekonomi antara individu.

Sistem perbankan Syariah yang mana perlaksanaannya adalah berlandaskan kepada syariah iaitu hukum Islam, haruslah menonjolkan aspek keadilan dan kejujuran dalam bertransaksi, dan selain itu haruslah juga menonjolkan pelaburan yang beretika, mengetengahkan nilai-nilai kebersamaan dan persaudaraan dalam setiap produk dan perkhidmatan serta menghindari kegiatan spekulatif daripada pelbagai transaksi kewangan.

Lebih utama lagi, manfaatnya akan dinikmati tidak hanya oleh umat Islam saja, tetapi dapat membawa kesejahteraan kepada seluruh lapisan masyarakat.

Syariah sama sekali tidak pernah menutup jalan atau menghalang manusia untuk memperoleh keuntungan duniawi yang bersifat material, akan tetapi Islam meraikan keperluan tersebut melalui cara dan kaedah yang seimbang dan saksama bagi memelihara kesejahteraan setiap insan.

Ijarah

Ijarah refers to a lease or commission contract that involves in the exchange of usufruct or benefits of an asset or services for a rent or commission for an agreed period at an agreed consideration.

In the context of Islamic finance, the ijarah concept is usually applicable in financing contracts such as in real property financing, vehicle financing, project financing and personal financing.

There are also financing products that enable the customers to lease the assets from Islamic financial institutions with an option to acquire the leased assets at the end of the lease tenure based on the concept of ijarah muntahia bi al-tamlik or al-ijarah thumma al-bai`.

The rules of Ijarah, in the sense of leasing, is very analogous to the rules of sale, because in both cases something is transferred to another person for a valuable consideration.

The only difference between Ijarah and sale is that in the latter case the corpus of the property is transferred to the purchaser, while in the case of Ijarah, the corpus of the property remains in the ownership of the transferor/ lessor, but only its usufruct i.e. the right to use the asset, is transferred to the lessee.

Necessary Conditions of Ijarah

The last point I will touch on the Necessary Conditions of Ijarah which is Subject to:

It must have valuable use, thus, a thing having no usufruct or value, cannot be leased

It must not be perishable for the whole period of the lease

It must be actually legally attainable, which means leasing something which cannot be delivered is not permitted.

It should be precisely specific

It is necessary to make known the purpose for which the asset is rented because it must be free from ambiguity and uncertainty

In commercial sectors, it is not permitted to lease a property to a company that will use the leased assets for Shari’a prohibited activities, such as to convert it into a gambling centre or bar

The period for using it must be fixed and agreed upon by both parties. Renewal terms also must be stated clearly and it should not be left alone to the lessor’s discretion

It is permissible to lease the property to those whose major activities are halal or permissible even they are involved some secondary prohibited activities

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.

Islamic finance would need a new storyline, would need a new narration to make it more trendy and fashionable and to suit the modern expectations of this new banking.

From time to time, people has changed, people has evolved, if you like, in terms of the expectation, in terms of their understanding, of anything in this world from the IT to the medical to the social life.

Human has evolved and the same goes to Islamic banking and Finance – for the last forty years Islamic Banking and Finance perhaps has been perceived in one form or another but the time has come in the 21^st century for the players of the industry to really put a new narration.

What would be the new narration, then?

Narration for Islamic Finance

As for me, the new narration would be – Islamic finance is for all, is not limited to any particular faith, any particular race, any particular geography.

Number two, Islamic finance is as good as a conventional finance in terms of transparency, risk management, good governance and quality of control and the best practices of any financial conduct.

The third element of the new narration Islamic Banking & Finance – it helps the real economy to evolve and to develop and to mature and to benefit everyone in the society.

And the fourth element – which is quite important, Islamic Finance is not that difficult to understand.

It should be made easy, it should be made human, it should be made very much close to humanity as all Islamic banking should be humanized.

We have to put the agenda of humanizing financial activities through products and services which are very dear and close to the heart of the society.

They are not being cheated, they are not being – if you like – misled, everything should be transparent, everything should be clear-cut, and the risk, the degree of the risk should be exposed to them and everything should be done in the proper disclosure and the proper transparency and in the proper articulation of the risk and reward as well as the behavior of the financial contract.

These are the four pillars of the new narration of Islamic Banking and Finance in the 21^st century.

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.

Islamic Finance has been in this world, in the modern history of financial systems in the last forty years; almost four decades.

And everyone and every stakeholder has been hoping to see Islamic banking finance to be operational on the centerstage of the world financial system.

I don’t think we have achieved that level, as yet, but it does not mean we cannot be putting the hope and aspiration to make this Islamic banking finance one day on the centerstage of the financial world.

Mainstreaming Islamic Finance

And this is what we call, ‘to mainstreaming Islamic finance’, to make Islamic finance the mainstream and the preferred financial solution for the financial world to consider.

The efforts should be coming from all the stakeholders and we have many stakeholders of the world, either in Muslim world or in non-Muslim world, they should be able to work together to articulate and to make sure that Islamic finance and banking is one of the preferred solutions with regards to banking, perhaps insurance, perhaps capital markets, funds and SRI, the green activities and what not.

So, Islamic finance and banking has all the ingredients, has all the important DNA to become the preferred solution across the globe.

It is not only limited to Muslims because the very fundamental of Islamic finance and banking is to provide transparency, is to provide real asset economy and perhaps real services economy that can give the real value to everyone in the market.

The trader, the user, the employee, the entrepreneur, the needy, the poor. Everyone would benefit from this system if we are able to put the right scheme of making Islamic banking and finance the preferred choice of financial activities and perhaps will make the Islamic banking the mainstream of the financial practice of the world.

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.

So if we speak about the Islamic Finance in Kazakhstan and the CIS region we can say that there is a very big demand for the Islamic financial products within the nations in this region.

And particularly, the Kazakhstan is leading in terms of the legislation.

It has developed the full legislation allowing for the Islamic banks, the Takaful companies which wants to make activities in this region and the legislation is developed for issuing Sukuk in Kazakhstan.

And now there is a very big initiative of Astana International Financial Center, which is working very close with the DIFC (Dubai International Financial Center) and it will be the similar platform to develop Islamic finance products and which can be the hub for the region to attract and to develop the Islamic Financial products.

Islamic Finance in Kazakhstan

And now according to the legislation the Kazakhstan has few banks, Islamic banks, and few leasing companies, the Ijarah companies and the Kazakhstan has issued Murabahah Sukuk in 2012 by the Development Bank of Kazakhstan and with coming this two years we are expecting two or three Sukuks to be issued by the Kazakhstani entities.

And the other states like Russia, is also working in this direction, especially the Tatarstan, which is in Russian Federation is one of the leaders in developing Islamic Financial products and legislation. And these works are on the way.

And Azerbaijan, Kyrgyzstan, Tajikistan they all are in the process of developing some legislation. In this regard, Kyrgyzstan has special decree by the president and the working Islamic bank as a model.

So, in general if we speak there is a huge territory that more than 200 million population, which is now going towards developing the legislation for the Islamic financial products.

And these market in coming 5 or 10 years might be very attractive for the Islamic, International Islamic Financial Institutions.

If you are interested to get us to help you with Islamic finance consultancy and Shariah advisory, feel free to contact us. Our team are looking forward to grow your brand with Shariah compliance products and services.