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Ekonomi Islam: Sebuah Mutiara yang Hilang

August 22, 2010 3 comments

Zhajang Lili Charli

“Hikmah itu adalah milik muslim yang hilang, maka ambillah ia dari mana pun engkau mendapatkannya”. (al hadist)

Pendahuluan
Selama kurang lebih 20 abad, perkembangan perekonomian dari waktu ke waktu mengalami kondisi yang kontradiktif (Ahmed, 2004, hal. 13). Di satu sisi, beberapa negara terus mengalami perkembangan dengan pertumbuhan yang meningkat tajam, perekonomian yang semakin membaik, serta tingkat kesejahteraan yang tinggi. Disisi lain banyak negara yang mengalami kemiskinan, kemelataratan dan keterbelakangan dibandingkan negara-negara maju lainnya.
Jika ukuran kemajuan negara adalah GDP (Gross Domestic Product) dan HDI (Human Development Index), maka sangat mengejutkan ketika kita melihat data yang dikeluarkan oleh UNDP (United Nation Development Program) pada tahun 2001. Dalam laporan tersebut dapat terlihat gap yang sangat besar antara beberapa negara. Dari 48 anggota IDB (Islamic Development Bank) memiliki 1,1 milyar populasi penduduk. Namun dari 48 anggota IDB ini hanya memiliki keseluruhan GDP $ US 1.31 trilyun. GDP dari 48 negara ini lebih rendah dari GDP Negara Inggris ($US 1.33 trilyun), 74 % dari GDP Prancis ($US 1.8 trilyun), 24 % GDP Jepang ($US 5.65 trilyun), 15 % GDP USA ($US 9.01 trilyun) (UNDP, 2003).
Padahal, jika kita menilik kembali sejarah keemasan Islam pada pemerintahan Umar bin Abdul Aziz (717-720 M), hanya dalam masa 2 tahun, ia berhasil mengentaskan kemiskinan sehingga tidak ada lagi yang mau menerima zakat. Semua rakyatnya merasa sudah menjadi muzaki (pembayar zakat) bukan lagi mustahik (penerima zakat) (Nasution, 2006, hal. 12). Pada masa itu Islam tidak hanya diterapakan dalam bidang-bidang tertentu saja. Islam diimplementasikan dalam setiap aspek kehidupan, tidak terkecuali dalam sistem perekonomian. Keberhasilan itu tidak hanya didukung oleh individu, tetapi juga peran strategis pemerintahan negara. Dalam konsep Islam peranan ekonomi dari negara adalah penting dan signifikan. Islam memiliki aturan yang luas dan komprehensif tentang peran yang harus dimainkan oleh penguasa, mulai dari panduan religius, penegakan hukum, menjaga keamanan dan perdamaian internal dan eksternal, hingga memenuhi kebutuhan ekonomi penduduk dan menjaga hak milik-nya.
Ekonomi Islam, Sejarah yang Hilang
Lantas jika negara-negara Islam (anggota IDB) pernah mengalami masa kejayaan dan memiliki kemakmuran yang tinggi, kenapa saat ini menjadi hal yang paradox? Tentu saja hal ini bukan tanpa alasan. Jika kita menilik perjalanan sejarah perekonomian dunia, terdapat noda kejahatan yang pernah tercatat. Sebut saja dalam penulisan sejarah pemikiran ekonomi. Kemajuan ekonomi islam tidak diakui sebagai kekuatan yang mempengaruhi tatanan ekonomi dunia. Seperti disebutkan dalam buku “Sang maestro: teori-teori ekonomi modern” yang dikarang oleh Mark skousen disebutkan bahwa, tidak ada yang mempengaruhi pemikiran ekonomi Adam smith selain filsuf Yunani dan sedikit sekali pegaruh ajaran Budha dari Cina (Skousen, 2005).
Jelas terlihat peran kontribusi ekonom islam pada waktu itu dihilangkan. Padahal jika kita amati sejarah dengan jeli ada perkataan Adam Smith yang sangat mengejutkan. ”Contoh masyarakat dengan ekonomi terbelakang adalah Indian di Amerika utara dan contoh masyarakat dengan ekonomi maju adalah Arab yaitu Mahomet and his immediate successors (Adam Smith, Wealth of Nations, Jilid 5 Bab 1, 1776)”.
Kemudian Joseph A. Schumpeter dalam karya klasik-nya, History of Economic Analysis (1954), mengatakan terdapat “Great Gap” selama “over 500 years” dalam evolusi dan perkembangan pemikiran ekonomi dari pertama kali timbul di Yunani pada abad ke-4 SM hingga bangkit kembali di tangan pemikir skolastik St. Thomas Aquinas pada abad ke-13 M.
Setelah diteliti kemudian, ternyata sejarah pemikiran yang hilang itu terjadi ketika zaman keemasan Islam pada babak ke-tiga sejarah Islam. Yaitu pada masa kekhalifahan, setelah masa khulafahu rasyidin berakhir. Hal ini terbukti dari kesamaan pemikiran Adam Smith mengenai spesialisasi kerja. Ide spesialisasi kerja (division of labour) dalam buku Welth of Nation telah dibahas oleh Imam al-Ghazali (1058-1111) dengan mempergunakan contoh pabrik jarum. Sama persis dengan analogi Adam Smith (1723-1790) yang mempergunakan contoh pabrik peniti hampir enam ratus tahun kemudian. (Wibisono, 2007, hal. 4).
Tinta Merah Sejarah Perekonomian
Tidak menjadi soal jika konsep dalam ekonomi islam ini diterapkan dalam keseluruhan perekonomian. Namun kenyataannya sistem yang ada sekarang hanya dipakai jika menguntungkan sebagian pihak. Sebagai contoh dalam pelarangan riba dalam basis perekonomian yang dilanggar. Pada sistem ekonomi mainstream saat ini, bunga menjadi basis perhitungan dalam semua bidang ekonomi.
Tinta merah sejarah perekonomian dunia juga diwarnai oleh perubahan sistem mata uang dunia. Sejak Amerika memenangkan perang Dunia ke-II banyak dana recovery yang dibutuhkan. Oleh karena itu pada Agustus 1971 dengan kekuatan yang dimiliki US, maka mereka tidak lagi mem-back up uang mereka dengan emas (Chapra, 1996). Ini menjadi pertanda berakhirnya Bretton Wood’s system dan akhirnya kita masuk pada era baru dimana pengaturan uang tidask lagi ada hubungannya dengan emas. US dengan mudahnya mencetak uang dan dunia harus mengikuti standar nilai pada dollar mereka.
Sejak berlakuknya standar ini ada dua fenomena yang tidak menyenangkan, tingkat inflasi yang sangat tinggi dan tingginya ketidakstabilan nilai tukar (Chapra, 1996). Bagi pengusaha dan investor hal ini mengakibatkan sulitnya melakukan proyeksi yang tepat dimasa yang akan datang dan akhirnya terjadi misallocation sumber daya baik di wilayah domestik maupun di Internasional.
Akibat lainnya sistem keuangan modern menjadi sangat labil secara sistemik. Karena sistem keuangan modern yang berbasis bunga dan fiat money dapat memfasilitasi kegiatan spekulasi. Pasar uang telah menjadi arena perjudian legal terbesar di dunia. Sejak runtuhnya sistem Bretton Woods pada 1973, gap antara perdagangan uang dan perdagangan barang semakin melebar dengan kecepatan yang semakin tinggi. Menurut BIS, pada April 2004, rata-rata volume transaksi harian valas mencapai US$ 1,9 triliun, yang terdiri dari transaksi spot US$ 0,6 triliun dan transaksi derivatif US$ 1,3 triliun. Sedangkan volume transaksi yang terjadi pada perdagangan dunia di sektor real hanya US$ 6 triliun setiap tahun. Ketidakseimbangan sektor moneter dan sektor riil akan memunculkan krisis. Sepanjang abad 20, telah terjadi lebih dari 20 krisis ekonomi, yang kesemuanya merupakan krisis finansial (Roy & Davies, 1996).
Dalam perkembangan ilmu ekonomi sekarang, cenderung mengarah pada ilmu yang menjauhkan dari kenyataan. Riset ekonomi menjadi terpisah dengan dunia nyata. (Leijonhufvud, 1981, hal. 347-359). Hal ini mulai terjadi ketika Ricardo membawa teorisasinya ke titik ekstrem dimana dia menggunakan semua asumsinya yang terbatas dan meragukan untuk mendapatkan kesimpulan yang dicarinya (Skousen, Sang Maestro Teori-Teori Ekonomi Modern, 2005, hal. 116).
Dampaknya adalah terjadi pada negara-negara yang sedang berkembang dan negara-negara miskin. Terdapat 2,5 milyar orang (40% penduduk dunia) hidup dengan pendapatan kurang dari $2 sehari. Jumlah ini setara dengan 5% pendapatan dunia. Namun hanya 10% penduduk terkaya dunia saja yang dapat menguasai 54% dari total pendapatan dunia (UNDP, 2005).
Perbedaan (gap) ini terjadi semakin parah dari tahun ke tahun. Seperti data yang ditunjukan oleh IMF yang membandingkan antara negara kaya dan negara miskin, terjadi pergerakan perbedaan pendapatan per kapita yang semakin jauh antara negara tersebut. Sehingga dapat terlihat dari grafik bahwa pertumbuhan pendapatan per kapita negara berkembang tidak terlalu tinggi. Sayangnya Indonesia termasuk pada kategori negara berkembang tersebut.
Gambar 1 Gap Pendapatan per kapita

Jika Indonesia menggunakan standar kemiskinan dengan pendapatan di bawah US $ 1 per hari, maka pada tahun 2007 jumlah rakyat miskin di Indonesia mencapai sekitar 36 juta jiwa atau sekitar 16,58%.
Gambar 2 Grafik perkembangan angka jumlah kemiskinan

Angka tersebut akan menjadi berlipat jika Indonesia menggunakan standar kemiskinan dunia yang ditetapkan oleh World Bank, penduduk yang dapat dikategorikan miskin adalah yang pendapatannya dibawah US $ 2 perhari. Maka pada tahun 2007 kemiskinan di Indonesia mencapai 49 % atau lebih dari 100 juta penduduk Indonesia berada dibawah garis kemiskinan. Berikut ini grafik proporsi penduduk hidup dibawah US $ 1 dan US $ 2 per hari di Indonesia.

Solusi alternatif
Tujuan akhir ekonomi adalah untuk mencapai kemakmuran. Sistem ekonomi sekarang telah terbukti belum mampu memberikan kemakmuran masyarakat Indonesia, selain itu gap pendapatan perkapita antara negara berkembang dan negara maju semakin membesar. Maka dibutuhkan sistem alternatif untuk menyelesaikan permasalahan ini agar tidak menjadi larut tak terkendali.
Kepemimpinan dan perubahan adalah kunci dari penyelesaian permasalahn ini. Peran-peran strategis harus difungsikan sebagai titik awal perubahan. Ekonomi Islam yang telah terbukti menjadi sistem yang dapat memecahkan permasalah ini harus di imolementasikan. Namun ekonomi Islam tidak akan kembali tanpa aktor-aktor yang melakukan perubahan itu. Dan inilah yang menjadi alasan mengapa kita disini. Di bina di PPSDMS. Tidak ada alasan lain, untuk mengembalikan kejayaan islam dan demi terciptanya Indonesia yang bermartabat.
Sistem ekonomi islam bukanlah sebuah sistem yang baru diciptakan pada saat sekarang. Namun sistem itu merupakan sistem yang hilang, dibajak, sekaligus didestruktif oleh oknum ekonomi demi kepentingan tertentu. Jika pada masa Umar bin Abdul Aziz (717-720 M) masyarakat Islam berada pada masa kemakmuran yang tinggi, dengan ditandai oleh tidak ada lagi masyarakat yang mau menerima dana zakat (mustahik) (Nasution, 2006), maka bukan terlalu muluk jika Indonesia mengalami hal semacam itu.
Sistem Finansial Ekonomi Islam
Fitur sistem ekonomi islam yang paling terkenal adalah sistem finansial non-ribawi (free base interest). Karena bunga adalah akar dari semua krisis finansial yang dialami perekonomian modern. Misalkan saja implikasi bunga dalam pasar uang. Dari data yang diperoleh dari BIS, pada April 2004, rata-rata volume transaksi harian valas mencapai US$ 1,9 triliun, yang terdiri dari transaksi spot US$ 0,6 triliun dan transaksi derivatif US$ 1,3 triliun.Sedangkan volume transaksi yang terjadi pada perdagangan dunia di sektor real hanya US$ 6 triliun setiap tahun (Nasution, 2006). Oleh karena itu gap antara sektor rill dan moneter majadi semakin tinnggi.
Penerapan bunga juga membuat output di sektor rill “dipaksa” tumbuh sesuai dengan tingkat yang diinginkan sektor finansial. Dengan demikian, penerapan bunga secara sistemik akan membuat upaya-upaya mendapatkan laba jangka pendek semakin marak sehingga mendorong eksploitasi sumber daya manusia dan alam secara berlebihan yang sering berujung pada krisis sosial dan ekologi. Di dalam dunia modern, dampak bunga terhadap perekonomian dan lingkungan menjadi semakin mengkhawatirkan. Ketika sistem bunga dikombinasikan dengan reserve fractional banking, maka efek inflasioner bunga bertemu dengan kemampuan sektor perbankan untuk menciptakan uang. Dampaknya adalah pertumbuhan uang beredar yang masif dan semakin cepat menuju tak terbatas.
Absensi Riba dalam perekonomian (sektor riil) mencegah penumpukan harta pada sekelompok orang (money concentration & creation), dimana hal tersebut berpotensi terjadinya misalokasi produksi (menghambat perkembangan sektor riil) dan eksploitasi perekonomian (eksploitasi pelaku ekonomi atas pelaku yang lain dan eksploitasi sistem atas pelaku ekonomi). Absensi Riba mencegah timbulnya gangguan-gangguan dalam sektor riil, seperti inflasi dan penurunan produktifitas ekonomi makro. Absensi Riba mendorong terciptanya aktifitas ekonomi yang adil, stabil dan sustainable melalui mekanisme bagi hasil (profit-loss sharing) yang produktif.
Dengan sistem finansial seperti ini (Syariah), sektor rill akan bergerak lebih cepat. Bergeraknya cepatnya sektor rill akan meningkatkan produksi dan lapangan kerja Maka hal ini akan bermanfaat bagi masyarakat karena produksi naik bersaman juga daya beli masyarakat naik. Artinya ada yang menyerap produksi tambahan atau dengan kata lain kenaikan kebutuhan diimbangi dengan kenaikan produksi barang sehingga tidak terjadi kenaikan harga-harga.
Sistem Moneter Ekonomi Islam
Dalam sistem moneter, Islam mendukung sistem moneter yang menghasilkan stabilitas nilai uang. Sistem seperti ini diraih Islam dengan cara:
1. Memastikan sistem bebas dari riba dan gharar.
2. Menjamin bahwa penciptaan uang terkontrol dengan system full-bodied money.
Oleh karena itu, jenis mata uang yang paling cocok untuk sistem ini adalah mata uang dinar-dirham. Hal ini dikarenakan nilai intrinsik dinar dan dirham sama dengan nilai nominal, selain itu mata uang ini memiliki nilai yang stabil sehingga perputaran uang tidak terganggu. Nilai Dinar ini telah terbukti memiliki nilai yang sangat stabil selama berabad-abad. Setelah lebih dari 14 abad daya beli/nilai tukar Dinar memiliki nilai yang tetap (Iqbal, 2007, hal. 55). Ha ini terbukati dengan daya beli 1 Dinar pada zaman Rasulullah SAW yang bisa ditukarkan dengan 1 ekor kambing. Pada saat inipun 1 Dinar dapat ditukarkan dengan 1 ekor kambing (1 Dinar sekarang sekitar Rp 800.000) (Iqbal, 2007, hal. 55).
Sistem moneter Islam berbasis emas ini superior dibandingkan sistem konvensional atas dasar sebagai berikut:
1. Excellent medium of exchange; emas diterima di seluruh dunia, setiap tempat, setiap masa.
2. Stable money; dalam sistem yang sepenuhnya didukung emas (fully gold backed system), penciptaan uang beredar yang berlebihan dan dampak buruknya (seperti business cycle) dapat dieliminasi.
3. Dinar promote a Just Monetary System; penggunaan dinar akan membuat keseimbangan antara sektor moneter dan sektor riil terjaga dengan baik.
4. Minimizes speculation, manipulation, and arbitrage; dengan emas sebagai mata uang tunggal dunia, maka aktivitas transaksi mata uang akan terhapus.
5. Dinar diversified risk and promotes trade; dengan mata uang tunggal, resiko inheren dalam sistem mata uang akan tereliminasi.
6. Promoting economic stability and efficiency; mata uang tunggal akan meniadakan kebutuhan terhadap instrument derivatif di pasar keuangan sehingga akan mendorong stabilitas dan efisiensi perekonomian.
Dengan demikian emas dan perak atau Dinar dan Dirham apabila digunakan sebagai alat ukur dan alat untuk menyimpan atau mempertahankan kekayaan umat Islam sudah memberi manfaat yang sangat besar karena kekayaan umat Islam (khususnya di Indonesia) tidak bisa dimainkan oleh spekulan pasar uang. Jika nilai uang selalu tetap maka tidak ada kekayaan masyarakat Indonesia yang dirampok karena kehilangan nilainya. Kekayaan akan tetap sama nilainya dan akan memperoleh manfaat yang maksimal dari harta yang dimilikinya.
Sistem Fiskal Ekonomi Islam
Sistem zakat dalam ekonomi Islam adalah sebagai garda terdepan sistem fiskal. Zakat memiliki fungsi alokasi, distribusi, dan sekaligus stabilisasi dalam perekonomian (Charli, 2007). Jika dikelola dengan baik, zakat akan menjadi salah satu solusi dari sasaran akhir perekonomian suatu negara (Charli, 2007, hal. 2). Yakni terciptanya kesejahteraan bagi masyarakat. Paling tidak ada beberapa effect jika zakat dikelola dengan baik :
1. Zakat Mendorong Pemilik Modal Untuk Mengelola Hartanya
Zakat mal itu dikenakan pada harta diam yang dimiliki seseorang setelah satu tahun, harta yang produktif dan digunakan untuk produksi tidak dikenakan zakat. Jadi jika seseorang menginvestasikan hartanya, maka ia tidak dikenakan kewajiban zakat mal. Hal ini dipandang mendorong produktivitas, karena uang selalu diedarkan di masyarakat, sehingga jumlah uang yang beredar bertambah. Akhirnya perekonomian suatu negara akan berjalan lebih baik.
2. Meningkatkan Etika Bisnis
Kewajiban zakat dikenakan pada harta yang diperoleh dengan cara yang halal. Zakat memang menjadi pembersih harta, tetapi tidak membersihkan harta yang diperoleh secara batil. Maka hal ini akan mendorong pelaku usaha agar memperhatikan etika bisnis.
3. Pemerataan Pendapatan
Pengelolan zakat yang baik dan alokasi yang tepat sasaran akan mengakibatkan pemerataan pendapatan. Hal inilah yang dapat memecahkan permasalahan utama bangsa indonesia (kemiskinan). Kemiskinan di Indonesia tidak terjadi karena sumber pangan yang kurang, tetapi distribusi bahan makanan itu yang kurang baik. sehingga banyak orang yang tidak memiliki kemudahan akses yang sama terhadap bahan pangan tersebut. Dengan zakat distribusi pendapatan itu akan lebih merata, dan tiap orang akan memiliki akses lebih terhadap distribusi pendapatan.
4. Pengembangan Sektor Riil
Salah satu cara dalam pendistribusian zakat bisa dilakukan dengan memberikan bantuan modal usaha bagi para mustahiq. Pendistribusian zakat dengan cara ini akan mendorong para mustahiq untuk melakukan usaha pada sektor rill. Hal ini akan memberikan dua efek yaitu meningkatnya penghasilan dari mustahiq dan juga akan berdampak ekonomi secara makro. Usaha yang dilakukan tersebut merupakan usaha yang meningkatkan sektor rill, menggerakkan pertumbuhan dan aktivitas perekonomian. dan hal ini sangat erat kaitannya dengan daya saing kompetitif dan komparatif suatu bangsa. Ukuran produktivitas suatu bangsa dapat dilihat dari kemampuan sektor riil-nya di dalam menghadapi persaingan yang semakin ketat.
5. Sumber Dana Pembangunan
Banyak kaum dhuafa yang sangat sulit mendapatkan fasilitas kesehatan, pendidikan, maupun sosial ekonomi. Lemahnya fasilitas ini akan sangat berpengaruh dalam kehidupan para dhuafa. Kesehatan dan pendidikan merupakan modal dasar agar SDM yang dimiliki oleh suatu bangsa berkualitas tinggi. Peran dana zakat sebagai sumber dana pembangunan fasilitas kaum dhuafa akan mendorong pembanguanan ekonomi jangka panjang. Dengan peningkatan kesehatan dan pendidikan diharapkan akan memutus siklus kemiskinan antar generasi.
Strategi Pengentasan Kemiskinan
Dari paparan sebelumnya dijelaskan mengenai fitur sistem ekonomni Islam. Pada bagian ini saya rangkum kembali bagaimana sistem ekonomi Islam dapat mengangkat mayarakat menuju masyarakat yang memiliki kesejahteraan tinggi. Ada empat strategi yang dapat dilakukan untuk mengatasi permasalahan kemiskinan, yaitu 2 strategi dari sisi makro dan 2 strategi dari sisi mikro (Ahmed, 2004, hal. 62).
Gambar 3 Macro Determinant of Poverty

1. Kebijakan Makroekonomi yang dapat mendorong Pertumbuhan
Kebijakan makroekonomi tidak hanya meliputi kebijakan fiskal dan moneter saja, tetapi juga harus diikuti dengan perjanjian dan transaksi yang meliputi kebijakan sektoral, pengaturan hutang, domestik dan external financing, kebijakan nilai tukar, dan berbagai kebijakan-kebijakan yang memberikan kemudahan secara eksternal. Selain itu, beberapa hal yang dapat meningkatkan pertumbuhan dalam ekonomi adalah reformasi sektor keuangan, perdagangan bebas, promosi ekspor, kebijakan investasi, pembangunan sektor swasta.
2. Kebijakan untuk redistribusi
Kesempatan dalam memperoleh peluang hidup yang layak dan distribusi pendapatan dapat ditingkatkan melalui kebijakan menyediakan peluang yang seluas-luasnya, memfasilitasi untuk menguasai sesuatu dan jaminan keamanan dan perlindungan bagi masyarakat miskin. Dengan mempromosikan peluang, membuat lapangan pekerjaan yang baik dan layak, membangun aset yang dimiliki masyarakat miskin adalah faktor kunci dalam redistribusi pendapatan kepada mereka.
3. Pembangungan kapasitas dan Menciptakan Kesejahteraan
Menurut Sen (1990), anak-anak dari keluarga miskin tidak memiliki kapabilitas dasar (The Basic Capabilities) yang mencukupi untuk menghadapi kompetisi di dalam pasar tenaga kerja secara maksimal. Rendahnya kapabilitas anak-anak dari keluarga miskin disebabkan oleh rendahnya modal sumber daya manusia yang mereka terima, baik itu dari segi pendidikan, kesehatan maupun lingkungan (Khan, 1992). Untuk itu diperlukan institusi-institusi yang dapat mendukung masyarakat miskin agar dapat meningkatkan sumber daya manusia yang dimilikinya.
Dengan adanya peningkatan modal fisik per-pekerja (physical capital per-worker) maka produktivitas yang dihasilkan oleh setiap pekerja akan semakin tinggi yang pada akhirnya akan menaikan jumlah penawaran sekaligus permintaan tenaga kerja. Sehingga pada akhirnya kesejahteraan masyarakat akan meningkat secara signifikan karena masyarakat secara aktif mendapat kesempatan untuk mengangkat tarap hidupnya dengan bekerja dan berpenghasilan yang mencukupi kebutuhan hidupnya.
Selain itu ada 3 hal lain yang harus ditingkatkan, yaitu perdagangan, produksi, dan tenaga kerja yang berdasarkan hak. Semua orang memiliki hak ikut ikut serta dalam proses perdagangan, produksi dan tenaga kerja.
4. Pendukung pendapatan
Banyak masyarakat yang tidak memiliki kemampuan untuk bekerja dikarenakan kondisi fisik mereka tidak memungkinkan untuk bekerja misalnya faktor usia yang sudah sangat tua, sakit, yatim piatu, cacat fisik dan lainnya. Maka, hal tersebut dapat diatasi dengan cara memberikan bantuan kepada mereka, misalnya dengan memberikan bantuan sosial oleh institusi/lembaga sosial, memberikan perlindungan dan jaminan hidup serta tempat tinggal yang layak bagi mereka oleh pemerintah. Mereka semua memiliki hak dan kesempatan yang sama untuk memperoleh kesejahteraan.
Untuk meminimalisir beban/peran negara untuk men-support masyarakat ini diperlukan sebuah kebijakan dari pemerintah. Kebijakan ini terkait dengan konsep penetapan upah buruh. Penetapan upah buruh yang direkomendasikan misalnya, harus berdasarkan kadar manfaat (jasa) yang diberikan oleh buruh, bukan berdasarkan daya beli upah untuk memenuhi kebutuhan-kebutuhan hidup minimum buruh, seperti dalam kapitalisme. Jika buruh tetap miskin dengan upah itu, maka yang bertanggung jawab atas kesejahteraannya adalah negara (Baitul Mal), bukan pengusaha.
Kesimpulan
Sudah saatnya ekonomi Islam diberikan kesempatan dalam perekonomian Indonesia sebagai alternatif sistem yang sudah ada sekarang. Sistem ekonomi yang telah terbukti dapat mensejahterakan masyarakat pada masa ke khalifahan Umar bin Abdul Azis (717-720 M). Maka menjadi hal yang sangat mungkin sejarah keemasan umat Islam dengan kesejahteraan yang merata dapat terulang kembali di Indonesia
Dengan mengambil kebaikan dari ekonomi yang ada sekarang dan koreksi dari sistem ekonomi konvensional akan menjadi kekuatan yang saling melengkapi dalam mensejahterakan rakyat Indonesia. Implementasi ekonomi syariah dalam berbagai bidang, seperti dalam sistem fianansial, sistem moneter, dan sisterm fiskal dalam perekonomian akan membuat sebuah sistem ekonomi negara yang kokoh dan stabil.

Reference
Ahmed, H. (2004). Role of Zakah and Awqaf in Poverty Alleviation. Jeddah: Islamic Development Bank Group Islamic Research And Training Institute.
Basri, F. (2005, November 22). Tatanan Ekonomi Dunia Memang Harus Dirombak. 4. Jakarta, Jakarta, Indonesia.
Booth, A. (2000). Survey of Recent Development. BIES , 73-104.
Bourguignon, F. (2004). The Poverty-Growth-Inequality Triangle. New Delhi: International Economic Relation.
Chapra, M. U. (1996). Monetary Management In An Islamic Economy. Islamic Economic Studies , 1-40.
Charli, Z. L. (2007, Maret 5). Economic Value of Zakah. Dipetik Januari 5, 2008, dari Amil ZIS Online: http://amilzis.ui.edu
Iqbal, M. (2007). Mengembalikan Kemakmuran Islam Dengan Dinar & Dirham. Depok: Spiritual Learning Centre & Dinar Club.
Khan, M. F. (1992). Human Resources Mobilization Through The Profit-Loss Sharing Based Financial System. Jeddah: Islamic Development Bank Group Islamic Research And Training Institute.
Leijonhufvud, A. (1981). Life Among the Econ. New York: Oxford University Press.
Nasution, M. E. (2006, Februari 1). Ekonomi Syariah: Sebuah Pengantar. Kuliah Ekonomi Syariah , hal. 3.
Roy, & Davies, G. (1996). a history of money from ancient times to the present day. Chicago: Prentice Hall.
Schumpeter, J. A. (1954). History of Economic Analysis. New York: Harper and Row.
Skousen, M. (2005). Sang Maestro Teori-Teori Economi Modern. Jakarta: Prenada Media.
Skousen, M. (2005). Sang Maestro Teori-Teori Ekonomi Modern. Jakarta: Prenada Media.
Smith, A. (1937). Wealth of Nations. Dalam A. Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (hal. Jilid 5 Bab 1). Chicago: University of Chicago.
Sollow, R. (1957). Tecnical Change and the Agregate Production Function. Review of Economic and Statistic , 312-320.
UNDP. (2003). Human Developement Report 2003: Millenium Development Goal: A Compac Among Nation to End Human Poverty. New York: Oxford University Press.
UNDP. (2005). Human Development Report. New York: UNDP.
Wibisono, Y. (2007). Sejarah Pemikiran Ekonomi Islam. Kuliah II (hal. 4). Depok: Fakultas Ekonomi Universitas Indonesia.

Development of Islamic Finance in Malaysia: A Conceptual Paper

August 22, 2010 Leave a comment

Darwis Abd Razak
School of Management, Universiti Sains Malaysia
11800, Penang, Malaysia
Tel: 04 6533888
Fax: 04 6577448
Email: drwis2002@gmail.com

Mohd Azhar Abdul Karim, PhD
Faculty Business and Economics
Universiti Putra Malaysia
43400, Serdang, Selangor

Abstract
Islamic finance has made significant inroads in the international financial markets that have achieved growing global awareness. Islamic finance now has a presence in over 60 countries, especially in Muslim countries. In the context of financial infrastructure, the Malaysian Islamic financial system is both robust and fast growing. The market has highly diversified players, with Islamic banks, investment banks, takaful companies, development financial institutions, savings institutions, fund management companies, stock brokers and unit trusts. The aim of this paper is provide a conceptual understanding on the growth in Islamic Finance in Malaysia by exploring its current and future development. It is observed that the participation in the Islamic finance process would require the development of a comprehensive and well established Islamic financial system such as: – a wide range of products and services; a good legal system, adequate financial infrastructure with competitive tax structures, low cost of doing business, high standards of business ethics, and conducive living conditions and cultural offerings. It would also need to be supported by adequate human talents that would drive the business and spur innovation. In addition, a strong regulatory regime in the Islamic financial system would be another pull factor. The implication of this paper is to provide a platform for industry players and regulators to highlights the recent developments in Islamic finance in Malaysia.
Key words: Development, Islamic Finance, Malaysia

1.0 Introduction
The Islamic finance industry is now in its fourth decade and, during that period, has developed extremely rapidly. In the past few years, overall market growth has been estimated at between 15-20 percent annually although individual Islamic banks have reported even faster growth (Howard, 2008). According to Bank Negara Malaysia (the Malaysian central bank), the number of Islamic bank branches in Malaysia increased from 126 in 2004 to 766 in 2005. Elsewhere, new Islamic financial institutions (IFIs) are being established rapidly in the industry’s traditional markets in the Gulf Co-operation Council (GCC) countries. Islamic finance is also on the rise in new markets such as Syria, Lebanon, the U.K., Turkey and Canada. In the U.K., for instance, two new Islamic banking license applications are currently being considered by the Financial Services Authority (FSA), following the authorization in the past three years of the Islamic Bank of Britain and the European Islamic Investment Bank (Yong, 2007).

With the rapidly changing international Islamic financial landscape, Islamic finance in Malaysia is now becoming increasingly integrated to the international financial system (Zeti, 2008). The world has witnessed the emergence of Islamic finance, and this phenomenon, as observed has continued to grow strongly. Global asset size for Islamic finance is estimated to be between US$200 and US$400 billion, and growing at 15% per annum. Apart from financial institutions in the Middle East, global banks are also responding to tap the opportunities of this huge pool of capital. Today, the number of Islamic financial institutions worldwide now exceeds over three hundred in seventy-five countries and offering a wide range of Syariah compliant products (El-Qorchi, 2005). This development has taken place in all segments of the Islamic financial system in Malaysia including the Islamic banking and takaful industry, and in the Islamic money and capital markets. These include Sukuk, takaful insurance, murabaha financing, as well as deposits and property funds structured using Syariah principles. In conjunction with this, there are now a large number of diverse players and institutions in the Islamic financial system in Malaysia. There has also been a growing range of products and services being offered. The pace of product innovation has intensified with more sophisticated Islamic financial products including the structured and investment-linked products. These products have become competitive both in terms of product structure and pricing. There has also been enhanced depth of the Islamic financial markets. This has increased the attractiveness of the Islamic financial instruments as an asset class for investment.

As mentioned earlier, the growth rate of Islamic Finance in Malaysia is impressive by any standards. Malaysia, therefore, has the capacity to retain its leadership in global Islamic finance despite the emergence of competition from centers such as Hong Kong and Dubai (Yong, 2007). He said despite the stiff competition that Malaysia was facing, it was way ahead of other countries in terms of product offerings and its sophistication, having been developing the market for the last 40 years. This paper is therefore interested is provide a conceptual understanding on the growth in Islamic finance in Malaysia by exploring its current and future development. The following sections will discuss on the emergence of Islamic finance, operating environment for Islamic finance, barriers to growth and the concluding remarks.

1.2 The Emergence of Islamic Finance
In essence, the purpose of Islamic economics is to identify and establish an economic order that conforms to the precepts of the Islamic scripture and the narrated traditions of its prophet (Chapra, 1992 and Naqvi, 1994). In the contemporary era, the move towards formulating an Islamic economic framework that was in sync with prevailing economic needs took shape in the 1940s, and three decades later efforts to implement them were under way in dozens of countries (Rahnema & Nomani, 1990; Kuran, 1993, 1995; and Malik, 1996). Despite the fact that Islamic economics contains many distinguishing features, Islamic banking is now regarded as the defining characteristic of an Islamic economic system (Kuran, 1995). The term “Islamic financial system” is relatively new, appearing only in the mid-1980s. In fact, all earlier references to commercial or mercantile activities conforming to Islamic principles were designated as either “interest free” or “Islamic” banking. The first modern experiment with Islamic banking was undertaken in Egypt. This pioneering initiative based on the profit-sharing principle was helmed by Ahmad El Najjar. It involved the establishment of a savings bank in the Egyptian town of Mit Ghamr in l963. By 1967, the number of banks operating on the same principles had grown to nine (Siddiqi, l988). Thus, they functioned essentially as saving- investment institutions rather than as commercial banks.

Though similar initiatives were being made in Malaysia and Pakistan, the overall growth of Islamic banking was miniscule until the 1970s when the nascent reawakening was propelled forward by the oil boom of 1974. The ensuing prosperity enjoyed by the predominantly Muslim beneficiaries of this boom witnessed resurgence in the adoption of Islamic values in countries with substantial Muslim populations and a concomitant rejection of the political and economic structures of the West. This rejection was especially evident in the banking sector as many Muslims opted to deposit their money and conduct commercial transactions with Shariah compliant banks (Lewis & Algaoud, 2001). With the passage of time, the role of Islamic financial instruments in the economy, particularly in the banking sector, began to expand.

The increased popularity and visibility of the sector was especially evident in the 1990s when Islamic finance grew rapidly as Islamic and non-Islamic financial institutions devised new instruments and both Muslims and non-Muslim clients alike began to embrace and utilize Shariah compliant features such al-Muddarabah, al-Muassasah etcetera in their daily banking transactions (Zeti, 2007). Furthermore, Islamic banking expanded as western banks themselves (such as HSBC and Citibank) created a number of financial innovations consistent with Syariah in order to capitalize on the increased demand for Islamic capital investment products (Warde, 2000, 2001). The existence of such Islamic features in the Western banking sector served as a catalyst to draw financing from countries such as Saudi Arabia and Kuwait. Consequently, a number of predominantly Islamic countries such as Iran, Malaysia, Pakistan, Saudi Arabia, and Sudan Islamized their banking systems using highly innovative banking initiatives.

The phenomenal growth of the Islamic Financial sector is underlined by the fact that there are now about 300 Islamic financial institutions in 75 countries, holding assets estimated at more than US$300 billion, and another US$400 billion in financial investments. The average growth of the sector is estimated to be approximately 15 percent per annum and it is projected to grow considerably in the foreseeable future, given the amount of oil wealth in much of the Muslim world and a pent-up demand for investment products developed according to the tenets of the Syariah, the legal and ethical code of Islam and the existence of an estimated 1.6 billion Muslims world wide (Beccalli et al., 2006). Thus it is hardly surprising that many multinational financial institutions are increasingly becoming actively involved in the sector. According to Chapra and Ahmed (2002), the conventional banking industry has utilized the services of commercial Islamic banks, Islamic investment companies, Islamic investment banks, insurance companies, asset management companies, e-commerce, and brokers and dealers to cater for current and future needs. As for financial products, the predominant ones are financial instruments based on a diverse set of Islamic principles, insurance products, mutual funds and unit trusts, Islamic bonds, and Sharia compliant stocks (Hasan & Basser, 2003). The growth of the Islamic financial system via the expansion of its banking sector from the historical perspective is captured in Figure 1.

Figure 1:
History of the Industry Development

Development of Industry
Evolving richness in products
1950s • Development of theoretical framework
• Muslim-majority nation independence
60s • Egypt and Malaysia pioneering institutions
• Establishment of OIC (1969)
70s • Islamic Development Bank (1974) and DIB
• One country-one bank setup
80s • Advancement of Islamic products
• Full “Islamiczation” of Pakistan, Sudan and Iran
• Formation of BIMB, Malaysia.
90s • Entry of global institutions e.g. HSBC
00s • Tipping point reached in some markets
• Development of industry building institutions

Sources: Stages of Evolution in Islamic Finance: Islamic Financial Services Industry

The above explication clearly attest to the fact that Islamic finance has been acknowledged to be a viable and competitive form of financial intermediation not only in Muslim countries but also outside the Muslim world through its offering of a wide range of financial products and services (Zeti, 2006). The viability, sustainability and competitiveness of Islamic finance have been mainly due to a number of congealing factors that are both intrinsic and extrinsic in nature. The intrinsic advantages of the Islamic financial system lay in its eschewing of conventional financial tools such as interest which is anathema to the precepts of the Holy Quran. Instead, the system adopted a sharia-based profit-sharing concept in its investment ventures thus spreading risk profiles in a more equitable manner. Figure 2 encapsulates the types of banks and the Islamic financial products offered in the relevant regions.

Figure 2:
Islamic Financial Services: Stages of Evolution in Islamic Finance
Institutions
Products Area
Commercial Islamic Banks Commercial Islamic banking products Guff/Middle East
Takaful Takaful Asia Pacific
Islamic investment companies Mutual funds/unit trust Europe/Americas
Islamic investment banks Islamic Bonds Global/Offshore Market
Asset management companies Syariah – compliant stocks
e-commerce Islamic stock broking
Broker/bankers

Commercial Islamic Banks Commercial Islamic banking products Guff/Middle East
Takaful Takaful Asia Pacific
Islamic investment companies Mutual funds/unit trust
Broker/bankers Islamic Bonds
Syariah – compliant stocks
Islamic stock broking

Commercial Islamic Banks Commercial Islamic banking products Guff/Middle East
Takaful Takaful Asia Pacific
Islamic investment companies

Commercial Islamic Banks Commercial Islamic banking products Guff/Middle East
Source: Aseambankers, World Islamic Funds and Capital Markets Conference, May 2006, Bahrain

1.3 The operating environment for Islamic finance
There are now a large number of diverse players and institutions in the Islamic financial system. There has also been a growing range of products and services being offered. The pace of product innovation has intensified with more sophisticated Islamic financial products including the structured and investment-linked products (Guru et al, 2002). These products have become competitive both in terms of product structure and pricing. There has also been enhanced depth of the Islamic financial markets. This has increased the attractiveness of the Islamic financial instruments as an asset class for investment. The standards are developed by the Islamic Financial Services Board (IFSB) to govern the operations of Islamic financial institutions (Zeti, 2006). The IFSB has, not only, an important role in the harmonization of standards, but also contributes towards the consistent development of Islamic finance across different jurisdictions. Several parts of the world, including in Malaysia, have implemented the prudential standards issued by the IFSB. These standards which have been designed to take into account the unique features specific to Islamic finance will contribute towards ensuring its soundness and stability.

In the Malaysian approach, the Malaysian scholars have applied the concept of bai al-dayn or the sale of debts. The formal definition is: “…the sale of debt as a type of contract in which the creditor sells his payable right upon the debtor either to the debtor either to the debtor… or to a third party. This sale [sic] contract between two parties may be either on the spot or forward basis. It may also be either at a discount price or at the cost price” claimed by Moustapha (2003). The growing role of Islamic finance in mobilizing and channeling funds to productive investment activities across borders contributes to more efficient allocation of funds across borders and facilitates international trade and investment. According to Zeti (2007), greater diversification of risks also contributes towards promoting international financial stability. The more recent developments in Islamic finance is the growing significance of the sukuk market to become an increasingly important component of the Islamic financial system. She added that modern sukuk, sometimes referred to as Islamic bonds, are better described as Islamic investment certificates. This distinction is as crucial as it is important, and it is stressed throughout this pioneering work that sukuk should not simply be regarded as a substitute for conventional interest-based securities. The aim is not simply to engineer financial products that mimic fixed-rate bills and bonds and floating-rate notes as understood in the West, but rather to develop innovative types of assets that comply with Shari’a Islamic law. Conventional bonds that yield interest, or riba, are of course prohibited under Shari’a law. Furthermore, those who buy and sell conventional bonds are rarely interested in what is actually being financed through the bond issue, which could include activities and industries that are deemed haram such as the production or sale of alcohol. Companies that are highly leveraged with bank debt may seek refinancing through issuing bonds, but such companies are not regarded as suitable for Muslim investors.

1.3.1 Developments in the sukuk markets
The year 2007 has seen an exceptional growth of the global sukuk market which expanded by more than 70 percent during the year. New issues during the year reached a record high to about US$47 billion and the outstanding global sukuk market has now surpassed the US$100 billion mark. Despite the more challenging international financial environment arising from the financial crisis that has occurred in a number of the advanced economies in the recent twelve months, the sukuk market while also affected, it has been to a lesser extent. Up until June 2008, it has held its ground with a total global issuance now exceeding US$10 billion (refer Figure 3 and 4).

Figure 3:
Sukuk Market in Malaysia

Figure 4:
Sukuk Types in Malaysia

With greater recognition of the sukuk market as a competitive and attractive form of financing, the global sukuk market is expected to continue its growth going forward. The International Islamic financial hub evolving in Malaysia is supported by five pillars as discussed below.

Pillar 1: Sukuk Origination
Following the first ever sukuk in the world that was issued in Malaysia in 1990, Malaysia has now developed a deep, liquid and vibrant sukuk market. Recently, the largest sukuk ever was raised in the Malaysian sukuk market in 2007 (Bank Negara, 2008). The magnitude was approximately RM15 billion or about USD5 billion equivalent. Despite being issued during the height of the sub-prime crisis, it attracted huge demand and was oversubscribed by more than two times. Sukuk origination has thus been identified as one of the important pillars of the Malaysian Islamic financial system. As of the end of 2007, more than 60 percent of the outstanding global sukuks originated from Malaysia. It has been increasing by an annual rate of about 20 percent and it accounts for about 56 percent of the outstanding bond market in Malaysia.

Pillar 2: Islamic Fund and Wealth Management
The sukuk market has been an important source of financing for productive investment activities, while for investors it provides potential for diversification into new asset classes. The second pillar in the Malaysia Islamic financial hub is the Islamic fund and wealth management industry. Malaysia is centrally located in the ASEAN region that has a population of 570 million. It is also positioned centrally between the major Asian economies of India, China, Japan and Korea. Malaysia has always been a highly open economy in trade and investment activities and has been a major recipient of foreign direct investment for more than a hundred years. As a destination for financial investment, the Malaysian capital market offers a wide range of world class financial products. More than 85 percent of the listed companies in the equity market are Shariah compliant, representing about 60 percent of total market capitalization. Other investment opportunities include in Shariah-compliant real estate investment trusts (REIT), in unit trusts and in the Islamic exchange traded fund (ETF).

Pillar 3: International Islamic Banking
The Islamic financial system has also been extensively liberalized to allow for the entry of foreign Islamic financial institutions that offer both domestic and international banking business. In addition, the foreign equity ceiling in Islamic financial institutions has been raised to a maximum of 49 percent as part of the effort to promote strategic alliances. The Islamic banking business in foreign currencies can be conducted by the international currency business units (ICBUs) that may be set up within existing financial institutions and the international Islamic banks. Such international Islamic banks may be established as either a branch or a subsidiary. Currently, about 16 percent of total assets in the Malaysian banking system are Shariah compliant.

Pillar 4: International Takaful Business
The fourth pillar is takaful and retakaful business. There are now eight takaful operators, several of which are joint ventures with foreign shareholding that conduct both domestic and international takaful business. In addition, licenses have been granted to three reinsurance players to undertake retakaful business in Malaysia. Several existing takaful operators have set up international currency business units (ICBUs) and one new international takaful company has been licensed as an international takaful operator to conduct foreign currency takaful business.

Pillar 5: Human Capital and Thought Leadership
The fifth pillar is human capital and thought leadership. Several important human capital development projects have been implemented to foster Islamic finance thought leadership and to create a supply of talent for the Islamic finance industry. Having a sufficient pool of the talent and expertise has been key to the development of the Islamic financial hub in Malaysia. The International Centre for Education in Islamic Finance (INCEIF) which has an international faculty and students from more than 40 countries is focused on programmes for Islamic finance professionals and specialists to meet the human capital requirements of the global Islamic financial services industry.

1.4 Barriers to Islamic Financial
The prospects for the growth of Islamic finance look bright. Nonetheless, there are several obstacles currently preventing faster uptake of Islamic financial products. These include the issue of regulatory capital and relative risk weightings and the Islamic Financial Services Board (IFSB) guidance; a lack of human capital; piecemeal financial and legal architecture; weaknesses in financial reporting and transparency; and the overarching problem of a lack of Shariah convergence. These barriers are discussed below:-

1.4.1 Risk weighting
In 2006, the IFSB issued two standards – the Capital Adequacy Standard (CAS) and the Guiding Principles of Risk Management for Institutions offering Islamic Financial Services. CAS offers guidance on the requirements for minimum capital adequacy to cover for credit, market and operational risks of IFIs that is equivalent to the Basel II Capital framework for conventional banking institutions. According to the IFSB, the key difference between CAS and Basel II provisions is the computation of an institution’s risk-weighted capital ratio (RWCR). In Islamic banking, given that the risks on assets financed by profit-sharing investment account holders do not represent risk to the capital of the institution, the CAS allows risk-weighted assets that are funded by the account holders to be deducted from the institution’s total risk-weighted assets in the calculation of RWCR.

1.4.2 Human capital
Human capital development is crucial, as the current lack of qualified young Islamic bankers looks set to hamper the development of the sector should it not be addressed. In part, this low investment in the industry stems from the fact that the sector lacks a global industry body to oversee standardization of continuous education and training. The lack of human capital in the sector affects all regions, including nascent markets such as the U.K. Training of Islamic bankers has not kept pace with the rapid growth of the sector and, as a result, there are shortages throughout the industry. The two centers for training have been KFH and Bank Islam Malaysia, which between them have been responsible for training many Islamic bankers. In 2006, for example, Bank Negara set up an RM500m endowment fund to support The International Centre for Education in Islamic Finance (INCEIF), with the main objectives of making Malaysia the leading center for Islamic finance education and developing human capital for the global Islamic finance industry. Similarly in 2006, The Central Bank of Bahrain set up a US$4.6m Islamic Finance Education scheme in cooperation with eight IFIs based in Bahrain.

1.4.3 Regulation and legal frameworks
While rising demand for Islamic finance has helped lead to handsome returns for key players, some experts in the industry are concerned that the rapid proliferation of IFIs has not been matched by development in the Islamic finance regulatory and supervisory architecture and infrastructure, especially in the GCC states. “One thing that worries me,” explains Ali Al-Ghannam, Head of International Real Estate at Kuwait Finance House (KFH), “is that the IFIs should be controlled better to avoid any bubble in the industry. There are a huge number of new IFIs being established in the market. Many banks and traditional companies are converting to Islamic finance. Islamic banking windows at global majors are proliferating. Many of these institutions are not going after the concept itself, but are following the flow of money.

1.4.4 Financial reporting
The quality and transparency of financial reporting and disclosure in the Islamic finance industry differs significantly from one regulatory jurisdiction to another. There is a general concern in the market and among those interviewed that IFIs, with the notable exceptions of those operating in the U.K., Malaysia, Bahrain and perhaps Turkey, should have more rigor in their disclosure and financial reporting, especially to the general market.

1.5 Concluding Remarks
Islamic finance has made significant inroads in the international financial markets that have achieved growing global awareness. Islamic finance now has a presence in over 60 countries, especially in Muslim countries. In the context of financial infrastructure, the Malaysian Islamic financial system is both robust and fast growing. The market has highly diversified players, with Islamic banks, investment banks, takaful companies, development financial institutions, savings institutions, fund management companies, stock brokers and unit trusts. The aim of this paper is provide a conceptual understanding on the growth in Islamic Finance in Malaysia by exploring its current and future development. It is observed that the participation in the Islamic finance process would require the development of a comprehensive and well established Islamic financial system such as: – a wide range of products and services; a good legal system, adequate financial infrastructure with competitive tax structures, low cost of doing business, high standards of business ethics, and conducive living conditions and cultural offerings. It would also need to be supported by adequate human talents that would drive the business and spur innovation. In addition, a strong regulatory regime in the Islamic financial system would be another pull factor. The implication of this paper is to provide a platform for industry players and regulators to highlights the recent developments in Islamic finance in Malaysia.

References
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Kuran, T. (1995). Private Truths, Public Lies. The Social Consequences of Preference Falsification. Cambridge MA. Harvard University Press.
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Kuran, Timur. (1995). Islamic Economics and the Islamic Subeconomy. The Journal of Economic Perspectives, 9(4), 155-173.
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Zeti Akhtar Aziz (2006): Recent developments in Islamic finance in Malaysia, Keynote address by Governor of the Central Bank of Malaysia, at the Malaysian Islamic Finance Issuers and Investors Forum 2006, Kuala Lumpur, 14 August 2006
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ANALISA KRITIS PRAKTEK AKUNTANSI KREATIF DALAM KONTEKS BUDAYA ORGANISASI PT. BUMI DAN PANDANGAN ISLAM DALAM MENYIKAPI PRAKTEK TERSEBUT

August 22, 2010 Leave a comment

Critical Analysis of the Creative Accuntancy in relation to Corporate Culture of PT Bumi and Islamic Concepts

Widarto
Mahasiswa Program Magister Sains Akuntansi, PPSUB

Zaki Baridwan dan Made Sudarma
Dosen Jurusan Akuntansi, FE UB

ABSTRAK

Tuntutan pasar pada perusahaan untuk membuat keuntungan sering menyebabkan praktek akuntansi kreatif, sehingga terjadi penurunan kualitas laporan keuangan yang dihasilkan. Kebijakan yang diambil oleh manajemen selalu menguntungkan pihak majority shareholder sebagai controlling. Budaya kerja telah mempengaruhi praktek akuntansi kreatif perusahaan, hal ini disebabkan adanya tuntutan dan campur tangannya direksi dalam akuntansi. Praktek ini bertujuan untuk mengiliminasi tindakan direksi agar transaksi yang mereka jalankan sesuai dengan kaidah akuntansi yang benar. Dengan demikian bagian akuntansi harus berusaha menyiapkan adanya data-data pendukung transaksi tersebut. Akuntansi kreatif yang dijalankan seputar manajemen laba dan SPE.
Praktek manajemen laba maupun SPE lebih mengarah pada praktek yang mementingkan pihak manajemen yang didalamnya ada direksi sebagai controlling. Perilaku ini tidak terlepas dari keberadaan para manajer yang diangkat dan direkrut oleh direksi, sehingga dalam pemahaman amanah, manajer merasa harus loyal pada direksi.
Namun jika dilihat dari hakekat amanah yang datangnya dari Allah, maka perilaku manajer maupun direksi diatas telah menunjukan perilaku yang tidak sesuai dengan hakekat amanah yang sesungguhnya. Pengkhianatan amanah merupakan tindakan yang dilarang agama, dan larangan ini hukumnya adalah haram jika dikerjakan.

Kata kunci : agency theory, praktek akuntansi kreatif, dan perilaku amanah.

ABSTRACT

Profit management and SPE have induced any practices which are oriented on the management interests, in which the direction as cotrolling agent. These behavior are due to the manager promoted by the direction, so their thinking about “amanah” tend to the direction interest.
In relation to the “amanah” phylosophy which is come from Allah swt., an above hehavior of manager and direction suggest any unsuitable behavior. Discrepancy actions from the amanah are haram.

Keywords: creative accuntancy, corporate culture

PENDAHULUAN

Tuntutan pasar pada perusahaan untuk membuat keuntungan sering menyebabkan penurunan kualitas laporan keuangan yang dihasilkan. Tekanan ini mempengaruhi manajemen untuk dapat menyajikan lapor-an keuangan dengan posisi laba. Tujuan pencapaian laba ini menurut (Triyuwono 1997) menjadi mapan ketika suatu organisasi disamakan dengan mesin, sehingga organisasi seolah-olah bagaikan mesin yang terdiri dari struktur formal, diskripsi kerja yang kaku, yang ditujukan untuk mencapai laba yang maksimal. Akibatnya realitas kehidupan manusia menjadi mekanistik dan tidak berbeda dengan mekanisme kerja mesin.
Organisasi bisnis merupakan sebuah pertemuan dari berbagai macam kontrak kepentingan, sehingga di dalam proses akuntansi, ada dimensi politis yang terlibat didalamnya. Sehingga dalam praktek akuntansinya telah memunculkan akun-tansi kreatif, dan akuntansi kreatif ini tidak di pahami oleh para akuntan saja melain-kan juga di manfaatkan oleh pihak-pihak yang mempunyai kepentingan dan kekuat-an untuk menggunakannya. Praktek akun-tansi kreatif di Indonesia menurut Hassim (2004) tidak terlepas dari keberadaan pendirian Perseroan Terbatas yang ber-cirikan : (1) dominasi anggota keluarga dalam mengelola perusahaan; (2) penipuan (vihicle) yang dilakukan perusahaan, sehingga muncul adagium umum bahwa “Perseroan Terbatas boleh kolaps tapi owner tetap mengkilap.”
Keunikan Perseroan Terbatas di Indonesia ini telah merpengaruhi perma-salahan keagenan perusahaan. Dengan pendekatan budaya dan melihat realitas kehidupan sehari-hari di perusahaan, maka penelitian ini akan melihat sejauh mana budaya perusahaan mempengaruhi praktek akuntansi kreatif di suatu perusahaan.
Rumusan masalah yang ingin dijawab dalam penelitian ini adalah: bagaimana proses terciptanya praktek akuntansi kreatif dalam konteks budaya organisasi PT. BUMI, dan bagaimana pandangan Islam terutama dari sisi amanah terhadap praktek akuntansi tersebut.
Seperti halnya penelitian terdahulu yang dilakukan Eddy R. Rasyid pada tahun 1998, bahwa budaya mempengaruhi prak-tek akuntansi pada suatu perusahaan, maka peneliti berusaha untuk menggunakan nilai-nilai partisipasi yang ada dalam perusahaan ini yang tujuannya untuk mengetahui hubungan antara budaya kerja dengan praktek akuntansinya, terutama dalam praktek akuntansi kreatif.
Penelitian ini diharapkan dapat mem-beri gambaran tentang hubungan budaya kerja dengan praktek akuntansi kreatif di perusahaan, sehingga dapat dianalisis relevansinya dengan pola agency theory Selain itu penelitian ini diharapkan dapat memberi kontribusi atas pengembangan pengetahuan akuntansi di Indonesia, dan dapat digunakan sebagai referensi bagi penelitian selanjutnya, serta dapat menam-bah wawasan terhadap dunia akuntansi yang selalu mengalami perkembangan.

KERANGKA KONSEP

Akuntansi dan Akuntansi Kreatif
Akuntansi selama ini telah dipahami sebagai seperangkat prosedur rasional yang dijalin untuk memenuhi kebutuhan infor-masi yang berguna bagi pengambil keputusan dan pengendalian yang rasional (Watts dan Zimmereman 1986; Horngren dan Foster 1991) dalam (Triyuwono (2000). Pemahaman seperti ini menye-babkan akuntansi diibaratkan seperti tehnologi yang keras, kongkret, kasat mata dan bebas dari nilai-nilai suatu masyarakat yang menyusun dan mempraktekannya.
Namun dalam perkembangannya akuntansi telah dipahami dalam konteks yang lebih luas yaitu dalam kontek organisasi dan sosial (Triyuwono, 2000). Dengan demikian akuntansi mulai dipandang sebagai suatu entitas yang terus berubah, tidak dipandang sebagai suatu entitas yang statis dan sudah selesai, melainkan sebagai suatu yang mengalami perubahan terus-menerus tergantung ling-kungannya (Hopwood, 1983, 1987,1990; Morgan 1988; Miller dan Napier 1993) dalam (Triyuwono 2000).
Akuntansi dalam praktek nyata dalam organisasi perusahaan telah membantu manajemen dari suatu organisasi untuk melihat secara jelas fenomena abstrak dan konseptual yang tidak pernah mereka pikirkan sebelumnya, misalnya pemaknaan laba dan biaya yang dalam praktek akuntansi dewasa ini merupakan simbol-simbol umum dan secara lazim memang diterima (Triyuwono, 2000).

Definisi Akuntansi Kreatif
Dalam beberapa pendapat tentang akuntansi kreatif, misalnya Breton, et al. (2000); Suwardjono (1990); Naser (1993) dan Amat et al. (2000) adalah sebagai proses pemanipulasian laporan akuntansi dilakukan dengan cara mencari celah-celah peraturan akuntansi demi keuntungan mereka, hal ini mempengaruhi cara pemi-lihan tolok ukur laporan dan pengungkapan laporan tersebut sehingga terjadi transfor-masi dari aturan sebenarnya, mereka mem-persiapkan pula bagian-bagian laporan yang lebih disukai, dan mengaturnya sedemikian rupa sehingga dihasilkan lapor-an akuntansi yang sesuai keinginan, ketimbang membuat laporan berdasarkan cara yang netral dan sesuai prosedur. Dari definisi ini, setidaknya dua hal pokok dalam menyikapi akuntansi kreatif yaitu, dalam kontek manajemen laba dan pere-kayasaan laba dengan cara SPE.
Manajemen laba ini merupakan re-fleksi sikap oportunis manajer untuk memperoleh keuntungan bagi dirinya sen-diri. Sedangkan persekayasaan laba dengan SPE mengarah pada unsur mani-pulasi data-data akuntansi. Praktek SPE ini banyak dilakukan oleh perusahaan-peru-sahaan kelompok besar, karena praktek ini akan melibatkan beberapa perusahaan afiliasi untuk mengatur transaksinya.
Istilah SPE itu sendiri mencuat di Indonesia ketika diketahui STT yang membeli saham PT Indosat menggunakan SPE yaitu Indonesian Communicate Limited (ICL) yang berkedudukan di Mauritus. Timbul kontroversi sekitar penggunaan SPE yang dibentuk hanya beberapa hari sebelum penutupan tran-saksi. SPE juga mengemuka pada saat perusahaan raksasa Amerika Enron meng-alami kebangkrutan tahun 2001.
Dalam perkembangan teori, Istilah SPE tidak memiliki definisi yang baku. Hartgraves et al. (2002) menyimpulkan bahwa SPE merupakan definisi teknis tentang instrumen keuangan yaitu: (1) SPE sebagai subsidiary; (2) SPE sebagai sekuritas; (3) SPE sebagai perusahaan sponsor; (4) SPE sebagai partnership atau joint ventures; (5) SPE sebagai instrumen khusus yang dibentuk untuk tujuan khusus dalam keuangan perusahaan.
Tidak mengherankan, bahwa dalam pelaksanaannya, SPE seringkali dinamakan sebagai off-balance sheet. Karena secara pencatatan, tidak tercatat dalam balance sheet parent company, baik sebagai aset maupun hutang (Hartgraves el.al 2002).

METODE PENELITIAN

Untuk mendukung penelitian ini, metodologi penelitian yang digunakan adalah metodologi etnografi kritis. Menu-rut Rudkin (2002) penerapan metodologi etnografi dalam kajian akuntansi telah menempatkan peneliti dalam konteks situsnya, serta mengasah kepekaan mereka terhadap pemahaman budaya yang khas disana.
Untuk merefleksi personal peneliti telah menemui tiga orang informan yaitu: manajer keuangan, manajer akuntansi dan manajer internal kontrol. Namun ketiga informan ini tidak bersedia untuk diungkap identitasnya secara detail, maka informasi yang mereka sampaikan dalam penelitian ini menjadi informasi bersama, walaupun dalam proses pengumpulan data dilakukan pada tempat dan waktu yang berbeda. Untuk itu peneliti tidak menyebut nama informan satu persatu dengan jelas.
Adapun teknik yang digunakan dalam pengambilan data, dilakukan dengan menggunakan Sensory experience dan communicative experience (Sawarjuwono, 2000). Sedangkan strategi yang dilakukan dalam pengumpulan data adalah dengan cara: interaksi langsung, melibatkan diri dalam pekerjaan subjek dan dengan wa-wancara.
Analisa data dilaksanakan sejak pe-ngumpulan data dilaksanakan sampai pe-nulisan penelitian ini berakhir. Informasi dan data yang berhasil dikumpulkan, dikelompokan berdasarkan subjek. Untuk mendukung informasi diatas, maka jika dimungkinkan informasi tersebut dico-cokan dengan data-data keuangan yang ada di laporan keuangan yang sudah diaudit oleh Akuntan Independen.
Waktu pengumpulan data tidak ditentukan dengan khusus dan formal. Kadang penulis berdiskusi sambil makan siang, diskusi pada istirahat siang, atau pada saat pulang kerja bersana-sama. Namun yang paling efektif yaitu interaksi langsung pada saat informan melakukan pekerjaaanya, sehingga penulis terlibatan langsung dalam proses akuntansi yang mereka jalankan.

Sejarah Singkat Perusahaan
Pada mulanya, PT. BUMI menga-dakan kerja sama dengan perusahaan terkemuka dari Jepang dalam jangka waktu 5 (lima) tahun dari tahun 1974 hingga tahun 1979, dan setelah masa kontrak berakhir pada (1979), perusahaan mela-kukan sendiri proses produksinya. Namun untuk pemasarannya, masih melakukan kerja sama dengan pihak asing.
PT. BUMI merupakan salah satu peru-sahaan publik di Indonesia dan perusahaan ini berada di bawah kelompok usaha JAGAT RAYA yang memiliki total anak perusahaan sekitar 20 perusahaan. Peru-sahaan anak ini menyebar di beberapa propinsi di Indonesia dan bahkan ada yang di Amerika, Eropa dan Singapura.

Pengorganisasian Perusahaan
Perusahaan memiliki struktur orga-nisasi sendiri dan struktur organisasi grup (bayangan). Pengelolaan perusahaan ba-nyak diperankan oleh organisasi bayangan yang di klaim bentukan dari para pendiri perusahaan yang terdiri dari lima ber-saudara, dan sebutan yang melekat pada orang per orang ini adalah “direksi”. Selain lima direksi diatas masih ada dua orang profesional yang menjabat sebagai direktur grup yaitu seorang “Direktur Akuntansi” dan “Direktur Personalia”. Namun kedua direktur ini tidak berhak menggunakan sebutan direksi. Organisasi bayangan ini tidak dibentuk secara notariil.
Wewenang direktur perusahaan hanya terbatas pada urusan pekerjaan, sedangkan urusan yang berhubungan dengan ke-uangan 100% urusan para direksi. Wewenang direksi ini sangat dominan, sehingga keberadaan direktur perusahaan hanya sebagai manajer.
Cash flow perusahaan dikelola lewat grup (kantor pusat) dengan harapan direksi dapat memantau secara langsung, dan kantor pusat ini mirip Bank-nya peru-sahaan grup ini. Untuk kebenaran transaksi dan saldo pihak perusahaan dan kantor pusat melakukan rekonsolidasi dengan cara telepon.

Budaya dalam Perusahaan
Karyawan di rekrut sesuai dengan kebutuhan perusahaan. Proses seleksinya ditangani langsung oleh direksi yang membutuhkan. Setelah semuanya selesai, maka karyawan tersebut disuruh meng-hadap direktur personalia. Baru pihak personalia menyiapkan kontrak-kontrak dan juga menjelaskan gaji dan fasilitas yang akan diberikan. Pada intinya besar gaji dan fasilitas yang ditetapkan oleh direksi dan direktur personalia ini berbeda, sehingga muncul istilah gaji kedua.
Budaya kerja di perusahaan ini me-munculkan kerajaan-kerajaan kecil, se-hingga untuk dapat masuk pada bagian-bagian tertentu harus mengatasnamakan perintah direksi. Perintah direksi dijadikan otoritas yang paling benar dan harus dilakukan.
Budaya kerja ini tidak terlepas dari sejarah panjang grup perusahaan JAGAT RAYA. Pada awalnya grup ini didirikan sebagai bisnis keluarga dengan menjual hasil laut Indonesia ke luar negeri, dan pada saat itu pengiriman dilakukan dengan lewat pesawat terbang. Pada saat ini walaupun organisasi bisnis sudah ber-bentuk PT, tetapi secara substansi adalah perusahaan perorangan/keluarga yang melibatkan banyak anggota keluarganya.

Praktek Akuntansi dan Akuntansi Kreatif di Perusahaan
Pengangkatan direktur akunting grup diatas menunjukan adanya Consern yang sangat tinggi terhadap akuntansi, sehingga tiap ada pemasalahan di perusahaan, semua direksi selalu melibatkan direktur akunting tersebut. Direktur akunting ini terkesan sebagai dewa penolong, kondisi ini ditunjang oleh performan orang yang menjabatnya yang mempunyai watak halus, sopan, tidak pernah marah dan selalu berkata bisa.
Permasalahan akuntansi perusahaan banyak disebabkan adanya campur tangan direksi dalam mengatur perusahaan, se-hingga untuk mengiliminasi transaksi tersebut bagian akuntansi melakukan akun-tansi kreatif. Akuntansi kreatif ini dijalan-kan agar transaksi tersebut seolah-olah benar dan legal.
Adapun praktek akuntansi kreatif yang mereka jalankan dalam manajemen laba adalah: (1) Menggabungkan beberapa perusahaan; (2) Kapitalisasi saldo laba; (3) Menghindari pajak final; (4) Menginflasi Modal Kerja dan (5) Penyusunan Proyeksi secara Optimis. Sedangkan praktek SPE yang dijalankan adalah : (1) Tidak meng-konsolidasi SPE; (2) Pengakuan sepihak atas pendapatan; (3) Meningkatkan pen-jualan ekspor; (4) Menstabilkan harga saham; dan (5) Melakukan window dressing.
Praktek akuntansi kreatif untuk manajemen laba ini banyak dilakukan pada saat perusahaan akan melakukan go publik dan right issue. Sedangkan praktek SPE dipraktekan pada saat perusahaan ingin mempertahankan harga saham di pasaran.

Penerapan Agency Theory Dalam Budaya Perusahaan
Dengan penjualan saham pada masya-rakat sebesar 20%, maka pihak direksi masih dapat mempertahankan kendali atas perusahaan-perusahaannya. Kepemilikan saham mayoritas oleh direksi ini menim-bulkan masalahan keagenan antara agent dengan owners, antara controlling sebagai mayority shareholders dengan publik sebagai minority shareholders, dan antara direksi sebagai mayority shareholder dengan kreditor dan pemerintah.
Direksi telah mempertahankan kendali perusahaan dengan jabatanya sebagai Presiden Komisaris dan Presiden Direktur, dengan demikian beberapa kebijakan yang diambil selalu menguntungkan pihak mayority shareholder. Kebijakan itu misal-nya: (1) Basic self-dealing, yaitu kondisi dimana seseorang melakukan transaksi atas nama perusahaan, tetapi untuk kepentingan pribadi atau perusahaan sendiri. (2) Executive compensation, yakni pemanfaat-an jabatan untuk menikmati fasilitas yang berlebihan. (3) The taking of corporate or shareholder property, yakni menggunakan aset perusahaan untuk kepentingan pribadi dan (4) Corporate action with mixed motive, suatu kondisi dimana pengambilan keputusan oleh manajemen tidak jelas untuk kepentingan siapa, apakah kepen-tingan perusahaan atau kepentingan pribadi.
Atas suatu jabatan, sebenarnya meng-emban tugas yaitu duty of loyalty, dute of care and diligence dan fiduciary duty. Ketiganya secara ringkas mengatakan bahwa direktur, komisaris pejabat publik ataupun manajer, tidak boleh mengambil keuntungan dari orang yang memberi kepercayaan (beneficiaries) melalui tindak-an yang menipu atau tidak adil. Untuk itu bagaimana pandangan Islam khususnya ajaran amanah terhadap praktek akuntansi kreatif diatas.

Tinjauan Amanah dalam Praktek Keagenan di Perusahaan

1. Praktek Self-dealing
Pihak direksi sering melakukan self-dealing berkaitan dengan perusahaan afi-liasi grup. Transaksi ini akan sangat merugikan pihak investor, karena seharus-nya dana tersebut dapat digunakan untuk meningkatkan deviden karena peningkatan laba perusahaan. Praktek ini mengakibat-kan munculnya ketidak adilan yang dilakukan oleh manajemen. Dengan demi-kian perilaku manajemen ini telah meng-khianati amanah, baik amanah dari pemilik minoritas saham atau amanah dalam menjalankan tugas yang dipercayakan pada manajemen tersebut.

2. Take Over Aktiva Tetap Secara Intern
Take over aktiva tetap perusahaan grup dilakukan dengan penetapan harga beli yang lebih tinggi dari harga pasar. Walaupun proses penetapan nilai pem-belian ini telah dilakukan oleh perusahaan penilai. Namun untuk meminta keterangan harga suatu aktiva di daerah setempat sangatlah mudah diatur, sehingga nilai aktiva tersebut masih sangat meng-untungkan direksi.
Prosedur melakukan take over juga telah dilakukan sesuai dengan peraturan yang ada misalnya: harus disetujui oleh mayoritas dari pemegang saham inde-penden (minority shareholders) dan pemegang saham mayoritas tidak boleh ikut dalam voting tersebut. Namun nam-paknya ketentuan ini dinilai tetap mem-punyai kelemahan, karena dalam RUPS (Rapat Umum Pemegang Saham) minority shareholder tidak ada yang datang. Minority shareholder mempercayakannya pada direksi, sehingga untuk memenuhi qorum rapat yang disyaratkan pihak direksi minta minority shareholder memberi kuasa pada orang yang di tunjuk oleh direksi, dan hasilnya sudah bisa dipastikan menyetujui hasil rapat.
Keterbukaan dan keadilan atas pe-nyampaian informasi oleh manajemen telah disampaikan dengan peraturan yang berlaku. Informasi yang disampaikan ini juga relevan, karena memuat langkah-langkah yang akan diambil perusahaan yang dapat diketahui dengan jelas oleh investor lewat publikasi di dua media. Prinsip-prinsip amanah dalam menjalankan tugasnya oleh manajemen telah dijalankan dengan baik dan benar, namun kenya-taannya dalam keputusan rapat masih selalu menguntungkan pihak mayoritas pemegang saham. Kondisi ini menggam-barkan bahwa sosialisasi peraturan pada publik harus lebih ditingkatkan lagi.

Tinjauan Amanah dalam Praktek Manajemen Laba

Praktek manajemen laba ini ber-hubungan dengan pengaturan laba, namun tidak mempengaruhi arus kas masuk perusahaan.

1. Menggabungkan Beberapa Perusahaan Anak
Menggabungkan beberapa perusahaan anak untuk tujuan go publik dilakukan agar perusahaan dapat membukukan asset lebih besar, operasional lebih bagus dan juga laba lebih besar. Kenaikan laba ini diharapkan dapat meningkatkan laba per saham yang mempengaruhi harga saham.
Praktek ini telah disajikan dengan transparan baik dalam laporan keuangan ataupun dalam prospektus yang diterbitkan oleh perusahaan, sehingga informasi ini tidak bertentangan dengan peraturan yang ada, dan tidak adanya asimetri informasi. Perilaku manajemen ini merupakan per-wujudan sifat amanah manajemen pada pemegang saham dan calon pemegang saham.

2. Kapitalisasi Saldo Laba menjadi Modal Saham
Kapitalisasi saldo laba menjadi modal saham ini dianggap sebagai langkah yang mengoptimalkan kekayaan direksi atas perusahaannya. Praktek kapitalisasi ini juga merupakan hak dari para pemegang saham untuk menjalankannya. Namun di-reksi menggunakan tehnik kapitalisasi ini untuk menghindari pajak final yaitu dengan mengalihkan saham direksi pada perusahaan holding yang disiapkan terlebih dahulu oleh direksi.
Langkah manajemen ini juga meru-pakan salah satu perwujudan dari sifat amanah yang diperuntukan pada pemegang saham. Namun pengalihan modal saham pada perusahaan holding jika ditujukan semata-mata untuk penghindaran pajak final merupakan tindakan yang tidak amanah, terutama amanah pada maka hal demikian merupakan wujud dari pengkhianatan sehubungan dengan wewenang dan jabatan yang dipercayakan oleh manajemen pada pemerintah dan pada masyarakat.

3. Menginflasi modal kerja untuk direksi
Menginflasi modal kerja untuk direksi ini diharapkan dapat memberi gambaran atas keberhasilan manajemen dalam me-ngelola perusahaan, sehingga direksi akan memberikan nilai tambah atas prestasi kerjanya. Mengingat peningkatan modal kerja perusahaan diartikan direksi sebagai tingkat keuntungan perusahaan, maka manajemen berupaya untuk meningkatkan modal kerja ini sebagai prestasi kerjanya.
Langkah manajemen ini merupakan salah satu dari upaya manajemen untuk mementingkan dirinya sendiri, agar presta-si yang bagus ini mendapat kompensasi bonus yang lebih tinggi. Perilaku mana-jemen ini merupakan wujud dari peng-khianatan amanah yang di berikan direksi untuk kepentingan dirinya sendiri.

4. Penyusunan proyeksi secara optimis
Proyeksi keuangan merupakan salah satu syarat pertimbangan persetujuan kon-trak dengan pihak perbankan yang disiap-kan oleh perusahaan. Dengan menyusun proyeksi secara optimis, maka diharapkan permohonan kredit dapat disetujui. Penyu-sunan proyeksi secara optimis ini juga sah-sah saja untuk dilakukan, karena pihak bank juga melakukan analisa atas proyeksi tersebut. Namun pihak perusahaan (direksi maupun manajer) dapat memberikan logika yang masuk akal dengan data-data yang dapat meyakinkan pihak bank. Peri-laku manajemen ini telah berhasil diman-faatkan untuk mendapatkan dana yang diinginkan perusahaan.
Namun selama tidak terjadi perma-salahan penungga’an angsuran dan pemba-yaran biaya bunga, maka tidak ada pihak yang dirugikan. Namun penyampaian informasi yang tidak semestinya ini dan ditunjang lagi dengan situasi krisis yang terjadi tahun 1977 yang menyebabkan diketahuinya jaminan yang tidak memadai, maka akan menimbulkan masalah perusahaan dengan para kreditor.
Penyampaian berita menyesatkan oleh perusahaan pada pihak kreditor khususnya perbankan telah mengidentifikasikan seba-gai sifat tidak amanah dalam menjalankan tugas. Hal yang demikian merupakan bentuk pengkianatan amanah yang diberi-kan padanya.

Tinjauan Amanah atas Praktek SPE

Praktek akuntansi kreatif dengan cara SPE meliputi: tidak mengkonsolidasi SPE, meningkatkan penjualan ekspor lewat SPE, menstabilkan harga saham lewat SPE dan melakukan window dressing dengan SPE. Praktek SPE ini dalam tinjauan amanah dapat di jelaskan sebagai berikut.

1. Tidak Mengkonsolidasi SPE
Dalam Prinsip Akuntansi Berterima Umum konsolidasi diatur atas perusahaan dan anak perusahaan dengan kepemilikan lebih dari 50%, baik langsung maupun tidak langsung. Namun jika tujuan SPE dibentuk untuk tujuan penggelembungan aktiva, menyembunyikan kewajiban dan juga meningkatkan laba, maka hal demi kian akan menyesatkan pemakai laporan keuangan. Transaksi ini sering dilakukan dengan tujuan untuk menyajikan informasi keuangan agar kelihatan besar, sehat dan juga bagus, dengan jalan memasukan informasi tidak benar. Ketidak benaran informasi ini bisa disebabkan adanya pene rimaan hutang dicatat sebagai pendapatan lain-lain.
Pada dasarnya para investor melaku kan investasi pada perusahaan ini juga secara tidak langsung melihat keberadaan grup perusahaan tersebut. Dengan demi kian pembelian saham perusahaan secara substansi juga membeli grup perusahaan tersebut. Dengan demikian transaksi intern perusahaan untuk menguntungkan salah satu perusahaan dan merugikan perusahaan grup lainnya tidak memberi nilai tambah atas kepemilikan saham tersebut bagi investor.
Praktek transaksi intern ini merupakan pembohongan yang dilakukan perusahaan pada para investornya. Secara konsolidasi praktek ini bisa jadi menurunkan asset perusahaan, karena peningkatan laba pada salah satu perusahaan afiliasi dengan merugikan perusahaan afiliasi dalam grup perusahaan akan menambah pajak dibayar perusahaan secara grup. Dalam sisi lain mengorbankan pengakuan pendapatan atau penerimaan laba perusahaan malah mengalami penurunan. Penurunan ini di-sebabkan adanya inflasi laba atas transaksi intern yang menimbulkan adanya pajak penghasilan, sedangkan pihak afiliasi beban atas transaksi tersebut tidak dapat mengurangi pajak yang dibayar, sehingga secara total terjadi kelebihan bayar pajak jika transaksi itu benar-benar dilakukan oleh masing-masing perusahaan.
Transaksi SPE ini jelas-jelas suatu pelanggaran, baik pelanggaran dalam pe-nyampaian informasi maupun pelanggaran dalam hal transaksi keuangannya. Pihak yang dirugikan adalah para investor dan juga pemerintah dan salah satu penyebab kebangkrutan perusahaan adalah praktek SPE. Dalam tinjauan amanah penyampaian berita bohong yang disampaikan oleh para manajer yang dipercaya, dan mereka telah menyalah gunakan amanah ini dengan cara memanipulasi informasi.

2. Pengakuan Sepihak atas Penda-patan Bunga Afiliasi
Dikatakan secara sepihak, karena pe-rusahaan mengakui adanya pengeluaran sejumlah dana pada pihak afiliasi, namun dana tersebut sebenarnya digunakan oleh direksi untuk investasi dan setoran modal pada perusahaan barunya. Praktek ini bagi perusahaan afiliasi tidak mencatat piutang tersebut.
Manajemen melakukan pelanggaran sehubungan dengan pembebanan sepihak atas pendapatan bunga tersebut. Direksi melakukan pelanggaran karena menggu-nakan dana publik atau dana perusahaan untuk kepentingan pribadinya, yaitu investasi pribadi. Praktek demikian jelas-jelas merupakan pelanggaran amanah.

3. Menginflasi Penjualan Ekspor ke SPE
Transaksi ini tidak mempunyai efek material berupa arus kas masuk yang dapat meningkatkan pembelanjaan perusahaan. Namun transaksi ini dapat digunakan manajemen sebagai dasar penerbitan surat hutang perusahaan. Dengan demikian proses menginflasi penjualan ini merupa kan suatu sifat yang tidak amanah ber kaitan dengan pemberian informasi bohong pada saat manajemen di percaya untuk mengelola perusahaan.

4. Menstabilkan Harga Saham Lewat SPE
Direksi telah melakukan intervensi perdagangan saham perusahaan dengan melakukan transaksi sendiri lewat peru-sahaan sekuritasnya. Praktek ini diharap-kan dapat untuk mengatur harga saham dan perdagangkan saham. Praktek demikian akan memberikan informasi yang menye-satkan bagi para investor. Transaksi ini dapat dikatakan sebagai praktek tidak adil atau tidak fair yang bisa mempengaruhi perilaku investor. Perilaku ini merupakan tindakan yang tidak amanah, karena direksi berperilaku tidak adil yang sangat meru-gikan investor.

5. Melakukan Window Dressing lewat SPE
Praktek window dressing pada intinya digunakan untuk menjadikan kondisi laporan keuangan menjadi bagus dan sehat. Praktek ini diharapkan menjadikan saham perusahaan banyak diminati oleh investor, sehingga harga saham perusahaan mening-kat terus dan performen perusahaan dimata investor dan kreditor nampak baik. Kondisi ini mempermudah perusahaan untuk men-dapatkan dana untuk operasional maupun untuk pengembangan. Laporan aktiva yang sering digunakan untuk praktek ini adalah transaksi kas, wesel tagih, piutang usaha dan persediaan.
Praktek window dressing ini jelas-jelas sebagai praktek yang merugikan penggunan informasi secara keseluruhan. Secara hukumpun praktek ini dianggap sebagai pelanggaran, dengan demikian manajemen yang diperankan oleh manajer dan direksi jelas-jelas menunjukan sifat yang tidak amanah.

KESIMPULAN DAN SARAN

Kesimpulan

Budaya kerja perusahaan telah mem-pengaruhi praktek akuntansi dan praktek akuntansi kreatif perusahaan. Praktek akuntansi kreatif ini banyak disebabkan adanya tuntutan dan adanya campur tangan direksi dengan tujuan untuk mengiliminasi permasalahan akuntansinya.
Sedangkan dalam tinjauan amanah praktek akuntansi kreatif baik dalam kon-tek manajemen laba maupun dalam kontek SPE termasuk dalam kelompok praktek yang bertujuan untuk mementingkan diri sendiri, baik oleh manajer maupun direksi. Perilaku manajemen dalam praktek akun-tansi kreatif ini lebih cenderung meng-untungkan direksi sebagai controlling, hal ini karena direksi adalah sebagian dari manajemen, dan para manajer telah di-angkat dan direkrut oleh direksi. Perilaku ini mengakibatkan para manajer mema-hami amanah sebagai sifat yang harus loyal pada direksi.
Namun demikian jika dilihat dari hakekat amanah itu datangnya dari Allah, baik manajer maupun direksi telah mela-kukan tindakan yang tidak sesuai ajaran amanah. Melanggar amanah merupakan tindakan yang menuju kearah berkhianat, dan hal yang demikian ini merupakan perbuatan yang dilarang dan larangan dalam agama adalah “dosa”.

Saran – saran

a. Pemerintah telah mengeluarkan aturan untuk melindungi minority share holder terutama dalam transaksi self-dealing yang menimbulkan benturan kepentingan. Meskipun demikian nampaknya ketentuan ini dinilai tetap mempunyai kelemahan, walupun pihak perusahaan sudah melakukan prosedur tersebut. Untuk itu hendak nya penelitian yang akan datang dapat meneliti sejauh mana respon dan pemahaman peraturan tersebut ter-hadap investor dan calon investor.
b. Alat ukur yang digunakan dalam penelitian ini adalah nilai-nilai amanah dalam Islam. Untuk itu peneliti yang akan datang hendaknya bisa menggu nakan nilai-nilai lain dalam Islam, sehingga ajaran Islam dapat lebih diaktualkan lagi dalam akuntansi.

Keterbatasan Penelitian
Seperti halnya dalam penelitian kua-litatif dan penelitian dengan pendekatan budaya maka, penelitian ini memiliki subjektifitas yang tinggi sehingga tidak dapat digenerallisasi. Kasus di perusahaan yang diteliti dan penunjukan informan merupakan keterbatasan penelitian ini, sehingga dengan penunjukan informan yang berbeda akan menghasilkan pendapat yang berbeda pula.
Rujukan Islam yang digunakan dalam penelitian ini adalah menunakan amanah, jadi simpulan yang ada dalam penelitian ini hanya terbatas pada faktor ini saja. Keterbatasan penelitian ini juga terletak pada pemahaman penulis tentang meng-artikan amanah secara detail dari sumber sama, sehingga jika ditemukan sumber lain tentunya akan menghasilkan pendapat yang berbeda.

DAFTAR PUSTAKA

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Burrel, G. and Morgan, G. 1979. Sociological Paradigms and Orga nisational Analysis. London : Heinemann Educational Books Ltd., 1979.
Hartgraves, 2002. The evolving account-ing standards for special purpose entities and consolidations. Accounting Horizons, September 2002, p. 245-258
Hasim, A.R. 2004. Menyoal tanggung jawab pemegang saham perseroan. BISNIS INDONESIA 15/09/2004
Horngren, C.T. and Foster G. 1991. Cost Accounting: A Managerial Empha sis. Englewood-Clifffs, N.J.: Prentice -Hall.
Ikatan Akuntan Indonesia, 1996. “Standar Akuntansi Keuangan”. Jakarta Sa-lemba Empat
Miller, P. and Napier. C. 1993. Genealo-gies of calculation. Accounting, Organizations and Society 18 (7/8): 631-47
Morgan, G., 1988. Accounting as reality construction: towards a new epi-stemology for accounting practice. Accounting, Organizations and Society, Vol. 13, No. 5, 1988, p. 477-475.
Naser K. 1993. Creative Financial Accounting: its nature and use. Hemel Hempstead: Prentice Hall.
Rasyid ER. 1998. “Saling-peran (interplay) antara Akuntansi dan Budaya Perusahaan: Penelitian Empiris dengan Metode Interpretif-Etnografis. Jurnal Riset Akuntansi Indonesia Vol. 1 No. I, Januari 1998 Hal 43-66

Rudkin, K. 2002. Applying critical ethnographic methodology and method in accounting research. Presented at the critical perspectives on accounting converence, Baruch college, city University New York, 25-27 April 2002.
Sagir, I.P,. 2003. SPE dan kasus divestasi indosat. WWW. Yahoo.com
Sawarjuwono, T. 2000. Metodologi penelitian akuntansi, manajemen, dan bisnis: Pendekatan kritis-critical paradigm (Habermasian). Makalah pada short course Metodologi Penelitian Paradigma alternatif: Untuk Akuntansi, Ekonomi, dan Manajemen, Fakultas Ekonomi Universitas Brawijaya, Malang, 8-9 Mei 2000.
Spradley, P.J. 1997. Metode Etnografi. PT. Tiara Wacana Yogya 1997
Suwardjono, 1990. Perekayasaan infor-masi akuntansi untuk alokasi sum-ber daya ekonomik secara efisien melalui pasar modal. Kongres ISEI ke IX tanggal 22-25 Agustus 1990 Bandung.
Triyuwono, I. 1997. Akuntansi Syariah dan Koperasi; Mencari bentuk dalam Bingkai Metafora Amanah, Jurnal Akuntansi dan Auditing Indonesia, Volume 1 no 1, Mei 1997
Triyuwono, I. 2000. Organisasi dan Akuntansi Syariah. Yogjakarta Lkis.
Watts and Zimmerman. 1986. Positive Accounting Theory. Englewood Cliffs, NJ; Prentice-Hall.

WORKSHOP ON ISLAMIC RISK MANAGEMENT

August 22, 2010 Leave a comment

JOINTLY ORGANISED BY

Hawkamah, the Institute for Corporate Governance
Level 14, the Gate, P.O. Box: 7477 Dubai, UAE
Tel: +9713622551 Fax: +97143622552 Website: http://www.hawkamah.org
AND

Amanie Islamic Finance Learning Centre
No, 44, Level 41, Emirates Towers,
Sheikh Zayed Road,
Dubai, United Arab Emirates

Phone: +971 4 319 7688
Mobile: + 971 5 092 27652
Fax: +971 4 330 3365

DATE:
26TH MARCH 2009
VENUE:
Lecture Room 2 Level 1, the Gate, P.O. Box: 7477 Dubai, UAE
THEME:
“Towards Better Understanding of Islamic Risk Management”

Course Objective

The objective of this workshop is to provide participants with a comprehensive understanding of the Islamic risk management. The workshop will allow participants to examine the unique risks involved in Islamic finance particularly in the aspect of Shariah compliant risk management tools, scope of risk and overviews of Islamic prudential standards of International Financial Services Board, rating of risk for Islamic financial institutions (IFIS) and Islamic financial products from rating agency perspective. The workshop content will be drawn heavily from the key issues of the day, in particular those which raise supervisory and management effectiveness questions.

Benefits for Attending

The workshop offers comprehensive module on Islamic risk management which has been designed by experienced and renowned experts peculiarly in providing Shari’ah advisory services and structuring of Islamic financial products both local and international market. The workshop will enable participants to understand the unique risk facing Islamic banks and the risk management techniques involved in Islamic finance industry.

Who Should Attend?

Risk Managers
Central Bankers
Banking Regulators
Bankers
Legal Advisors
Shariah Scholars
Internal Shariah Reviewers or officers
Asset and Fund Managers
Accountants & Auditors
Tentative Program
0830hrs Opening Remarks by Mr. Nickolai Nadal, Director of Hawkamah

0900hrs Scope of Risk for Islamic Financial Institution (IFIS) and Overviews of Islamic Prudential Standards of IFSB: Dr. Syed Musa Al Habshi

- Risk Management Framework, Capital Adequacy & Shariah Governance, Types of Risk exposures of IIFS
– Impact of Profit Sharing Investment Accounts (PSIA) on capital adequacy requirement
– Role of Shari’ah Review on governance of Shari’ah compliant activities

1030hrs Tea Break

1100hrs Application of Risk Management Tools and Standards for IFIS: Dr. Syed Musa Al Habshi
– Application & Impact of Risk Management Tools
– Importance and need for Risk management tools for Islamic financial transactions
– Issues on Shari’ah acceptance of risk management tools Potential Impact of risk management tools on IIFS

1230hrs Lunch

1400hrs Shariah Compliant Risk Management Tools – The Role of Islamic forwards, option and swaps: Dr Mohd Daud Bakar
1515hrs Tea Break

1545hrs Risk Management and Corporate Governance in Islamic Financial Institutions: Mr. Zulkifli Hasan

1615hrs Panel Discussion on Islamic Risk Management:
Amanie: Dr. Mohd. Daud Bakar
DIFC: Mr. Nik Norishky Thani
Hawkamah: Mr. Nickolai Nadal

1700hrs End of Workshop
Fees
Normal fees are USD1, 000 and 20% discount will be given to group registration of 3 or more and Hawkamah members.
About the Speakers
Dr. Mohd Daud Bakar
Dr. Mohd Daud Bakar is currently the Managing Director of Amanie Islamic Finance Learning Centre (DIFC Incorporated) Dubai. He received his first degree in Shari’ah from University of Kuwait (1988), PhD from University of St. Andrews, United Kingdom (1993) and external Bachelor of Jurisprudence at University of Malaya (2002). He has published more than 30 articles in various academic journals and presented more than 200 papers in various conferences both local and abroad. He is now Chairman of the Shari’ah Advisory Council at the Central Bank of Malaysia, member of the Shari’ah Advisory Council at the Securities Commission of Malaysia, (Malaysia), Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) (Bahrain), Dow Jones Islamic Market Index (New York), Unicorn Investment Bank (Bahrain), Financial Guidance (USA), BNP Paribas (Bahrain), Bank of London and Middle East (London), Islamic Bank of Asia (Singapore), Noor Islamic Bank (Dubai), Morgan Stanley (Dubai), Dubai Bank (Dubai) and in other financial institutions both local and abroad. He has been involved in advising Islamic funds and Islamic Sukuk both local and globally. In 2005 he has been awarded the Islamic Banker Award of 2005 by the Association of Islamic Banking Institutions Malaysia

Dr. Syed Musa Alhabshi
As principal consultant of Amanie Business Solution, Dr Syed has been involved in Islamic financial product design and development, Professional module design and development of Islamic finance courses and programs as well as spearheading research for the Islamic Financial Services Industry. He actively conducted training in the area of Accounting, Risk and Governance for Islamic Financial Institutions, Islamic Finance and Banking in public seminars and in house training programs for various financial institutions, international audit firms, supervisory agencies and rating institutions in London, United Arab Emirates, Mauritius, Brunei, Malaysia, Singapore and Indonesia.
In setting the direction for the industry he had been appointed as a technical consultant with Centennial Group International where he was involved in developing Islamic Financial Services Board (IFSB) Prudential Standards. He had also served as a member of Accounting, Auditing and Governance Standards Board of Accounting Auditing Organization for Islamic Financial Institutions (AAOIFI). In Malaysia he is currently a member of Malaysian Accounting Standards Board (MASB) Working Committee of Islamic Financial Reporting Standards.
As an academic Dr. Syed Musa Alhabshi was an Associate Professor and Dean of Faculty of Business Administration, Tun Abdul Razak University (UNITAR) till February 2007. In postgraduate education he designed and developed doctoral and masters degree curriculum as well as graduate programs in both UNITAR and International Islamic University, Malaysia (IIUM). His teaching experience spans from undergraduate, professional to postgraduate programs in the areas of accounting and finance with special focus in Islamic finance and accounting. He supervised doctoral students in Islamic Finance and has presented papers in both local and International Conferences as well as published papers in academic journals and related academic literature which includes areas on Performance and Efficiency of Islamic Financial Institutions and Foreign Investments, Accounting, Auditing, Governance, Risk Management, Performance Measurement and Zakat particularly for Islamic Financial Institutions. In addition his previous employment as audit assistant in Coopers & Lybrand as well as a police inspector in Singapore provides early exposures to the demands of commercial and social environment.
His early education was from Singapore where he obtained a Diploma in Business Studies from Ngee Ann Polytechnic and later pursued and obtained first class honors degree in Bachelor of Business Administration (1989) from International Islamic University (IIUM), as well as conferred Bank Islam Malaysia Overall Best Student Award. He then proceeded to obtain Doctor of Business Administration (1994) (Accounting and Finance) from Strathclyde University, UK.

Nick Nadal

Nick Nadal is the Director at Hawkamah Institute of Corporate Governance, in charge of developing programmes for family owned enterprises, non listed companies, banks and financial institutions, capital markets, media and academia on corporate governance. Prior to joining Hawkamah, he was the Program Officer for Middle East and North Africa programmes at the Centre for International Private Enterprise, a non-profit affiliate of the U.S. Chamber of Commerce, building linkages with and supporting regional business associations, developing and conducting training programmes on association governance and developing programmes to advance entrepreneurship, economic journalism and corporate governance in the region.

Nik Norishky Thani
Nik Norishky Thani is Executive Director of Islamic Finance, at the Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. He has over a decade’s experience in advising and structuring Islamic financial instruments, in particular Islamic Sukuk. Prior to DIFC, he was the Head of Islamic Capital Markets for MIMB Investment Bank Malaysia and Bank Islam Malaysia Berhad. He was previously attached with Aseambankers Malaysia Berhad and Commerce International Merchant Bankers (CIMB), Malaysia.
Nik Norishky Thani was a Fulbright scholar at Georgetown University, Washington DC where he focused on Islamic law and finance for his Master of Law (LLM) and graduated top of his class with Distinction and Dean’s List. Subsequently, he was a fellow at the Center for International Environmental Law, a Geneva-based international body that promotes sustainable economic development. He also underwent the Program of Instruction for Lawyers at Harvard Law School in Boston, Massachusetts. Nik Norishky Thani is a past winner of the Petronas scholarship, and holds a law degree (LLB) from the University of Cardiff, United Kingdom.
Zulkifli Hasan
He has worked extensively in Islamic finance industry as an advocate and solicitor, in-house counsel for Bank Muamalat Malaysia Berhad and member of Rules and Regulations Working Committee for Association of Islamic Banking Institutions Malaysia. As an academician, he has developed excellent research skills as senior lecturer at Faculty of Shari’ah and Law and hold various academic positions such as legislation editor for the Malaysian Journal of Shari’ah and Law, Shari’ah panel for the Institute of Fatwa Management and Research for Islamic Science University of Malaysia, ad-hoc reviewer for the International Journal of Business and Finance Research, the Institute of Business and Finance Research, USA as well as a member of the Advisory Editorial Board of the Shari’ah Law Reports. He has published numerous articles in various academic journals and presented many papers in various conferences both local and abroad. He obtained his first degree in Bachelor of Laws from International Islamic University (2001) and received his second degree in Bachelor of Shari’ah (2002) as well as Master of Comparative Laws (2004) from the same university. Currently, he is doing his Ph.D at University of Durham, United Kingdom.

ISLAMIC BANKING MEETS “CONVENTIONAL” BANKING: A SURVEY OF RECENT DEVELOPMENTS IN BANKING IN PAKISTAN

August 22, 2010 Leave a comment

Isobel Lobo, Benedictine University
Frank Bonello, University of Notre Dame

In 1985, Pakistan declared that interest had been eliminated from banking. Its religious court ruled otherwise in 1991. The Supreme Court upheld the ruling and directed the government to bring a number of banking laws into conformity with Islamic injunctions by June 30, 2002. As the deadline approached, however, in a surprising last minute reversal, it remanded the case back to the religious court for reconsideration. Granted a reprieve, the country appears headed towards a dual banking system.

A Synopsis of the Elimination of Interest and the Evolution of Interest-Free Banking
Islam prohibits riba which is generally taken to include the interest banks pay and receive. Pakistan began planning for an interest-free banking system in 1977. It followed a cautious, and gradual transition that started with the acceptance of profit/loss sharing (PLS) deposits by the nationalized commercial banks in January 1981. The transition was declared complete in July 1985 when bank assets and liabilities (except for foreign loans and foreign currency deposits), were converted to various non-interest bases. The country’s central bank, the State Bank of Pakistan (SBP), provided the banks inter alia with a list of approved modes of finance and a method for calculating rates of return on the banks’ PLS deposits.
A number of “qualitative deficiencies” were, however, found to characterize the procedures used by the banks. [Institute of Policy Studies]. Recognizing this, the terms interest-free or noninterest-based (NIB) banking, rather than Islamic banking, have commonly been used to describe the system in place since 1985. One of the main shortcomings of the noninterest-based system is the banks’ almost exclusive reliance on a single mode of finance – mark-up with or without buy-back arrangements – that closely resembles interest, and their virtual exclusion of any form of PLS or partnership-based finance (e.g. musharaka or mudaraba) that many Muslim scholars of religion and economics consider more truly reflects the spirit of the Quranic prohibition of riba. In 1992, for example, mark-up based finance accounted for over eighty percent of the finance extended by the nationalized commercial banks (who at the time accounted for about 90 percent of bank assets), while their musharaka finance was insignificant. Another shortcoming is the fact that banks are (still) allowed to invest in (interest-paying) government securities.
As one writer concludes, the elimination of interest “was carried out without serious regard to Islamic legal doctrine, leaving the interest-based banking system fundamentally unchanged, but covering it with an Islamic varnish.” [Ray]. The elimination of riba (interest) had not been carried out with regard to the true spirit of the prohibition. [Makhdoom]. Moreover, the minimal nature of the change was apparent to most people. [Gieraths].
Key Judicial Rulings on the Banking System From 1991 to 2002
Monetary and fiscal issues had been excluded from the jurisdiction of Pakistan’s religious court, the Federal Shariat Court (FSC) up to June 26, 1990. On November 14, 1991, after hearing 115 petitions challenging twenty banking and fiscal laws, the Court found that provision for interest in these laws came under the definition of riba and was, therefore, repugnant to the injunctions of Islam. It set a deadline of June 30, 1992 after which the various provisions would cease to have effect.
The Shariat Appellate Bench (SAB) of the Supreme Court of Pakistan upheld the FSC’s ruling on December 23, 1999. The Bench explained its opinion of the modes of finance that appear in the different laws under consideration. Unlike the FSC, the Bench noted that a sale on mark-up (murabaha) is permissible if it is based on the genuine sale of a commodity. Mark-up may not be charged on a money loan. It endorsed the use of some modes of finance (including lease and hire-purchase in approved forms) while emphasizing musharaka and mudaraba as true alternatives to interest Its judgment indicates that: (i) any amount over the principal in a contract of loan or debt is riba forbidden by the Quran; (ii) the prevailing interest-based financial system has to be subjected to radical change to bring it into conformity with Islamic injunctions; and (iii) provisions for payment of interest in eight specific laws (on money lending) would cease to be have effect from March 31, 2000 and all other laws considered in the judgment would be ineffective from June 30, 2001.
The Appellate Bench suggested the following measures be taken to transform the existing system: (i) austerity measures to curtail government expenditure; (ii) laws to regulate government borrowing powers; (ii) laws to ensure transparency and freedom of information; (iv) establishment of an institution to control “white collar and economic crimes; (v) establishment of credit rating agencies; (vi) establishment of evaluators to scrutinize feasibility reports; and (vii) establishment of special departments and a Shariah Board within the central bank (to scrutinize and evaluate procedures and products).
The Bench directed the government inter alia to establish a Commission for Transformation of the Financial System in the SBP to prepare a strategy, and to constitute task forces in the Ministries of Finance and Law, for preparation and approval of model financing agreements, and for conversion of the government’s domestic borrowing into project-related financing (inter-government loans and central bank finance were to be interest-free). The SAB admitted it would be difficult to implement the prohibition of interest in the area of foreign loans. It directed the government to renegotiate existing loans, to avoid foreign debt, and to structure any necessary future foreign borrowings on the basis of Islamic modes of finance. The Bench set deadlines for the government to comply with each of its instructions.
On December 29, 2000 the government issued a prompt and categorical reassurance that banking transactions would continue to be protected and that Pakistan would honor its foreign debt commitments. Despite this, the SAB’s ruling cast uncertainty over the country’s dealings with international lenders. [Bokhari 2000]. During the period between the FSC’s judgment in 1991 and the SAB’s decision to uphold it in 1999, all financing arrangements in the country contained force majeure clauses referencing the possibility of the riba judgment being finally upheld. [Raja]
In 2001, the Shariat Appellate Bench extended its earlier deadline to June 30, 2002. The United Bank appealed the SAB’s verdict and it was joined by the government early in 2002. Some of the country’s conservative religious groups sent their own lawyers to defend the earlier ruling. [BBC].
On June 24, 2002 the SAB reversed its own decision of 1999 (which had upheld the FSC’s ruling of 1991) and remanded the case back to the FSC for re-determination. It has been suggest that revised national priorities may explain the SAB’s reversal of its own ruling. [Shah and Wasti]. A constitutional lawyer notes that it is significant that prior to the SAB’s reversal, the President of Pakistan had removed from office a member who had been on the bench since 1980. [Raja].
In arriving at its decision, the SAB took note of a number of points raised by the counsels for United Bank Limited and the Federation. The counsel for United Bank contended: that the SAB had not properly distinguished between usury, interest, and riba; that usury is a kind of riba; that what is prohibited is not what is reasonable and fair, but what is doubled and multiplied; that Quranic verses explaining the prohibition mainly contrast riba with sadaqat (almsgiving); that banks cannot be made to give alms to industrialists; and that the business of banking is covered by the term “bai,” an approved method of finance, which includes sale, business, investment and so forth.
Counsel for the Federation argued that the FSC had no jurisdiction to declare riba illegal or impermissible: the Constitution makes it the duty of the Federal Government (not the FSC) to eliminate riba. He stated also that, in pursuance of the SAB’s judgment of 1999, the government had formed a Commission and two task forces to direct the transformation of interest-based government borrowing to Islamic modes of finance, to effect a transition in the financial sector, and to establish a legal and regulatory framework for an Islamic economy. In an affidavit to the SAB, the government stated that after its best efforts to find ways to implement the SAB’s directives, it had found that implementation was neither practical nor feasible, and if attempted would pose great risk to Pakistan’s economic stability and security.
The SAB took note of a number of contentions of other counsel for the Federation including inter alia the arguments (i) that the “impugned judgment amalgamated legal and moral aspects of riba” in violation of injunctions in the Quran and the Sunnah and against the opinion of eminent jurists; (ii) that the SAB’s failure to define the word qarz (which is involved in almsgiving) rendered the impugned judgment against Islamic law since the word “loan” is not the exact translation of qarz; (iii) that exploitation is an essential ingredient of riba; (iv) that the present system of bank accounts and investments in various government savings schemes do not involve riba; (v) that the views of certain jurists and scholars on riba and banking practice had been ignored; (v) that the SAB ought to have asked the FSC to decide whether indexation was permissible; (vi) that the SAB had applied the prohibition to non-Muslims although this was not the issue before it; and (vii) that the Islamic banking system suggested in the judgment under review was a misnomer and that (except for Musharaka) all the other recommended modes of finance involve riba in disguise.
The Deputy Governor of the State Bank of Pakistan filed an affidavit with the SAB stating that after taking steps to promote Islamic banking and after considering all other practical problems of transforming the financial system, it was the considered judgment of the Bank that
“a parallel approach will be in the best interest of the country. This means that Islamic banking is introduced as a parallel system of which a beginning has already been made … .This approach will eliminate the risk of any major costs/damage to the economy, give a fair chance to Islamic banks to develop alongside conventional banks, and will provide a choice to the people of Pakistan, and the foreigners doing business in/with Pakistan, to use either of the two systems.” [SAB]
In remanding the case back to the Federal Shariat Court, the SAB directed the FSC to re-determine the issues after thorough research, and after comparative study of financial systems in other Muslim countries and to give a definite finding on all the issues involved (which the FSC had not done in 1991). It asked the FSC to make its determination
“in the light of the contentions of the parties noted above and the observations made which are germane to the controversy. Besides the points … , the parties would be at liberty to raise any other issues relevant to these cases and the Federal Shariat Court may also, on its own motion, take into consideration any other aspect which may arise or may be found relevant … .” [SAB]
Towards A Parallel Banking System: Establishing an Institutional Structure and a Regulatory Framework for Islamic Banking
In December 2001, even before the SAB heard the appeals, the central bank took a step towards promoting a parallel banking system that would offer consumers a choice by announcing criteria for the establishment of private sector Islamic commercial banks. The criteria covered eligibility conditions, licensing requirements, guidelines on set up, Shariah compliance and other operational matters. In September 2002, after the SAB’s reversal of its earlier judgment, an amendment was enacted in the Banking Companies Ordinance (the major banking law), making it possible for commercial banks to establish Islamic banking subsidiaries. The banks were also allowed to apply for permission to set up Islamic banking branches in the country. On January 1, 2003, the central bank issued Policies for the Promotion of Islamic Banking. In it, the central bank enunciated its strategy of promoting Islamic banks, Islamic banking subsidiaries of existing commercial banks, and stand-alone branches of existing commercial banks that engage only in Islamic banking.
In September 2003, the central bank established within itself an Islamic Banking Department to regulate and promote Islamic banking. This department is responsible for the licensing, supervision, regulation, Shariah audit, and training the personnel of Islamic banks and Islamic branches. The central bank established a Shariah Board within the department to ensure Shariah compliance, and to advise banks on modes, procedures, laws and regulations for Islamic banking. The Board includes three religious scholars, a banker and a lawyer. The central bank also arranged for an accounting firm to conduct Shariah compliance audits of Islamic banks, to create a Shariah audit manual, and to train State Bank officers. Further, the central bank initiated an Islamic Banking Awareness Program to train banking and other personnel and a Learning Program to learn from the experiences of other Muslim countries.
To establish either an Islamic commercial bank, an Islamic subsidiary of an existing commercial bank, or an Islamic banking branch of an existing commercial bank, permission must first be sought from the Director of the Islamic Banking Department (IBD) of the central bank. The proposed institution must also appoint a Shariah advisor in accordance with the “Fit and Proper Criteria” issued by the central bank’s Shariah Board, and the advisor must be approved by the central bank (the institutions may also appoint a Shariah Committee if they so choose). To prevent conflict of interest, the central bank mandated that a bank’s Shariah advisor must not serve in the same capacity at any other Islamic banking institution. This restriction does not apply to the central bank’s nomination of a Shariah advisor to its own Shariah Board. Islamic commercial banks and Islamic subsidiaries of (conventional) commercial banks are subject to prevailing banking and other laws and to the rules and directives of the central bank. Islamic banking branches of commercial banks are required to comply with all the directives and guidelines of the central bank, particularly those applicable to Islamic banking.
Criteria specific to the establishment of an Islamic commercial bank include capital adequacy requirements, standards for integrity of sponsors and directors, measures for broad-based ownership and measures directed against interlocking ownerships of banks and other institutions. Their financial transactions must be in accordance with the injunctions of Shariah. The application for permission from the IBD must indicate the modes of finance proposed to be used to raise resources and extend finance.
According to IBD Circular No. 2 of 2004, an Islamic commercial bank inter alia: is a public limited company; must be listed on the stock exchange; must offer at least 50 percent of shares to the general public; must have a minimum paid-up capital of Rest. 1 billion and maintain a minimum capital adequacy ratio of 8 percent of risk-weighted assets; and must have at least seven sponsor directors who subscribe at least 15 percent of total paid-up capital and retain their shares for at least three years (they must obtain the central bank’s approval if thereafter they choose to dispose of their shares). The sponsors may make foreign capital investment which is non-repatriable (dividends are repatriable). In addition, not more than 25 percent of the sponsor directors can be from the same family (as defined in the Banking Companies Ordinance). The directors cannot serve as directors of any other financial institution (nor can any one group own more than one bank). The proposed bank must begin operations within six months of permission and must open at least five branches within twelve months.
Existing commercial banks (who meet the central bank’s guidelines on capital adequacy and) who wish to establish subsidiaries to carry on Islamic banking must also apply to the IBD for permission. These subsidiaries are also public limited companies, and are considered to be Islamic commercial banks. Like the latter, the chief executive officer of a subsidiary of an existing commercial bank must be approved by the central bank. (In addition, each director of the subsidiary must be cleared by the central bank.) Applications for permission to establish both Islamic commercial banks and Islamic subsidiaries of existing commercial banks must submit risk management guidelines and plans for internal control. At least 51 percent of a subsidiary’s shares must be subscribed by the parent commercial bank and no more than 49 percent may be offered to the public.
Finally, existing commercial banks (including foreign banks) may apply to the central bank for a license to open stand-alone Islamic banking branches to offer Shariah compliant products and services. The applicant bank is required to maintain a minimum “Islamic Banking Fund” of Rs. 50 million funded by allocation from its head office (or 8 percent of the risk-weighted assets of its Islamic banking branches, whichever is higher).
In making its decision, the central bank will consider the financial strength of the bank. The applicant bank must inter alia indicate the number of Islamic banking branches it proposes to open in the next financial year and their location, the deposits, finance, investment, and other products and services proposed to be offered, how it will segregate the funds of its Islamic banking branches from the funds of its commercial banking branches, the accounting policies to be followed, and the profit and loss sharing mechanism.
After the central bank’s approval, the applicant bank must set up an Islamic Banking Division at its head office in Pakistan to control the Islamic Banking Fund and inter alia to ensure that all the central bank’s directives are followed including, for example, the statutory cash reserve and liquidity requirements. The Islamic branches have to meet the same cash reserve requirement as conventional banks i.e. 5 percent of their time and demand liabilities. They are, however, required to maintain a liquidity reserve of only 6 percent of their liabilities with the central bank – instead of 15 percent for the conventional banks – until such time as Shariah-compliant approved securities are developed. The central bank’s guidelines list the systems and control guidelines to be followed. For example, while the applicant bank may authorize some of its existing branches to sell Islamic banking deposit schemes, these branches must transfer the funds raised to the Islamic banking branch on the same day and must not receive or pay interest on such services. They may, however, receive a reasonable fee or commission on sale of deposit schemes.
On April 15, 2005, the central bank issued a press release communicating the “Essentials and Model Agreements for Islamic Modes of Finance” approved by its Shariah Board to “ensure compliance with minimum Shariah standards by banks conducting Islamic banking in Pakistan,” and to serve as guidelines which will eventually be enforced as prudential regulations for Islamic banks. The central bank also provided model agreements for the modes. Individual banks could, with the approval of their Shariah advisor, adapt these to suit the products they design. The main features of the approved modes are described below.
The seven Islamic modes of finance include: Murabaha, Musawama, Ijara (leasing), Salam, Istisna, Musharaka and Mudaraba. Only the last two modes involve sharing in profits and losses. For each of the five cases not involving profit (loss) sharing, the Shariah Board approved the stipulation of a penalty for late payment or default in the agreement. The penalty is expressed in terms of percent per day or per annum as an interest rate would be. The Shariah Board’s guidelines (and the model agreement forms) note, however, that the penalty will go to the bank’s charity fund and cannot become a source of further return to the bank. The bank may, however, ask a court for award of solatium, which is determined “on the basis of direct and indirect costs incurred, other than opportunity cost.” Furthermore, the bank is allowed to sell any collateral or security it holds (without court intervention). All of the agreements approved by the Shariah Board contain provision for insurance of assets under the Islamic concept of Takaful when this is available (and with a reputable insurance company until this time).
The Shariah Board defines murabaha as a sale of goods for cash or on a deferred payment basis. The seller is required to disclose the cost of the goods and a margin of profit is included in the sale price of the goods — which once determined cannot be changed. The financier bears the risk for the period between the purchase of the good (by the bank’s agent) and its sale to the buyer (the bank’s client). As noted earlier, much controversy surrounds the use of Murabaha. The Shariah Board’s guidelines therefore include caveats: murabaha contracts cannot be rolled over (although the repayment date can be extended with no increase in the sale price), and buy-back arrangements are prohibited.
A Musawama is defined like a Murabaha except that the seller is not obliged to reveal his cost. Ijara is a permissible lease arrangement. A Salam is an advance payment against deferred delivery of goods. The approved guidelines note that it can be made with respect to homogenous units of goods (traded by counting, measuring or weighing) but not, for example, in precious stones or cattle heads each unit of which is different. A salam cannot require the seller to buy back the goods. The bank is allowed, however, to enter into a parallel salam contract with a third party under given conditions. In an istisna (which is a mode of sale), the buyer (bank) places an order to manufacture a commodity to be delivered at a future date. If the seller fails to deliver the goods in the stipulated period, the price can be reduced by a specified amount per day as agreed upon. The bank (as buyer) is allowed to enter into a parallel but independent istisna contract with a third party in which it is the seller.
Musharaka is defined as a relationship to share profits and losses of a joint enterprise. All partners make an investment and share profits as agreed in the contract and losses in proportion to their capital. A managing partner may (under a separate agreement) receive a fee. Assets are jointly owned in proportion to capital contributed. Like earlier definitions of this form of financing, the definition approved by the Shariah Board is silent on the extent of the partners’ liability (i.e. whether limited or unlimited). In fact, the circulated model agreement for a musharaka includes a clause stating that the agreement shall not be deemed to create a partnership or company and that in no way has the client any authority to bind the bank. The model agreement also contains a clause (as in the other modes of finance) for payment of penalty for default of a payment due. The penalty (as in the case of the other modes) is expressed as a percentage per day (or per annum) and is to be used by the bank for charitable purposes only.
A Mudaraba is an arrangement in which one person (e.g. bank) contributes money and the other, the Mudarib (who may be a natural person, group of persons, legal entity or corporate body) contributes his efforts. Profit is divided in the proportion contracted for and losses (except in the case of fraud, negligence or willful misconduct) are borne by the party providing the funds (bank) and are limited to this amount. Mudaraba contracts may be multi- or single purpose, open-ended or closed, for a fixed period or perpetual, restricted or unrestricted. The Mudarib may be permitted by the financier to invest his own funds in the business as well. In this case, the financier may not receive a share in profits that is greater than the ratio of his capital to total investment, and losses are shared in proportion to the capital invested. Neither the model agreement nor the guidelines for a mudaraba include provision for penalty, solatium or damages. The model agreement for a mudaraba indicates that it is not deemed to create a partnership — just as the model agreement for musharaka does.
The central bank constituted a committee with the Institute of Chartered Accountants, Pakistan to develop accounting standards for Islamic modes of financing. The committee has prepared the standard on Murabaha and is working on the Ijara and Musharaka standards.
In August 2004, the chairman of the Shariah Board expressed his appreciation of the proactive role being played by the State Bank of Pakistan in promoting Islamic banking in the country. He observed that the current regulations governing Islamic banking are in line with the best and the most progressive regulations being followed in countries like Bahrain and Malaysia. In a speech earlier that year, the director of the Islamic Banking Department described the central bank’s introduction of Islamic banking side by side with “traditional banking” as a hybrid of the Malaysian and Bahrain models. The central bank has collaborated with the Bahrain Monetary Agency on Islamic banking regulations and on sukuks (Islamic bonds or government securities). It also arranged an orientation program on Islamic banking and insurance (Takaful) with the central bank of Malaysia. It is actively involved with other Muslim committees and forums on Islamic banking and finance.
Islamic Banking in Pakistan: Performance and Issues
The Meezan Bank, which was the first bank to be issued an Islamic commercial banking license in Pakistan, was already operating as an investment bank. It converted and began functioning as an Islamic commercial bank in 2002 and has 25 branches today. The bank has a paid up capital of Rs. 1.7 billion contributed by local and international financial institutions (from Kuwait, Bahrain and Saudi Arabia). According to its website, the bank strives to find “commonalities with the conventional banking system” while not compromising on Shariah rulings. Meezan Bank has a Shariah board staffed with Islamic scholars who also serve on the boards of Islamic banks in other countries. It recently introduced a new account, the Meezan Islamic Institution Deposit Account or MIIDA for Islamic financial institutions needing an outlet for their excess liquidity. Meezan Bank uses the deposit pool to provide financing on Islamic modes mainly on the basis of Murabaha and Ijara. The bank also issues a long-term deposit certificate for Pension Funds. Twenty percent of gross profit on the deposit pool goes to certificate holders. In September 2005, Meezan Bank’s Shariah Board approved of diminishing musharaka-based Islamic financing for medium and long term financing of plant and machinery and non-commercial vehicles. The Board also declared day trading (as currently practiced) unIslamic and approved an alternative product for futures trading.
Two other Islamic banks were issued licenses in 2005: Al-Baraka Islamic Bank, which is a foreign bank that converted to Islamic banking, and Bank Islami Pakistan, which was licensed on March 31, 2005. In addition, there are 29 Islamic banking branches of conventional banks (including two foreign banks) operating in the country. Al-Baraka offers a number of deposit accounts including PLS savings deposits, incentive accounts, khazana accounts, term deposits, AMI accounts, and foreign currency savings accounts.
According to the central bank, at the end of March 2005, the share of Islamic banking in overall banking in Pakistan was only about 1.6 percent. During the first quarter of 2005, the total assets of these banks in Pakistan had increased by 13.6 percent to Rs. 50.2 billion and their deposits had risen by 10 percent to Rs. 33.3 billion. Murabaha dominates as their preferred mode of finance (53%) followed by Ijara (28 percent), Diminishing Musharaka (8 percent), and Musharaka (1 percent). The central bank took up and resolved the issue of double taxation on murabaha transactions with the Central Board of Revenue. Savings deposits account for the largest share in the deposits of the Islamic banking institutions (47 percent), followed by fixed deposits (28 percent) and non-remunerative current account deposits (24 percent). The central bank is working on the creation of an Islamic inter-bank market once there is a sufficient number of Islamic banks.
Government securities that conform to Islamic principles are not widely available in Pakistan. The first Pakistani International Bond, the Sukuk Al-Ijara was launched in the international capital market at the beginning of 2005 and was heavily oversubscribed by conventional and Islamic institutions (resulting in a foreign inflow of $600 million). Meezan Bank, the first domestic Islamic bank was the local structuring advisor for the Sukuk issue and the government hopes that the issue will spur the creation of domestic Islamic capital and money markets.
According to the central bank’s strategic plan (2005-2010), a two-pronged approach will be followed to promote Islamic banking as a parallel and compatible system: attract international banks of quality to locate in Pakistan and nurture domestic professional Islamic bankers. The central bank also plans to design and implement new tradable instruments necessary for Islamic banking treasury operations. [SBP, Strategic Plan]. In addition, the plan briefly mentions the future enactment of new laws in the area of Islamic Banking.
The IMF believes that despite legal ambiguities regarding the process Islamization of the financial sector, the establishment of new Islamic banking institutions is likely to continue. It recommended inter alia close monitoring of the Islamic financial institutions, development and standardization of Islamic banking products and financial instruments, and the development of a specific framework for risk management and lender of last resort arrangements for the Islamic banking sector. The IMF regards the central bank’s vision of Islamic banking and conventional banking operating parallel to each other as appropriate since this set-up affords users a choice compatible with their religious beliefs and fits in with the country’s position as an emergent market that is integrated into the global economy.
The “conventional” banking system in Pakistan is the system in place since the transition to non-interest based banking. Banking in Pakistan has, however, undergone substantial reform in the last decade and more reform is envisaged. For example, the central bank’s strategic plan calls for a deposit insurance scheme. The structural changes already made include the privatization of four of the five nationalized commercial banks, the divestiture of a portion of the shares of the fifth bank, central bank autonomy, liberalization of the financial sector, and increase in the minimum capital requirements for banks from Rs. 500 million to Rs. 1 billion. The IMF noted improvements in financial soundness indicators as non-performing loans have fallen and profitability indicators such as return on assets and equity have begun to approach international norms.
According to central bank data, local private banks continue to dominate commercial banks in the private sector in terms of share in total assets (87 percent) although foreign banks are more numerous (20 versus 14). Foreign banks account for about 34 percent of profits of all commercial banks in the private sector although they only account for about 15 percent of deposits and 16 percent of advances.
The macroeconomic environment in which the banks operate has improved. The government of Pakistan’s data estimates real GDP growth at 8.4 percent in the fiscal year ended June 30, 2005 (making Pakistan the second fastest-growing economy after China). Indicators of social and living conditions are also better. The country’s public (and external) debt burden declined to the lowest level in decades. The inflation rate (9.3 percent) is high, however, and the current account just turned deficit after three years of surpluses.
Closing Thoughts
There are about 300 Islamic banking institutions operating in some 70 countries with assets estimated at over $250 billion growing at the rate of about 15 percent per annum. The market is largely untapped, according to an article in Global Finance since the majority of Muslims still use conventional products. For example, Malaysia has 15 million Muslims, and nine Islamic financial institutions, but only 10% of total banking assets are held in Shariah compliant accounts.
Malaysia and Bahrain served as models for Pakistan’s dual banking system. In Malaysia, separate Islamic legislation and banking regulations exist side-by-side with those for the conventional banking system. The legal basis for the establishment of Islamic banks is the Islamic Banking Act (1983) which empowers the central bank with supervision and regulatory powers over Islamic banks. According to its central bank, Islamic banks in Malaysia offer over 40 financial products and services. An Islamic interbank money market began functioning in 1994. Takaful, an Islamic insurance system, began in 1985. Malaysia has set up a dedicated high court to try Islamic banking and finance cases.
Bahrain also has a dual banking system and the largest concentration of Islamic financial institutions in the Middle East region. It hosts a Liquidity Management Center and the International Islamic Financial Market, and its monetary agency has introduced a prudential and reporting framework that is specific to Islamic banking and finance. According to Pakistan’s central bank the interpretation and Shariah position of contracts (e.g. sale and purchase of debt instruments and grant of gifts on savings and financial papers) is different in Malaysia. Another source supports this view, “there is a certain polarization between the schools of thought centred in Asia and those centred in the Middle East with a general perception that the Middle Eastern schools of thought are more conservative in their views. This has a material effect on the acceptability of some Islamic investment products structured in Asia and offered to investors in the Middle East.”
The Federal Shariat Court’s re-determination of the case is widely expected to take several years and the IMF notes that “there remains a degree of legal uncertainty about the ultimate basis for banking activities in Pakistan.” In a letter of intent to the IMF, the government and the central bank, however, regard the Supreme Court’s decision as having cleared the way for the pursuit of “an evolutionary approach to Islamic finance, through encouraging the development of Islamic banking alongside traditional financial institutions.” Implicit in this view is the acceptance of the fact that interest is involved in the current operation of the traditional institutions. The central bank’s numerous explicit references to “interest” and interest rates” in its reviews and annual reports acknowledge the existence of interest in banking operations. It appears from the government and the central bank’s statements and actions that they implicitly believe (or hope) that the FSC will allow “traditional financial institutions” to continue functioning. It is not clear, however, whether these institutions will be able to revert to their original existence as truly conventional banks paying and accepting interest and forsaking the present unwieldy and burdensome trappings of an “interest-free” system.

References
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Bokhari, Farhad. “Still Taking an Interest.” The Banker. (February 2000). Vol. 150, no. 888, pp 56-57.
Bokhari, Farhad. “The Outlook for Islamic Banking.” The Banker. (May 2005).
Gieraths, Christine. “Pakistan: Main Participants and financial Products of the Islamization Process.” Islamic Financial Markets. Ed. Rodney Wilson. New York: Routledge, 1990. 171-196.
Government of Pakistan, Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding. October 16, 2002. http://www.imf.org/External/NP/LOI/2002/pak/03/index.htm
Hawser, Anita. “Players Vie for a Prime Slice of a Promising Market.” Global Finance. September 2005.

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Developments of Islamic Banking in Pakistan & Malaysia: An Analytical Review

August 22, 2010 Leave a comment

Abstract

This study compares Islamic banking operations currently practiced in Pakistan and Malaysia. Both countries started Islamic banking in early 1980’s but employed entirely different approaches. Pakistan attempted to convert the entire financial system in accordance with Islamic law at once at national level. Malaysia adopted the gradual application approach. It allowed Islamic and conventional banking systems to operate and to compete for deposits on parallel basis. This study examines the Pakistani and Malaysian approaches towards the implementation of Islamic banking in their respective countries. It recognizes lack of commitment and long term planning problems in case of Pakistan.

Introduction

Islamic banking system has emerged as a competitive and a viable substitute for the conventional banking system during the last three decades. It is especially true for Muslim world where presently Islamic banking strides at two separate fronts. At one side, efforts are also underway to covert the entire financial systems in accordance to Islamic laws (Shariah). At the other side, separate Islamic banks are allowed to operate in parallel to conventional interest based banks. Pakistan and Malaysia are the two good examples of above mentioned approaches.
Both countries adopted different tracks for the same ultimate destination of developing full fledge viable Islamic financial system and produced quite interesting results. The Government of Pakistan tried to covert the entire financial system to an interest free system through presidential orders at a national level. However, the overnight practice of islamization didn’t achieve the required success. Most of the efforts have either been reversed or further developments have been stopped. Malaysia opted for the alternative gradual way of developing and implementing Islamic banking system. Starting with one Islamic bank it later allowed conventional financial institutions to offer and participate in Islamic banking products and services through their existing staff and branches. The country is now actively involved in designing new Islamic financial instruments for capital and money market transactions. This study provides the comparative analysis of implementing two opposite Islamic banking approaches, one in Pakistan and other in Malaysia along with their acquired results.

Origin of Islamic banking in Pakistan

The process of islamization the financial system of Pakistan is coincided with the globally resurgence of Islamic banking in the late seventies. Pakistan was among the three countries in the world that has been trying to implement Islamic banking at national level. This process started with presidential order to the local Council of Islamic Ideology (CII) on September 29, 1977. The council was asked to prepare the blueprint of interest free economic system. The council included panelists of bankers and economists who submitted their report in February 1980, highlighting various ways and sufficient details for eliminating the interest from the financial system of Pakistan. This report was a landmark in the efforts for Islamizing the banking system in Pakistan.

Origin of Islamic banking in Malaysia

In Malaysia, the roots of Islamic banking go back to 1963 when the government established Tabung Haji or Pilgrims Management and Fund Board. The institution was established to invest the savings of the local Muslims in interest free places, who intend to perform pilgrim (Hajj). Tabung Haji utilizes Mudarabah (profit and loss sharing), Musharikah (joint venture) and Ijara (leasing) modes of financing for investment under the guidance of National Fatawah Committee of Malaysia.
The first call for separate Islamic bank was made in 1980, in a seminar held in the National University of Malaysia. The participants passed a resolution requesting the government to pass a special law to setup an Islamic bank in the country. Responding to the request, the government set up a National Steering Committee in 1981 to study legal, religious and operational aspects of setting up an Islamic bank. The committee established the blue print of a modern Islamic banking system in 1983, which later enabled the government to establish an Islamic bank and to issue non-interest bearing investment certificates.

Initiatives Taken in Pakistan

The Islamic banking movement in Pakistan was a nationwide and comprehensive. As it was a mammoth task, the switch-over plan was implemented in phases. The process was started by transforming the operations of specialized financial institutions like National Investment Trust (NIT), Investment Corporation of Pakistan (ICP), and House Building Finance Corporation (HBFC) to the system conforming to the Islamic principles with effect from July 1, 1979. Separate Interest-free counters started operating in all the nationalized commercial banks, and one foreign bank from January 1, 1981, to mobilize deposits on profit and loss sharing basis. As from July 1, 1985, all commercial banking operations were made ‘interest-free’. From that date, no bank in Pakistan, including foreign banks, was allowed to accept any interest-bearing deposits. All existing deposits in banks were treated to be on the basis of profit and loss sharing. However, foreign currency deposits/loans were continued to govern on interest basis. The government meanwhile also passed Mudarabah Companies Act 1984, enabled financial institutions or business groups to setup special Mudaraba Companies in a country.

Initiative Taken in Malaysia

The establishment of Bank Islam Malaysia Berhad (BIMB) in July 1983 marked a milestone for the development of the Islamic financial system in Malaysia. BIMB carries out banking business similar to other commercial banks, but along the principles of Islamic laws (Shariah). The bank offers deposit-taking products such as current and savings deposit under the concept of Wadiah (guaranteed custody) and investment deposits under the concept of Mudarabah (profit-sharing). The bank grants finance facilities such as working capital financing under Murabaha (cost-plus financing), house financing under Bai’ Bithaman Ajil (deferred payment sale), leasing under Ijara (leasing) and project financing under Musharikah (joint venture). BIMB has grown tremendously since its inception. It was listed on the Main Board of the Kuala Lumpur Stock Exchange on 17 January 1992. At the end of 2003, the bank has a network of 82 branches throughout the country and staff of 1,200 employees.

Development of Islamic banking in Pakistan

The change management with regard to the introduction of new system is always a sophisticated job requiring long term planning and commitments. This is particularly true in case of present day financial system wherein the interests of the stakeholders are embedded and considered important ingredient. Only a well thought out plan with committed and continue efforts could lead to success. Unfortunately the economics managers in Pakistan lost the desired path of success. Currently, there is hardly any transaction deal in inter-banks , intara-banks or the government related financial activities which can be called as Islamic. In the beginning of islamization process the banks expressed some anxiety to adjust them to the new system and tried to develop methods to eliminate the interest form their transactions. But the issuance of BCD circular No.13 of June 1984 allowed banks to provide finance on mark-up and on buy-back agreement basis. The technique of buy-back agreements are nothing but disguised forms of interest. With the help of new terminology the financial institutes retained the conventional methods of interest bearing finance. The Islamic modes of finances such as musharikah, mudarabah, ijara, ijara wa iktina, were not adopted in majority of the cases. The aggressively established Mudaraba Companies also failed to continue their existence; most of them are either in losses or are in the process of agglomerated with other financial institutions.
The present day financial system is largely based on ‘mark-up’ technique with or without buy-back arrangement. This procedure was, however, declared un-Islamic by the Federal Shariat Court in November 1991. Appeals were made to the Shariat Appellate Bench of the Supreme Court of Pakistan (the apex court). The Supreme Court delivered its judgment on December 23, 1999 rejecting the appeals and directing that laws involving interest would cease to have effect finally by June 30, 2001. In the judgment, the Court concluded that the present financial system had to be subjected to radical changes to bring it into conformity with Islamic laws (Shariah). It also directed the government to set up, within specified time frame, a commission and task forces for the transformation of financial system, to achieve the objective. The Court also indicated some measures related to the infrastructure and legal framework, which needed to be taken in order to have an economy conforming to the injunctions of Islam.
The Commission for Transformation of Financial System (CTFS) set-up in the State Bank of Pakistan submitted its report in August 2001 that mainly comprised the recommendation given in the two Interim reports submitted earlier in October 2000 and May 2001. Currently, a task force is working in the Ministry of Finance to suggest the ways to eliminate interest from government operations. Another task force has been set-up in the Ministry of Law to suggest amendments in legal framework to implement the Supreme Court’s Judgment.

Development of Islamic banking in Malaysia

The long-term objective of the Central Bank of Malaysia was to create an Islamic banking system operate parallel to the conventional banking system. A single Islamic bank (BIMB) did not represent the whole financial system. It required large number of pro-active players, wide range of products and innovative instruments, and a vibrant Islamic money market. Realizing the situation, the Central Bank introduced Interest Free Banking Scheme (now replaced with Islamic banking scheme (IBS) in March 1993. The scheme allowed conventional banking institutions to offer Islamic banking products and services using their existing infrastructure, including staff and branches. Since then, the numbers of IBS banking institutions have increased to 36 till the end of 2003, comprising 14 commercial banks (of which 4 are foreign banks), 10 finance companies, 5 merchant banks and 7 discount houses. The Central bank of Malaysia in its annual report (1993, page no 57) stated:
“With the implementation of the interest free banking scheme, Malaysia has emerged as the first country to implement a dual banking system, whereby an Islamic banking system functions on a parallel basis with the conventional banking system”.

The aspiration to establish a comprehensive Islamic financial system has created a spill-over effect to the non-bank Islamic financial intermediaries which also started to offer Islamic financial products and services under Islamic banking scheme. Such institutions include the Takaful Companies, the savings institutions (i.e. Bank Simpanan Nasional & Bank Rakyat) and the developmental financial institutions (i.e. Bank Pembangunan dan Infrastruktur Malaysia and Bank Pertanian.
In October 1996, the Central Bank issued a model financial statement for the IBS banks requiring them to disclose their Islamic banking operations (balance sheet and profit and loss account) as an additional item under the Notes to the Accounts. The Central Bank also setup a National Shariah Advisory Council on Islamic Banking and Takaful (NSAC) on 1 May 1997. The council considers as the highest Shariah authority on Islamic banking and Takaful businesses in Malaysia. On 1 October 1999, the Central Bank issued license for second Islamic bank, Bank Muamalat Malaysia Berhad.
The country also introduced Islamic debt securities market has made its debut in 1990 with the issuance of RM 125 million Islamic bonds. Islamic Inter-bank Money Market (IIMM) on 4 January 1994 to link institutions and Islamic investment based instruments. Since then, both the markets provide variety of securities ranging from two to five years medium terms Islamic bonds to short-term commercial papers one to twelve months.

Present scenario of Islamic Banking System in Pakistan

Pakistan after the gap of twenty years has now decided to shift towards interest free economy in a gradual and phased manner without causing any further disruptions . Some extracts from the affidavit submitted by the Deputy Governor of the State Bank of Pakistan (SBP) in the Supreme Court of Pakistan reflected the future policy of the Bank for the time being.
“That having taken a series of steps to promote Islamic banking………. and considering all other practical problems associated with the complete transformation of the financial system, discussed herein, it is State Bank of Pakistan’s considered judgment that the parallel approach will be in the best interest of the country. This means that Islamic banking is introduced as a parallel system, of which beginning has already been made; it is provided a level playing field vis-à-vis the existing conventional banks, and its further growth and development is supported by Government and State Bank of Pakistan through appropriate actions. The approach will eliminate the risk of any major cost/damage to the economy, give a fair chance to Islamic banks to develop alongside the conventional banks, and will provide a choice to the people of Pakistan, and the foreigners doing businesses in/with Pakistan, to use either of the two systems” .

State Bank of Pakistan issued detailed criteria in December 2001 for the establishment of full-fledged Islamic commercial banks in the private sector. Newly established Islamic bank can be listed on the stock exchange provided minimum of 50 percent of total shares must be offered to the general public. At least 15 percent of total paid-up capital should be subscribed personally by sponsor directors. Islamic bank are also required to maintain a minimum capital adequacy ratio of 8 percent based on risk weighted assets. Meezan Bank Limited (MBL) received the first Islamic commercial banking license from SBP in January 2002. At the end of 2003, MBL has a small net-work of 10 branches with total deposits of US $ 130 million.
In January, 2003 the State Bank issued detail instructions upon setting up subsidiaries and stand-alone Islamic banking branches by existing commercial banks. Accordingly six existing commercial banks including one foreign bank are allowed to open separate Islamic banking branches. Out of which eight branches of four banks have already started their operations since June 2004. Islamic banks are also allowed to maintain statutory liquidity requirements (SLR) and special cash reserve (SCR) deposits in current account with the State Bank to the maximum extent of 40% of SLR and SCR for other banks in order to avoid interest.
Some developments have also been witnessed in the capital market with regard to Islamization. During the last few years, numbers of companies have issued Term Finance Certificates (TFC) to raise redeemable capital on the basis of Musharika. The payments of profit of or sharing of loss with the TFC holders are linked to the operating profit/loss of the TFC issuing companies. Therefore, the investors assume the risk of sustaining losses proportionate to their principal amount in case of operating losses incurred by the company. In September 2002, Securities and Exchange Commission of Pakistan (SECP) also allowed the Mudaraba companies to float Musharikah based TFC’s.
Another significant development during the year 2003 is the permission to set up ‘SME Modaraba’ with the participation of about 20 Modarabah companies to undertake SME businesses in the smaller towns and distant areas. SME Modaraba will resolve the problem of the individual Modarabah companies which do not have a big branch network to reach out to the prospective clientele.

Present scenario of Islamic Banking System in Malaysia

Today, Malaysia has a full-fledged Islamic financial system operating parallel to conventional financial system. In terms of products and services, there are more than 40 different Islamic financial products currently available in a country. However, differentiating fixed assets and overhead expenses are problematic in case of IBS banks. Usually, an IBS bank consists of a team overseeing Islamic banking transactions. Product development, marketing and other policy issues are conducted at the respective headquarters. At the branch level, there is no delineation over Islamic and conventional transactions. Each branch officer is expected to deal with both systems. Islamic and conventional transactions share the share computers and automated teller machines (ATMs) facilities. To some extent, overhead expenses on wages/salaries, office equipment and furniture etc. can be accounted for at the bank’s headquarter, but not at the branch level. The same applies to security systems, land and office premises as these cannot be divided into the Islamic and conventional individual components (Rosley, 2003).
Overall Islamic banking industry in Malaysia has continued to register strong expansion during 2003 to account for 9.7% of the total assets of the banking system (8.9% in 2002), 10.4% of total deposits (10.2% in 2002) and 10.3% of total financing (8.1% in 2002). The improved performance was characterized by strong growth in financing activities for the purchase of transport vehicles and residential property.
The thrust of Islamic financial policy in 2004 will continue to be directed at further strengthening the fundamental essential for progressive Islamic banking industry. The Central Bank is focusing on strengthening the institutional infrastructure, enhancing the regulatory framework, strengthening the Shariah and legal infrastructure as well as enhancing intellectual capital development and consumer education. In 2003, the Central Bank of Malaysia brought forward liberalization in Islamic banking to allow three full-fledged foreign Islamic banks to be set-up in Malaysia.

Conclusion

Islamic banking has proved vital potential as a competitive and better substitute against conventional banking system in many countries of the world. Currently, two different approaches are experienced towards the development of Islamic banking. First way experienced by Pakistan, Iran and Sudan is to implement Islamic banking on a country wide and on a comprehensive basis. Second, way is to setup individual Islamic banks in parallel to the conventional interest based banks. Pakistan and Malaysia can be assumed as the two leaders of Islamic Finance. Both countries selected different tracks to achieve the same goals of developing full fledge Islamic banking but gained different results.
The Governments of Pakistan has tried to employ Islamic banking system at once at national level. The overnight exercise of islamization didn’t produce the required results due to lack of required support and continue efforts to eliminate the interest (Riba) from the economy. Most of the Islamization efforts either had been reversed or at least, further progress was stopped. Since 2001, the Central Bank of Pakistan has started adopting the gradual policies of implementing Islamic banking which Malaysia has adopted twenty years back. Al-Meezan Bank in Pakistan (fully Islamic and independent commercial bank) and full fledge separate Islamic banking branches from few commercial banks are healthy indicators for positive expectations.
Malaysia employed the gradual approach of implementing Islamic banking. Although, the country is facing problems in segregating Islamic and conventional banking fixed assets and overheads expenses but, no doubt, it has successfully developed viable Islamic financial system. After developing Islamic banking infrastructure and Islamic instruments for financial investments and liquidity management, the country is actively progressing towards the development of Islamic capital market. Malaysia is now also inviting the international players to experience its new dual banking system.
References
Ahmad, A (1997),” Towards an Islamic Financial Market, A Study of Islamic Banking and Finance in Malaysia” Research Paper No 45, Islamic Research and Training Institute, Islamic Development Bank, Jeddah.
Rosley, S A (2003), “Performance of Islamic and Mainstream Banks in Malaysia” International Journal of Social Economics, Vol 30 – 12, PP 1249 – 1265.
The Central Bank of Malaysia, (1993-2003),”The Central Bank of Malaysia, Annual Reports”, Kuala Lumpur, Malaysia.
, (1999), “The Central Bank and the Financial System in Malaysia: A Decade of Change (1989 – 1999)” the Central Bank of Malaysia Publication.
The Bank Islam Malaysia Berhad, (1994-2003),”The Central Bank of Malaysia, Annual Reports”, Kuala Lumpur, Malaysia.
State Bank of Pakistan, (1999-2003),”State Bank of Pakistan, Annual Reports”, Karachi, Pakistan.

The 2nd Annual Islamic Finance Summit

August 22, 2010 Leave a comment

ACHIEVING GROWTH THROUGH DEDICATED INNOVATION
21st & 22nd January, The Langham Hilton, London

Plus a separately bookable one-day pre-conference workshop on:
Islamic banking, finance and investment management
Monday 20th January 2003

Euromoney Seminars are proud to present the 2nd Annual Islamic Finance Summit: an unrivalled opportunity to explore the enormous potential for growth in Islamic banking. Innovative products of increasing scope and complexity are attracting greater numbers of investors to Shari’ah compliant instruments and the volume of capital under Islamic management only looks set to increase fast.

This Summit gives you a ‘questions and answers’ forum in which you can learn more about the screening of products from the world’s foremost Shari’ah scholars. Keynote addresses from some of the industry’s leading figures will deliver a cutting-edge assessment of the achievements of Islamic banking and the challenges that it faces today. In addition, highly focussed presentations from senior industry players will ensure that you are fully briefed on the most significant deals and the most exciting prospects. The range of topics includes:

• The Islamic economic system
• Successful strategies for Islamic fund management
• New Shari’ah compliant products and services
• Creating an Islamic secondary market
• Trends in Middle Eastern investment in western based Islamic products
• Conventional banks and the Islamic system
• The growing market for Islamic retail financial services
• Islamic sukuk issues

The summit will also offer a great environment for networking with the industry professionals that matter most, and for sharing ideas on an informal basis. For learning, debate and business opportunities, the 2nd Annual Islamic Finance Summit will be a vital experience for both established professionals and those interested in understanding the sector better.

Gold Sponsor: First Islamic Investment Bank
Silver Sponsor: Oasis Asset Management (Guernsey)
Bronze Sponsors: First Investment, Dawnay, Day Global Investment
iHilal Financial Services, Global Securities House
The International Association for Islamic Economics

Plus a separately bookable one-day pre-conference workshop on:
Islamic banking, finance and investment management
Monday 20th January 2003
Workshop leader: Stella Cox, Managing Director, Dawnay, Day Global Investment, United Kingdom

Also featuring:
Abdelhak El Kafsi, Managing Director, Islamic Finance Consultants, Bahrain
Bryan Kraty, Independent Consultant
Topics will include:
• Shari’ah compliant structured finance deals
• The application of Shari’ah compliant financial contracts to investment and financing opportunities
• Identifying and expanding acceptable asset classes for Islamic investment funds
• Interacting with Shari’ah authorities
• Islamic securitisation
• The Islamic markets

DAY ONE

08.15 Coffee and Registration

08.45 Chairman’s welcome and opening remarks

George Kardouche, Senior Advisor, Arab Bankers Association, United Kingdom

09.00 Keynote address

HE Abdulla Hassan Saif, Minister for Finance and National Economy, Bahrain

09.30 Keynote address: Creating an Islamic economic system

• Developing Industry
• Developing welfare of people
• Creation of jobs
• The essence of Islamic banking and the Islamic system

Sheikh Saleh Kamel, President, Dallah Al Baraka Group, Saudi Arabia

10.00 Development of the Islamic banking industry

• Growth in Islamic investment banking
• New entrants into the market
• New products
• Alternative investments
• Islamic retail banking: expanding into Europe and North America
• Industry consolidation through mergers and acquisitions between older Islamic banks
• Development of an Islamic capital market in the Gulf and Malaysia

Atif A. Abdulmalik, CEO, First Islamic Investment Bank, Bahrain

10.30 Morning Coffee

11.00 Successful strategies for Islamic fund management

• Addressing clients’ priorities
• Overcoming practical difficulties
• Making the best of Islamic limitations on investment options
• Comparing different markets around the world
• Marketing your fund to private and institutional investors

Basil Al-Nakeeb, Senior Executive Director, First Investment, Kuwait

11.30 A review of Islamic finance in 2002 and prospects for 2003

• A period of re-assessment and re-focusing
• More conventional bank interest in Islamic finance – from HSBC Amanah to UBS Noriba Bank
• Islamic bank responses to growing conventional presence in the Islamic finance industry
• Challenges facing Islamic equity funds
• Switching from western to Muslim markets
• Risk management through Islamic capital protected funds

Professor Rodney Wilson, Centre for Middle Eastern & Islamic Studies, University of Durham, United Kingdom

12.00 The global regulatory environment for Islamic finance

• AAOIFI and the move towards regularisation for Islamic institutions
• Regulatory requirements in accounting and documentation for Islamic banks and investors in:
• The Middle East
• The Far East
• Europe
• The United States

Professor Rifaat Abdel Karim, Secretary General, Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI), Bahrain

12.30 The First Annual Awards Ceremony for Innovation in Islamic Banking, hosted by EUROMONEY Magazine

12.45 Lunch

14.00 Panel discussion – developing new Islamic products and services

• Addressing the restrictions that product limitation places on the Islamic finance industry
• The challenges of developing instruments based on Islamic principles
• Gaining a competitive edge through diversification in product and service options
• Meeting the liquidity mismatch problem
• Documentation for new products
Ramzi Abukhadra, CEO, iHilal Financial Services, UAE
Henry Thompson, Executive Director, First Islamic Investment Bank, Bahrain
Dr Mohd Daud Bakar, Shari’ah Scholar, International Islamic University, Malaysia
Angus Blair, Head of Investments, Al-Rajhi Bank, Saudi Arabia*

14.45 Trends in Islamic banking and finance

• Retail and private banking
• Institutional/corporate banking
• How clients’ requirements are changing
• Different and new asset classes

Iqbal Khan, CEO, HSBC Amanah Finance

15.15 Islamic equity funds – the long term solution

• Growth of Islamic investment funds
• Different asset classes
• Shari’ah guidelines for investing and benchmarking
• Portfolio management
• Smaller investment universe does not necessarily imply lower return

Adam Ismail Ebrahim, CEO, Oasis Asset Mangement (Guernsey), South Africa

15.45 Afternoon Tea

16.15 Creating an Islamic secondary market

• Review of current Islamic secondary markets
• Developing tradeable Shari’ah compliant instruments
• How to create a market with:
• Liquidity
• Rapid, reliable and secure clearing and processing
• A harmonised regulatory regime
• Assessing structures for short-term deposits

Duncan Smith, CEO, ABC International Bank Islamic Asset Management, UK

16.45 Panel discussion – Can there be an Islamic hedge fund?

• What are the mechanics of a traditional hedge fund?
• What challenges do they present?
• What would be the benefits for investors of creating an Islamic hedge fund?
• Approving short-selling and greater levels of leverage
• Legal and regulatory issues: disclosure and accounting standards in relation to Shari’ah

Moderator: Michael McMillen, Partner, King & Spalding, USA
Eric Meyer, Senior Managing Partner, Meyer Capital Partners, USA
Eric R. Roper, Partner, Gersten, Savage, Kaplowitz, Wolf & Marcus, USA
Sheikh Yusuf Talal DeLorenzo, Shari’ah Supervisor, and Director, Yassar Ltd, USA

17.35 Chairman’s closing remarks

17.45 Close of Day One

DAY TWO

08.15 Coffee and Registration

08.45 Chairman’s welcome and opening remarks

Michael McMillen, Partner, King & Spalding, USA

09.00 Keynote address: The Islamic financial sector: a Malaysian perspective

Mohd Razif Abd Kadir, Associate Governor, Bank Negara, Malaysia*

09.30 Open Fatwa and Shari’ah panel discussion

• Each scholar will give a brief address on contemporary issues of importance for Islamic finance
• The scholars will give responses to audience questions concerning Islamic finance and economics
• The scholars will clarify any doubts participants may have regarding contracts and Shari’ah related matters

Moderator: Sheikh Nizam Yaquby, Member of Global Securities House Limited, Shari’ah Supervisory Board, Kuwait

Justice ® Muhammad Taqi Usmani, Vice President, Darul Uloom Karachi, Pakistan
Sheikh Yusuf Talal DeLorenzo, Shari’ah Supervisor, and Partner, Yassar Ltd, USA
Dr Mohamed A. Elgari, Director of the Centre for Research in Islamic Economics, King Abdulaziz University, Saudi Arabia

10.20 Morning Coffee

10.50 Examining elements of Shari’ah contracts in comparison to western legal and regulatory practices

• Regulatory issues for Islamic mutual funds in the EU
• Contract law questions in the EU and US
• Islamic mudariba structures and partnership law

Glenn M. Stewart, General Manager, Algosaibi Trading Co., Bahrain

11.20 Changing Times? Shari’ah compliant investment in the international financial environment

• Assessing opportunities for Islamic investors
• Maximising the appeal of international asset classes
• What barriers/ disincentives are there for Islamic investors seeking cross-border investments?
• Trends in capital flow
• Is there a global market for Islamic financial services?

Stella Cox, Managing Director, Dawnay, Day Global Investment, United Kingdom

11.50The growth of Islamic banking in the Saudi financial markets

• Baseline size of Islamic versus conventional banking
• Consumer products, corporate banking and project finance
• Growth of different Islamic vehicles
• What is driving the growth of the Islamic sector?
• Looking at prospective developments

Brad Bourland, Chief Economist, Saudi American Bank, Saudi Arabia
Naveed Khan, Head of Islamic Banking, Saudi American Bank, Saudi Arabia

12.20 Lunch

13.50 Islamic funds and indexes: prospects and problems

• Islamic funds and indexes: a symbiotic relationship
• More is needed: a peer review
• Constraints on investing Islamically
• Consolidation: too many funds chasing too few assets
• How and why did Islamic funds fail in the UK and US?
• Do scholars need to revisit the Shari’ah criteria?
• Lessons from Socially Responsible Investing (SRI)

Rushdi Siddiqui, Director, Islamic Market Index, Dow Jones, USA

14.20 Conventional banks and Islamic finance

• Analysing the decision to develop an Islamic finance division
• Selecting an implementation team and advisory body
• Competitive advantage of Islamic products within a conventional set-up
• Successfully marketing Islamic products and services
• Creating strategic partnerships for competitive growth and development in the sector

John Voss, Vice President, Merrill Lynch, United Kingdom

14.50 Growth in the market for retail Islamic financial services

• Islamic mortgage alternatives
• Charge and debit cards
• Auto and other consumer transactions
• Crossover opportunities
• Credit issues
• Securitization tools

Abdulkader Thomas, President & CEO, SAMAD American Holding Corp, Principal, AJIF.org, LLC, USA

15.20 Afternoon Tea

15.50 Panel discussion: Islamic Project Finance and Structured Finance in the Middle East

• Evolution of Project Finance / Structured Finance in the Middle East: the last five years
• Recent significant transactions: elements that are / are not Shari’ah compliant
• Collateral structures
• Leveraged leases
• Trade and construction finance
• Justification of non-Shari’ah compliant elements in integrated project structures

Moderator: Craig Hart, Associate, O’Melveny Myers, USA
Nadim Khan, Senior Associate, Banking and Project Finance, Norton Rose, Bahrain
Michael Duncan, Partner, Allen & Overy, United Kingdom

16.35 Islamic sukuk issues

• Principles of an Islamic sukuk
• Looking at Recent sovereign sukuks
• Advantages of issuing an Islamic euro-sukuk
• Various Formats of Sukuks from listing perspective
• Rating sukuk certificates
• Listing Requirements for Sukuk on international exchanges
• Assessing the need for high Investment grade Sukuks as alternate liquidity management instrument
• Developing the secondary market

Saad Zaman, Managing Director, Citi Islamic Investment Bank, Bahrain
Saad Ashraf, Unit Head, Global Islamic Finance, Citigroup, UK

17.05 Case study: Islamic leasing to Emirates airlines

• The natural place of leasing within the principles of Islamic economics
• Differences in documentation between Islamic and conventional leases
• Scope for development in Islamic leasing structures

Riyaz Peermohamed, Corporate Treasurer, Emirates Airlines, UAE
Javed Ahmad, Associate Director, HSBC Amanah Finance, United Kingdom

17.35 Chairman’s closing remarks

17.40 Close of Summit*

*To be finally confirmed

REGISTRATION FORM:
2nd Annual Islamic Finance Summit
21 – 22 JANUARY 2003, THE LANGHAM HILTON, LONDON

FURTHER INFORMATION REQUEST
Please tick box for more detailed information
Euro. Inv. Grade Corporate Bonds Conf. 
2nd Annual European Hedge Funds Conf. 
Forming the Future of Finance / Euroland 
Islamic Finance: A Partnership for Growth 
Islamic Finance: Innovation & Growth 
The Full Range of titles 

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The programme may change due to unforeseen circumstances. Euromoney Seminars reserves the right to alter the venue and/or speakers’
CANCELLATION POLICY
Should you be unable to attend, a substitute delegate may attend the seminar in your place at no extra charge. Otherwise the originally registered delegate will be subject to the following refund policy. Full refunds less 10% handling charge are available for all cancellations received in writing (letter or fax) by 3rd January 2003. Subsequently no refund will be given.

The course fee includes all tuition, course documentation, luncheon, midmorning and afternoon refreshments. Hotel accommodation is not included.

DISCOUNTS -
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