the current risk management framework in use by … · (kuran: 2003) blames the inheritance system...

THE CURRENT RISK MANAGEMENT FRAMEWORK IN USE BY ISLAMIC BANKS CAN BE IMPROVED. IMPROVEMENTS MADE ARE ESSENTIALLY BENEFICIAL TO THE GLOBAL FINANCIAL SYSTEM.

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The current risk management framework in use by Islamic Banks can be improved.

Improvements made are essentially beneficial to the global financial system.

Ariffhidayat Ali

INCEIF

Author Note

Ariffhidayat Ali, PHD Candidate, Matric No: - 0900320

Term Paper for Risk Management for Islamic Financial Institutions

(TK 6413) Semester January 2011

Supervisor: - Datuk Prof. Dr. Kamaruddin Sharif


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Abstract

This paper demonstrates that the current Risk Management framework in Islamic Banks (IBs)

needs improvement. The current “value-free” framework can be improved since presently

guided by a single worldview. This worldview shapes and influences the on-going realities of

the global financial system including IBs. The paper’s approach is moderately abstract

employing philosophical, religious, historical and socio-political analysis. The modified

“value driven” framework must reflect goals that are tangible and measurable. The twin

notions of “ijtihad” and “jihad” need to be employed; essentially it is knowledge and action

working in concert. Stakeholders within IB remain the conduit shaping the current and future

framework. This is seen as an industrial, institutional down to a leadership/managerial

challenge. There is logic in using the risk management framework as the conduit for Shariah

values. Bring this together with human resource development and the use of technology and

we essentially have the foundation of knowledge in Islam namely reason, experience and

revelation. A well-functioning Islamic financial system transcends the Muslim world leading

to a “win-win” for humanity.

Key terms: Risk Management, Shariah, Knowledge, Worldview, Ijtihad, Jihad, Values,

Technology and Human Resource.


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The current risk management framework in use by Islamic Banks can be improved.

Improvements made are essentially beneficial to the global financial system.

The Islamic finance industry has grown at a tremendous double digit annual growth

(estimates of between 15% - 25% dependent on the sources) and has surpassed the USD 1

trillion figure. It has also become a permanent fixture within the global financial landscape.

Due to this and arising out of globalization, any stabilizing and de-stabilizing events resulting

from within the industry affects the system. Nevertheless it remains a “David” compared to

the “Goliath” of the conventional industry. A feature of banking is that it deals in risk which

is essentially a feature of our existence. Banking is and continues to become more complex

and thus demand any framework of risk management to be exceptionally robust.

The existing framework is and continues to being “shaped by” and “is shaping”

developments within capitalism or the worldview shaping capitalist behaviour and

orientation. At a philosophical level, it is essentially “man-centric”, knowledge as

epistemologically grounded in reason and experience; which is essentially rational. This gave

rise to the supremacy of science, which is “value-free”, subject to empirical testing, reduced

to theories (constructs that can be either proven or falsified) or consistent in terms of logic

and/or in its mathematics. Our departure comes from the premise that in dealing with

anything “Islamic” we must look towards having values. More importantly the objectives that

these values orientate towards must be tangible and measurable. At present there are certain

dislocations within Islamic Banking that has not been given its due attention, partially

undermined by the current restrictive framework.


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However, the risk management function is by far the most suitable in pushing this agenda

since we are all cognizance of the risk-reward relationship, a relationship that most agree

must be in balance, the risk management function encapsulates most if not all areas within a

banking institution and this function is seen as an important “cog” in ensuring the on-going

viability of a banking institution.

To begin with, a proposal for reform must essentially in essence explain any deficiencies

within the existing framework. A major one has been mentioned above, namely the “value-

free” foundation. However for something to gain acceptance must essentially arise out of

certain “pull” or “push” factors. These factors are elaborated in the paper. Some are related to

the exegesis surrounding rise of modern capitalism and banking, to the nature of Islam itself,

to the rise and fall of the Islamic civilization, replaced by the West and how this has shaped

the present global economic system.

In approaching all of the above, the essential ingredients of the existing framework is

discussed, the transmission of the framework, its institutionalization, the interest/preferences

of major stakeholders, how these factors has shaped their roles in theory and practice.

The paper concludes that what is good for the Islamic financial system namely to be “value”

driven with clear, tangible and measurable Shariah objectives (founded on “ijtihad” and

“jihad”) will be good for Islam. A robust Islamic financial system plays a stabilizing role not

only by mitigating against “systemic” risk but more so in contributing towards social and

political stability globally. The West need not fear an Islamic resurgence and must essentially

look beyond misinterpreting the use of certain concepts especially “jihad”.


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Literature Review

This has been intentionally divided into two sections. The 1st section addresses subjects that

serve as bedrock to our main discussion on risk. The subject matter of risk will be dealt in the

2nd section.

Section 1: Major philosophical and historical developments shaping present

economic realities

Practice precedes attempts to fully understand a phenomenon. Economics in all its

complexities was rendered only as a “science of the household” if we refer to Aristotle’s

Politics. Hellenistic philosophy seen by most as the foundation of Western civilization didn’t

escape the scrutiny of Arab philosopher (Adamson & Taylor e.d.: 2005)

Trading and commercial activities is sine qua non with the growth of Islam. Mekah’s

location, status and thus influence shaped the course of the religion (Holt e.d.: 2008). The

expansion of Islam into South-East Asia to a large extend coincided with the arrival of

Islamic traders to our shores. (Ricklefs: 2002). The richness of literature on fiqh muamalat

transcended all the mazhabs and much revolved around the Islamic contracts in existence at

that time (Hidayat Buang: 2007)

Natural if we look at nature, water falling from the higher point. A superior civilization

essentially nourishes the inferior civilization. Thus knowledge essentially flowed from the


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Islamic world to the West (Makdisi: 1999). Some of these debts were acknowledged whilst

some were not.

The ascendancy of a civilization does not last (Kennedy: 1989). From perhaps the middle of

the 15th century) onwards, Islam went into decline. Numerous theories for explaining the

decline have been ventured. (Hidayat Buang: 2007) saw the decline as a result of Muslims’

indifferent attitude towards the application of the Shariah. (Schacht: 1964) saw this being due

to “the closing of the gates of Ijtihad” as a factor for the decline. (Kuran: 2003) blames

the inheritance system for Muslim economic underdevelopment.

Banking is relatively more difficult to place in the context of Islamic history.

The existence of the Baitulmal could at least be traced to the time of Sayiddina

Umar al Khattab (Azmi: 2002). Based on Wikipedia, Western claims to banking

are perhaps stronger, the word itself is Western andthe oldest bank still in existence is

Monte dei Paschi di Siena, headquartered in Siena, Italy, and has been operating continuously

since 1472. More pertinent is on the institution of usury or “riba”. An early detractor was

Aristotle and Christianity itself held out till around the 17th century.

Essentially the growth of banking is synonymous with an expansionist Europe

(the United States arrived much later). Banks mostly in private hands became

conduits to finance the expensive business of war fought increasingly by

professional soldiers. Early bankers were believed to include the Knight

Templars connecting the Church and the various European states. War became

merely an extension of political action (Von Clausewitz: 1827)


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The aberrations of the Church sparked events such as the Reformation, the

Inquisition and the Enlightenment. In the end the Church’s credibility were left

in tatters. It led to the rise of a secular West, where religion underwent

desacralization and the supremacy of science over dogma. The epistemology of

knowledge was to be grounded on reason and experience. Man now possesses the

necessary implements to chart his own destiny. Rational thought, empiricism,

logical positivism or variants of these laid down the foundation of all sciences

deemed value-free since the constructs of the hypotheses, models and theories

are based on largely observable, testable but more importantly grounded in logic

and mathematics. The above essentially shapes the conventional worldview.

Growth of capitalism globally introduced the sceptre of economic crises be it

affecting the real economy, the financial sector as well as the banking industry

per se. Since crises became global, trans-national institutions came into being

and the role of Central Banks also changed. Both international and domestic

economic stability needed to be secured. Banking specific tools like deposit

insurance, legislation such as the Glass-Steagall Act and the Basel initiatives

which came later were introduced. (Just to name a few).

Suffice to say that the above are efforts to manage risk collectively. Islam

meanwhile continued in slumber with some periodic awakenings. The revival


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gathered pace in the late 19th and the early 20th century in the Middle East and

the Asian sub-continent. The revival was multi-factorial and the focus was multi-

dimensional. Names such as Hassan al Banna, Muhammad Abduh, Jamal Al-Din

Afghani and Sayyid Qutb sprang forth from either religious or educational

establishments. Later the Cold War arrived and being “neutral” was not an

option. (Baqir as-Sadar: 1982) saw this and discussed both these conflicting

ideologies. More importantly, he re-emphasized the concept of the “Ummah”

arising above state and regional interests.

Some identified the malaise affecting Muslims worldwide as a crisis of

identity due to millennia of decline in all areas. A remedy which became

known as the Islamization of Knowledge (IOK) initiative was championed by

the likes of Al-Attas and Ismail al-Faruqi. Much literature has been expended

by supporters and detractors alike. IOK is closely related to worldview and

much has been written on the subject (Waleed: 2008, Sardar: 2002, Al-Attas: 1978) as

compared to the conventional. Most are within the context of philosophy, politics and

economics. None approaches it from the risk management angle; the closest brush is

perhaps on accounting via works of Shahul Hameed. Islamic banking (essentially “banking

without riba”) continues to be seen as an important clog within Islamic economics. Mit-

Ghamr Bank (Egypt), Pilgrims Funds Board (Malaysia) was seen as the first IBs. Other

major impetus and results of the revival was the Oil Crisis in the early 70s, the Iranian

Revolution in 1979, the support of governments in Pakistan, Sudan and Malaysia.


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Section 2: Risk and risk management

Risk is synonymous with existence. It may be inferred from Darwin, dealt with

in any version of the Bible. The Al-Quran also is littered with reference to the

ideas of risk, profit and loss namely Q2:155, Q3:142 and many others.

(Saiful Azhar Rosly & Mohammad Ashadi: 2010) referring to Elgari and then

Shelagh renders uncertainties leading to loss or personal injury as risk based on the

Arabic word mutakharah, as the situation that involves the probability of deviation from the

path that leads to the expected or usual result. This is somewhat similar to the definition

espoused by proponents of conventional finance, i.e. risk is the volatility or SD of net cash

flows of the firm. We must cite “al ghunmu bil ghurm” (profit is linked to loss) or “al-kharaj

bid-daman” (Entitlement to revenue is based on corresponding liability for bearing loss) as

being the sole basis for legitimate profit in Islamic finance. No discussion on risk is complete

without mentioning Frank Knight namely his discussion on the notion of uncertainty vis a vis

risk and the justification of profit for the entrepreneur for assuming the challenges posed by

uncertainty (Knight: 1921)

Risk management is the process by which managers identify key risks, obtaining consistent,

understandable, operational risk measures, choosing which risks to reduce and which to

increase and by what means, and establishing procedures to monitor the resulting risk

position (Pyle: 1997)


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Dealing with risk has always been the raison d’etre of financial intermediation and its

underlying principle (Scholtens and van Wensveen, 2000, p. 1247) as such risk management

in banking and insurance is not a new phenomenon (Schroeck, 2002). According to Nocco

and Stulz (2006), to create shareholder value, every enterprise should have an integrated,

holistic approach to risk management. Maximizing shareholder value is the mantra within

finance, reflected by most corporate finance textbooks. Risk management is more important

in the financial sector than in other parts of the economy (Carey, 2001) as it is a cornerstone

of prudent banking practice as banking is, in fact, a business of risk; therefore, efficient risk

management is vital (Al-Tamimi and Al-Mazrooei, 2007).

(Furash: 1996) saw that comprehensive risk management is important in managing large,

diverse, and complex financial services companies especially banks. In Islamic banking, risk

management and ability to manage different risks is seen as one of the critical factors in

providing better returns to the shareholders (Akkizidis and Khandelwal, 2008, Khan and

Ahmed, 2001). The challenges of globalization necessitate effective and efficient risk

management (Sundararajan and Errico, 2002). Essentially this is demonstrated by the growth

of standard setting bodies like AAOIFI and IFSB, various academia led research institutes,

central banks activism down to concern bloggers in cyberspace.

Whilst the above represents the rationale, the following represents the current dynamics

permeating the area. Risk management in Islamic Banking is not significantly different from

conventional banking (Thijs: 2010). There is also no special risk management approaches

required in Islamic banking, only the analysis and identification of the risk environment (van

Greuning and Iqbal: 2008). There are unique risks in Islamic banking vis a vis the application


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of the various Islamic contracts, the measurement of these risks needs improvements by

applying for examples value-at-risk (VAR) methodology (Sundararajan: 2007). There has

also been burgeoning interests in measuring the performance of Islamic banks against

conventional banks applying various measures with both business and risk management

implications (Iqbal and Molyneux (2005), Iqbal and Llewellyn (2002). However compared to

conventional risk management and especially in areas identified below the research from the

Islamic perspective has been relatively abbreviated in length and technical analysis.

The several areas on risk management researched from the conventional perspective are:

1. Theoretical side of risk management (e.g. Schmith and Roth, 1990; Santomero and

Babbel, 1997 and Oldfield and Santomero, 1997).

2. Risk management in banking (e.g. Santomero, 1997; Oldfield and Santomero, 1997; and

Boston Consulting Group, 2001).

3. Credit risk management (e.g. Avery and Berger, 1991; Drzik, 1998 and SAS and Risk

Magazine, 2004)

The recent financial crisis has essentially contributed to again shifting the risk management

agenda to the forefront of the industry’s concern. Islamic banking is seen as either being

exposed to additional risks as compared to conventional banking, certain risk areas within the

industry needs reassessment whilst at the same time dealing with present and future Basel

related initiatives. The likes of Siddiqi, Chapra, Mirakhor and others have commented on the

risk issues facing IBs.


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The questions that we plan to address are as follows:-

1) Islamic banking have been extensively reviewed and commented on. Can

we identify the major areas covered under the “circle of concern” for

Islamic Banking?

Without a doubt, to answer the above means essentially threading into the

minefield of subjectivity. For a start, where does one draw the appropriate

timeline and demarcate the literature. Secondly what constitutes an objective

review or comment (as initial filter supervisor, regulator or industry insider

comments and review is to be critically assessed). Does one look to frequency,

controversy or any other notion that implies concern or importance? Lastly does

one take the micro approach or macro approach in putting the circle together

bearing in mind the interlocking and permeable lines that exist?

For this the author identified the Profit Loss Sharing (PLS) the divergence

between theory and reality as within the circle. (Mirakhor: 1987), Siddiqi earlier

works and Chapra have written on this. It fits in term of its length of time in

discussion, being reviewed by veterans of the industry, it has frequency, also

controversy and some regulators have commented on this issue.

The second item to be included within the circle is the relevance and continuing

importance of the subject matter of “the prohibition of interest (riba) in Islam”


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which continues to attract reviews, comments and studies from different

perspectives.

The third item to be included within the circle is perhaps demonstrative of the

micro/macro approach and the interlocking areas of concern. This relates to the

product and solutions that have been delivered, in use, in production, pending

delivery to the market. Concerns range from the perspective of issues on

“financial engineering”, on “form versus substance”, “asset backed versus asset

backed”, “the role of Shariah advisors and Shariah boards” and other approach

one may decide to pursue. One may then struggle to frame the item within the

circle effectively. For this purpose, classifying this under “competitive

positioning” is deemed appropriate.

2) Has risk management been recognized within the circle and the major

determinants affecting this?

The first fallacy to be avoided is the notion that recognizing the existence of risk

and the ability to classify risks into types of risks constitutes risk management.

The preceding identifies risk as a noun; risk management is a verb, a series of

activities that is circular and without end. Essentially the environment this

activity has taken shape in the context of Islamic banking are essentially

influenced and identified as per below.


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Z = Factors shaping the risk management activity/environment surrounding IBs

Z = f (Ijtihad in the history of fiqh muamalat prior to the 20th century, modern

day ijtihad applied in Islamic Banking and the resulting “fit” of Islamic banking

within Islamic Economics*, state of industrial maturity linked to the

development of risk management practices in conventional banking*, role of

both internal and external stakeholders. *, ∞) * signifies a dynamic state.

Ijtihad in the history of fiqh muamalat prior to the 20th century

As a concept, Ijtihad is representative of the foundation of knowledge in Islam. It is

systematic, guided by rules down to the persons qualified to exercise ijtihad and non-

speculative. On the law of contract, Western commentators pointed to the lack of a so-called

general theory of contract. (Saleh: 1990) referred to fiqh being casuistic not dogmatic, it is meant

to solve cases whilst declining to devise theories from the solution given to those cases. Fiqh

muamalat dealt with realities of actual business and risk management was predominantly tackling

the gharar elements within the sale (bay’) contract. Another feature of the “gharar” discussion

remains the diversity of opinions even at the conceptual level as opposed to the discussion on

“riba”. On regulation, historical precedents exist in the practice of the Prophet s.a.w as well as in the

institution known as “hisba”. An important feature needs stressing is that the early fuqahas never

co-existed peacefully or at best were neutral towards the state.


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Modern day Ijtihad applied in Islamic Banking and the resulting “fit” of

Islamic banking within Islamic Economics

Modern jurists and practitioners are subject to the external environment often describe as a state of

emergency or “Daruriyyah” at the inception of Islamic Banking. Mit Ghamr itself was modelled on

the German savings bank and did not label itself as an Islamic bank. The historical imperative was

to ensure a “riba” free beginning and this took centre stage. From the onset, Islamic Banks adopted

the conventional model in terms of organizational structure, similar set of financial accounts barring

some adjustments, embraced technology designed for conventional banking and the list of

similarities goes on. The differentiator was the emergence of Shariah advisors, Shariah boards

(internal and external to the IBs) and other stakeholders (to include academia, the public, standard

setting bodies etc.). Without doubt, the basic framework of risk management was adopted from the

conventional model. The question of “fit” should be clear based on the above. A feature that needs

mentioning was the role governments in pushing the agenda as either owners/influencing

supervisors. This is essentially an unsettling heritage since it remains questionable whether the right

foundations were established. Examples, as mentioned Mit Ghamr and others were nationalized by

Nasser several years later. The Iranian Revolution also saw state control of the economy. Another

was Khurshid Ahmad experiment in establishing an Islamic economics system in Zia-ul-Haq’s

Pakistan. Lastly we cite Tun Mahathir’s “Inculcating Islamic Values” initiative in Malaysia. Some

saw this merely as UMNO responding to PAS in trying to win the Malay majority. Also it was seen

as a ploy to lure the firebrand ABIM leader, Anwar Ibrahim who later became his deputy. Lastly

we need to bring up how politicized the banking industry can be in Malaysia where pre-

consolidation certain banks were identified as being flagships of either MCA or UMNO.


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State of industrial maturity and development of risk management practices

in conventional banking

Islamic banking is a new phenomenon, and modelling itself on conventional

banks and modelling risk management practices on conventional banking is

preferred and efficient. However there is a need to realize two important facts.

One, the focus on risk management in conventional banking in itself is a new

phenomenon. We may want to identify the starting point as being the

Depression; some may point to the rise of volatility in the financial world since

the mid-1970s and who is to argue if we point towards Basel 1 introduction in

1988. Secondly, one theme must be stressed from the above, major regulatory

responses arise mainly due to events. It can be single event driven, some as

response to cumulative events, some maybe termed as crises regardless whether

it is regional or the worst of its kind a global crises. Since Islamic banking is

part of the global financial system there is no running away from being affected

by events or more importantly choosing to opt out (if this option is indeed

possible) from implementing risk management practices.

Based on recent developments, we can be positive in stating that risk

management has steadily made headway within the circle of concern but its

agenda has been catapulted further due to emphasis being put on it against by the

likes of Siddiqi, Chapra and Mirakhor etc.


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Role of both internal and external stakeholders

Survey any organization chart of a bank and the risk management function

occupies an important position within the hierarchy often with an independent

reporting line. However banks are by nature a business driven organization

where profit centres are seen in a different light compared to cost centres. One of

the aspects of modern organizations is the agency relationship that describes the

relationship between managers and the business owners. Whether managers serve

the owners interest in maximizing shareholders value or maximizing their own

perks (most performance related to profit/revenue measures) remains an on-

going subject for research. A single time series study conducted over an eight

period between January 1, 1992 and December 31, 1999 showed a selected list of European

banks having underperformed compared to the broad market index on which they are listed

on does raise eyebrows but the author does not want to infer too much into this (Schroeck

2002). Suffice to point out that bank management may not necessarily be at the forefront of

the industry in creating value.

A feature of the globalization and liberalization of the financial system was namely the rise of

mega-banks formed mostly via mergers and acquisition (M&A). It has become an undeniable

fact that organic growth has come to be seen by some as a “slow” growth strategy and M&A

activities maybe preferred. Often institutions with a higher market capitalization/share value

initiate the takeover of a smaller rival. Recent examples were the Royal Bank of Scotland

taking over National Westminster Bank in 2000 and ABN AMRO Bank N.V. in 2007.


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Risk management as a function are cost centres and classified as a

backroom/business support function. Some suffer the indignity of being subject

to a lower remuneration program. A feature recognized by Jamie Diamond at JP

Morgan which he addressed (Tett: 2009). In good times, in the context of credit

risk, these risk managers are often ridiculed as “naysayers”. During downturns,

some gloat at being proven right but often having to do the thankless job of debt

recovery or debt restructuring involving negotiations with either hostile,

recalcitrant or desperate customers. There is absolutely no doubt that the above

legacy is reflected in most IBs.

External stakeholders can be classified as government political, economic and

trade blocs, Central Banks (CB), International organizations, standard setting

bodies, Development Banks, Research institutes, Universities, Legal and

accounting firms, Jurisdiction specific bodies, Industry/Trade Associations and

Law enforcement bodies.

The above plethora of stakeholders influences the risk management landscape.

The ability to influence can be expressed as

Z = Factors affecting the ability to influence

Z = f (legitimacy, goal congruent, subject matter expertise, resource availability,

ability to reward and/or sanction, ∞)* regardless whether these are “real” or

“perceived” and * signifies a dynamic state


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By far the largest influence remains the Basel Capital Accords.

The Basel Committee came into the existence when the members of the G-10

nations decided it needed to check the increasing volatility of the global

financial system. This volatility in part related to the expanded use of technology

in the financial markets, the growing interrelatedness of financial centres, and

the introduction of new financial products. However matters came to the boil

when Bankhaus Herstatt collapsed in 1974 and since then counterparty

settlement risk became referred as Herstatt risk (Horcher: 2005) . Event driven

regulation has been addressed but more important is the time span of 14 years

the countries to agree on Basel 1 which was a 26 pager document. Secondly the

committee agreed that “equity capital and disclosed reserves” as the key element

of capital common to all banking systems. Basel II had a shorter gestation

period, from 2001. A comprehensive version was ready by mid-2004 (the final

version came up to 251 pages was issued in July 2006). Then came the global

economic crisis and as a respond to this Basel III came into existence in late

2010.

3) What was the response of the Islamic Banking industry to the

introduction of Basel I and Basel II initiatives?

It must be pointed out that adoption by non G-10 members depended on the state

of readiness to be assessed by each nation’s supervisory authority. Essentially, it

was realized that sooner or later adoption is necessary if all banks (including

Islamic Banks) are to be seen as a legitimate player in the global financial


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markets. This message was succinctly put across by certain supervisors to

industry players.

On a positive note, this helped to build and maintain the focus on risk

management. In terms of costs, the logic behind it is that sooner or later it will

have to be incurred.

More importantly is the learning curve involved both at the supervisor and at the

IB level. To reflect the below was obtained from CIMB Bank and was

subsequently applied to CIMB Islamic Bank. This transplant is not peculiar to

CIMB alone.


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This showed a process that took approximately 4 years from application to

approval. A diagram like the above does not necessarily reflect the challenges in

terms of conceptualizing the framework at an abstract level, to develop it within

a fluid environment, handling what essentially is change and the dissonance that

is for certain will arise within an organization. The processes involved are the

subject of various texts written by academia.

Ground realities forced credit managers to re-adjust to the new framework

(assuming they had experienced Basel I) and personnel within operations met the

framework for the first time. New technology, system, manuals and

communication flowed through the environment. External to the IB, technology

solution providers began looking at either new system design or looked into the

possibilities of “customizing” their existing offerings. Risk management

consultants also jumped on the bandwagon recognising the revenue potential of

managing Basel II implementation projects in the banks.

Academics as well as supervisors meanwhile started to review the potential

impact of compliance on the competitiveness of IB as a whole. This in itself was

fraught with danger and carried various consequences. The Basel initiatives dealt

with “real” risks events. Academia looking at IB dealt with “real” risks minus

the events and also “perceived” or “hypothetical” risks. These risks arise out of

the theoretical differences between IB and conventional banking (CB), the

divergence between the “theoretical” and the “actual” practices in IB and the

growing convergence between the “actual” practices of IB and CB.


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The early fuqahas only dealt with “real” risks events and thus their “ijtihad”

arise out of a sound methodological approach.

Current analyses meanwhile varied in their approach as reflected by the

following and others nevertheless conclusions reached are somewhat similar.

(Hassan & Dicle: 2005) though Islamic banks offer profit and loss sharing accounts and

therefore expose limited risk of insolvency, systemic risks still exist. The nature of different

types of accounts becomes the center of the issue. High ratio of current accounts and their

utilization with the profit and loss accounts require regulatory concern. Investment account

holders’ rights within the organization compared to equity holders is another regulatory

concern. Deposit insurance schemes for Islamic banks are an issue of recent academic debate.

On the one hand, it helps the competition with conventional banks and brings financial

stability. On the other hand, it is objected due to religious concerns. The risks associated

with Islamic credit transactions, their illiquid nature, lack of lender of last resort and inability

to utilize short term money markets are some of the risks that do not exist for the existing

financial intermediaries. Basel II introduces a new approach to evaluating credit risk.

(Ahmad: 2008) The Islamic financial system is based on participatory approach and risk

sharing. Islamic banks face many challenges to be able to comply with international standards

and guidelines for risk management. Islamic banks face unique and somewhat extra risks,

compared to conventional banks. Basel II with certain modifications can be adopted subject

to addressing the distinct nature of Islamic financial activities, with accommodating


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differences in liability side with special treatment to investments account holders (IAH) and

devising different risk weights for assets.

(Kahf: 2005) Islamic bank have qualitatively similar credit risk to conventional banks.

Equity must be interpreted to include the equity of shareholders and the equity of the owners

of unrestricted deposits because the latter carry their share of the risk of losses by virtue of

the Mudarabah contract. Elements of fairness must be taken into consideration in distributing

the losses as well as in distributing equity charges between the shareholders and owners of

unrestricted deposits. The portion of operational-risks minimum capital charges to share

holders in Islamic banks is apparently lower than their counterpart in the conventional banks.

Here again the reason is the Mudarabah contract that does not charge the Mudarib for losses

not-resulting from negligence, fraud or violation of contract including violation of normal

and customary professional standard practices. This means that while the parameters of

operational risk weighing and minimum equity calculation in Islamic banks may be the same

as in their conventional counterpart, the capital burden on shareholders should be lower than

that in conventional banks. Although the supervisory authorities in countries where there are

Islamic banks did not yet fully apply the review procedures suggested in Pillar 2 of the New

Basel Accord, the application of these proposals does not pose any theoretical or practical

impediment to Islamic banking or to Islamic modes of financing.

The above can be confusing. Positive statements (grounded in research) which may or may

not represent the theoretical foundation of IB intertwined with hypotheses of varying degrees

of validity and maybe interspersed with “value” or “normative” statements.


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The confused landscape of discussion have forced the industry especially

supervisors to embark on the path of least resistance namely in introducing

standards that are essentially complimentary to the Basel framework whilst

taking cognizance of recommendations from academia and other stakeholders in

terms of clear theoretical differences that exist in IB thus the modified

framework.

4) What are the on-going challenges posed by the current framework?

We have alluded above to the organizational challenge for IBs as well as for the

supervisors/standard setting bodies in bringing the framework to life. The

modified framework with its varying approaches (there remain question marks

whether there is methodology or its offshoot namely methods being applied) has

somewhat managed to adequately identify the risk types and is operational in

some banks. The remaining challenges namely to satisfy the whole gamut of

requirements which eventually leads to the ability to measure thus allowing for

mitigation This is an area where the particular IBs have influence, thus can

either recognized or ignore the need for risk management activities. To ignore

raises questions of transparency, accountability and corporate governance.

The ability to influence is the capacity to have an effect on the character, development, or

behaviour of someone or something. In our particular case the intended effect is the

successful measurement of a risk type in terms of probability of loss and potential size of

loss. One way influence can be enhanced is by ensuring the availability of both hygiene-

motivation factors. Hygiene factors entail continuous investment in risk management tools

adopting technologies that support risk management. Most risk management mantra revolves


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around the use of value at risk (VAR) to be complemented by usage of stress testing. These

methods are essentially favoured by both industry and regulators alike in conventional banks

activities. The types of risk being measured have expanded over the years. To embark on this

journey a medium-longer term outlook is required and essentially reflects the circular and

never ending activities that constitute risk management. One concern remains namely

whether all Islamic banks have access to adequate resources to support this activity. The

likes of CIMB, HSBC, OCBC and many others have side-stepped this by depending on

conventional support. Standalone entities may have to wander in the wilderness for a while

all but they still need to make the transition. Being in a competitive industry subject to also

banking secrecy laws, direct co-operation or sharing of best practices is an uncommon

feature.

We must recognize that the framework is not a destination but is a continuing journey thus

what comes after implementation is as important or perhaps more important than reaching the

goal of implementation.

The circle of influence must grow and this relates to another drawback facing IBs namely the

lack of data supporting rigorous testing. IBs thus find themselves within the Knightian

Uncertainty – Risk continuum. Banks are in the business of risk taking and this sit well with

the legal maxim: Al Ghonm Bil Ghonm (No risk no gain).

What does not sit well is growing dependencies on models devoid of data. On this we refer to

the derivatives team at JP Morgan who invented the initial Credit Default Swap (CDS)

instrument. We may not buy-in to the idea of derivatives and the team at Morgan did push the

envelope as far as derivatives were concern however when faced with unreliable data

pertaining mortgages they turn down several opportunities (Tett: 2010). One was to caution


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that the VAR should be treated only as a tool box and not a black box. Too much reliant on

models designed by quants, namely experts in financial modeling can be disastrous. The most

renowned as of recent years was the inventor of the Gaussian copula, David X. Li. The

copula was relied upon by bankers and was partially to blame for the recent crisis.

A safeguard within the current framework revolves around transparency, accountability and

corporate governance. The Islamic banking environment would surely be where these values

are more permeable. Arising from the differing approaches some academics has questioned

this and data remains scant. Another has been the perception that Islamic Banking tends to be

riskier than conventional banking. Some justify by virtue that IBs are exposed to additional

risks such as Shariah and Displaced Commercial Risk. Others have opined that the asset-

liability structure of IB is what makes it riskier. Further studies are required so as not to

divert resources to minor areas of concern.

5) Is there any more room for improvement within the existing framework?

Up to this instance, the author has worn the hat that supports the existing framework and

mainstream thought. Going forward, both the framework and the underlying thought are

questioned. It outlines the impact of such on IB and also points out what needs to be done.

Firstly, the three major religions have had a shared history of collaboration in enriching

human understanding and knowledge. Thus suffice knowledge is not a monopoly of any

religion and IBs should be open to adopt Western practices and technology that brings utility

to them.

Still we must recognize that the framework is essentially designed as a response to issues

besetting the global financial system. Essentially it is a reflection of the conventional


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worldview. It also shapes the debate within capitalism shaping preferences for large over

small banks, financial supermarkets, deregulation over regulation and believe in free markets

economics of the Chicago School. Linking this to the financial crisis the following are

relevant. One, the supervisors believed that the 3 pillars will go a long way in helping

starved off crises. However the framework covers only a portion of the financial system

namely the commercial banks. It does not cover the “shadow” banking system, the hedge

funds, the monoline insurers and various other entities that were instrumental in plunging the

world economy into the abyss. Secondly the recent crisis is what some called the appearance

of a “black swan” or a “fat tail event”. These events essentially bring markets to a standstill.

It does not matter whether an institution is well capitalized, undercapitalized, liquid or

illiquid, solvent or insolvent it is just a matter that the deficit in terms of “trust and

confidence” is insurmountable. Thirdly we need to consider the so-called derivatives and

securitization instruments namely the CDOs, CDS, BISTROs etc. Whilst these products came

later with the advent of technology, the supervisors were already busy at work looking at the

volatile markets of the exchange rates and other traded instruments. Similar to physics, action

begets reaction. Thus imposing capital adequacy requirements, sets the tone to invent new

products that essentially transfers risk (thus the need for capital) off the balance sheet of the

banks. At the onset, the supervisors were playing catch-up to the derivative boom. They

essentially relied on the industry to firstly explain these products, the upside and the models

to measure exposure/risks to the banks and thus make these products safe. Apart from

embracing the models, the supervisors also allowed the industry to agree and issue guidelines

to ensure a level playing field. Having been satisfied, they permitted the industry to regulate

itself not forgetting the “revolving door” of regulators joining the industry and vice-versa. All

the preceding is part of what that has become known as “regulatory arbitrage”. Recently


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Western commentators have opined that these products were not inherently defective,

institutions and people were to blame for inappropriate handling of these products. Lastly on

the models themselves, (Crouchy: 2009) saw reliance on oversimplified models, non-linearity

in the subprime CDO tranches, over-reliance on suspicious ratings, lack of data and inability

to calibrate the models and huge reliance on off-balance sheet funding. Notwithstanding all of

the above and let’s add to Roubini’s Crisis Economics, the takeaway for all is that capitalism

may have its weaknesses, as a machine its break down time to time, some minor parts needs

replacement and the application of lubricant. Once this is done, it can start on its run again.

Whether defective or not, the framework has been accepted for IB use by most supervisors

and academia subject to modification. We infer there is some form of goal congruent since

the sub-system is not viable if it does not work within the system. More often than not the

status quo is preferred. This however perpetuates various existing dislocations already

existing within Islamic Banking.

The dislocations are as follows:-

i) The risk management framework consumes resources within the IB. In most countries

the supervisory regime decides the timeline thus prioritizing goals becomes

imperative. It may undermine items already low on the agenda of the IB. One is with

respect to the PLS preference in Islamic Banking. IBs prioritize and so does

supervisors. Most supervisors rank national policy agenda higher e.g. in Malaysia was

to build the local banking industry within the framework of the New Economic Policy

(NEP). Seldom there is imperative to support the PLS agenda anywhere in the Muslim

world. At present, IBs get scot-free since they claim that could not manage/quantify


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risk of PLS which is essentially due to their failure to even consider such venture.

Essentially this is a “chicken and egg” situation.

ii) The existing framework entails adhering to market disclosure, transparency,

accountability and corporate governance. Whilst this must apply to IBs, supervisors

must play its role and complicity to hide or downplay events does not augur well with

openness. The following case is cited. The local subsidiary of Kuwait Finance House

(KFH) declared substantial losses in 2009 and 2008. MD Salman Younis left

unannounced on 31 May 2009. The new MD, Jamilah Jamaluddin (who is a merchant

banker by training) came back from RHB Islamic on 9 February 2010. For nearly 8

months KFH did not have an MD. At the same time almost a dozen commercial

bankers were suspended including the acting MD (a veteran of HSBC of over 20

years). In the end 6 out of the 12 were asked to leave. No media coverage except for

unrelated but adverse news in the Star. BNM as the supervisory authority kept matters

under wraps and raises speculation. The earlier massive losses incurred by Bank Islam

needed new foreign equity injection escaped much scrutiny since the losses were

incurred in Labuan thus covered under a different jurisdiction.

iii) Claims by academics on the lack of accountability, transparency and corporate

governance in Islamic banks have been mentioned above. Supervisor acquiescence

may explain this. Perhaps this is related to the shareholdings structure and ownership

of these banks. We must take cognizance that most Islamic banks are owned or

closely linked to governments. 6 out of the 10 largest Islamic Banks in the world are

located in Iran with or having previous ties with the Iranian government. Being

subject to international sanctions does not give any incentive to these banks to be


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transparent. The next contender in terms of size is from Saudi Arabia namely the Al-

Rajhi Banking Group. However it is still family owned whilst other banks in the GCC

have certain mixture of private, government, quasi-government and royal family ties

in the U.A.E (Al-Hassan, Khamis and Oulidi: 2010) This is an anomaly compared to

conventional banking but not necessarily to business entities in the Middle East (take

SaudiBinLaden group for example). Even proud partnerships e.g. Goldman Sachs

needed to embrace the public. Structures akin to Al Rajhi also limit expansion. A

recurring theme is the opinion that IBs are still miniscule compared to conventional

banks. Although size is not akin to being better, sufficient scale must still be in place.

It also makes sense from the risk management angle. Conventional risk management

approaches the above from mere disclosure angle. From the equity/welfare

perspective this is ignored since this is a value loaded issue.

iv) The “values” that needs imparting are values that ensure the attainment of “justice” or

“adl” as envisage by Islam. To achieve this, it is essentially the avoidance of

transgression or “zulm”. We are reminded that the first transgression by Man was

essentially an economic kind, namely the “unlawful consumption” of Allah’s

property. Thus we infer the importance of avoiding “zulm” in whatever form

especially in economic matters. At the same time, these values that are cherished are

also “universal”.

v) Related to the above the author wants to bring into the discussion that Islam as a

religion best described as an orthopraxy. (Orthopraxy is a term derived from Greek


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meaning "correct action/activity", and is a religion that places emphasis on conduct,

both ethical and liturgical, as opposed to faith or grace etc. This contrasts with

orthodoxy, emphasizing a correct belief, and, the use of rituals (Google Dictionary)

Based on the above, can the industry and/or its defenders claim that the journey (of avoiding

“zulm” and championing “adl”) so far is “real” or “perceived” based on the following.

a) Shariah risk - the term “Shariah Compliance” litters most guidelines issued. Tangible

proof of compliance remains the sign-off by the Shariah advisors/Shariah boards for the

products. No emphasis is in place to employ a “yardstick” and design “units” that we

could carve into the “yardstick” to measure how far we have travelled so far.

At the most basic level, the question to be posed who essentially owns the industry that

has exceeded USD 1 trillion. Is it Muslim investors, non-Muslim investors, governments

etc. In the recent talk held at the Securities Commission of Malaysia, Prof. Volker

Nienhaus remarked that the government/government linked corporations etc. owns over

90% of the 20% targeted IB share of the total banking asset in Malaysia. Déjà vu

considering this happened also with regards to the NEP.

b) Credit risk – The current approach to credit use in conventional banking and Islamic

Banking is similar. Since PLS contracts are negligible, what remain are short term

working capital facilities where types, quantum and tenor are determined largely by

analysis of financial statements and discussions with the clients. The process is similar to

the conventional approach. Some IBs have managed to outsource the risk management

function to their conventional counterparts. The similarities have even found its way


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down to the identical credit syllabus of the Certified Credit Professional and the Certified

Credit Professional-i. The current risk management framework plays down emphasis on

customer training and engagement. Credit is evaluated, credit is approved or rejected.

Approved facilities are subjected to yearly review. In the interim the client may or may

not be supported in terms of any advisory services. If there are fundamental differences

between how Islam approaches banking relationships the above has essentially nullified

it.

c) Legal risk – This is by far perhaps the largest risk faced by Islamic banking and one

furthest away from its circle of influence. The author in an earlier paper (unpublished)

essentially identified four types of jurisdictional hurdles faced by Islamic finance namely

fiqh related, issues pertaining governing laws, internationalization of laws and lastly the

role other professionally designed standards such as accounting and other regulatory

influences.

The plethora of cases just from Malaysia is lengthy. We then add Shamil Bank of Bahrain v

Beximco Pharmaceuticals Ltd and Others, EC [2004] EWCA Civ 19, The Investment Dar

Company KSCC v Blom Development Bank SAL, [2009] EWHC 3545 (Ch), The East

Cameron Sukuk etc.

Notwithstanding all of the above, the efforts of academia, trained in economics and Shariah

must not go unappreciated. Despite the varying approach/methodologies most issues have

never escaped attention. The struggle to discover the methodology that will rightly guide

Islamic economics and finance is fraught with difficulties since it needs to go back to the

original sources of knowledge in Islam, namely the Al-Quran and the Sunnah. This requires


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qualifications approximating a “mujtahid” and then the knowledge has to be synthesized with

knowledge of modern economics and finance.

At present, even in the absence of a guiding methodology, most observers including

academics are fully aware of the issues. Some refrain from participating in the “blame” game,

some points to “this party” or “that party” whilst other couched their position in abstraction.

The above is out of “fear” but another critique of the academic world is the “elitist” and

“theoretical” approach to even the most basic of ideas. This is representative even in the use

of words in PHD thesis writing. While sophisticated it does not transmit well even to the

undergraduate level. Some strands of the Islamization of Knowledge (IOK) venture is

perhaps most representative of this.

Without academia providing the intellectual foundation, this agenda maybe short-lived.

Besides this academic push, “social” pressure should also be brought to bear on stakeholders

thus in creating the awareness the language of framing the issues should be as vernacular for

local consumption but global in outlook.

This brings the author to the notion of “jihad” and Prophet Muhammad (S.A.W.) said: “The

most excellent type of Jihad is speaking a true word in the presence of a tyrant

ruler.” {Reported by Imams Abu Daood, At-Tirmithi and Ibn Majah.}

It is hoped that the agenda can be pursued without resulting in too many casualties in terms of

the careers of either academics, bankers, supervisors and other stakeholders. However

remaining silent, choosing deep thought is no longer an option. Sayyid Qutb’s Milestones

embodied this call for action.


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They of the first generation did not approach the Qur'an for the purpose of acquiring culture

and information, nor for the purpose of taste or enjoyment. None of them came to the Qur'an

to increase his sum total of knowledge for the sake of knowledge itself or to solve some

scientific or legal problem, or to remove some defect in his understanding. He rather turned

to the Qur'an to find out what the Almighty Creator had prescribed for him and for the group

in which he lived, for his life and for the life of the group. He approached it to act on what

he heard immediately, as a soldier on the battle- field reads "Today's Bulletin" so that he

may know what is to be done.

6) Why has the risk management framework been chosen as the conduit of values?

Is it not the instrument of the Basel Committee and will it not again be brow beaten by the

supervisors. An interesting object lesson from history comes to mind. It was Nixon, the

epitome of “anti-communism” that engaged the People’s Republic of China. Historians have

come to view the actions of “hawkish” presidents in extending the olive branch to enemies as

being actions grounded on objective thought.

The risk management function is the most suited to play this role. It existence at least in

theory is as a countervailing force to unbridled enthusiasm of business. Its so-called

“independence” can be made true. It is “goal oriented” and more importantly adept in control

and supervision. It is authoritative in its current role and can be this also in the future. It need

however to be more communicative as well as consultative. Its obvious strength is that it has

access across all functions within the IB. It also has or eventually will gain access to an

enormous array of data and most banks have or will support this with expenditure on various


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information systems. The current framework has also seen to the emphasis on documentation

whether it is rules, policy or procedures.

The risk management function also plays an allocative function especially in the area of

credit risk dealing e.g. controlling exposure size and/or industry concentration. We foresee

that this will also apply when it embarks on its new role. This function executed properly

secures a “peace and acceptance” dividend for the Bank. In light of present developments

perhaps this dividend is worth securing and the “ijtihad” put in would be rewarding.

The “value” driven framework is not expected to hit the ground running although it must

yield tangible results. On credit risk, the framework is expected to bring new meaning to the

terms partnership and intermediation. Both are expected to generate value and this need not

necessarily be in monetary terms. Essentially it is to leverage the expertise of the IB in terms

of know-how. If clients are rejected due to poor credit, IBs without exception should

endeavour at the minimum to reason out the issue as well as rendering advice on how the

client should address the “credit standing” matter into the future. The enhanced framework

should also be tasked into looking at instilling deeper meaning to the cliché of “Knowing

Your Customer”.

Meanwhile on operational risks, the enhanced framework is tasked with reinforcing what

essentially has been documented on paper. The framework is to replace mere “reading” with

“understanding and practice”. Similar to managing credit risk, this is an evolutionary

process.


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Nevertheless, there remain limitations to the enhanced framework. Moral hazard, asymmetric

information is still abound bearing in mind the external environment and counterparties that

IBs or its clients deal with. Thus the changes within IB must in itself be supported with a

change in conduct of its own supervisors and its external stakeholders. Essentially this

involves the effort to handle legal risk. Unless there are fundamental disagreements, it is most

likely that IBs globally will see value of the framework. This will lay a firmer ground for

Muslim parties/nations to engage in alternative dispute resolution (ADR) solutions like

arbitration and mediation. Whilst these are positives, rooting out “Non-Shariah” compliance

defences as done in the Shamil Bank and the Investment Dar should be high on the list of

priorities of supervisors/govt. A “value” driven framework cannot tolerate attempts to

undermine it or weaken the “moral” high ground that the framework captures.

Present commentators would ask why we insist to impart what may be deemed extraneous

social imperatives on IBs. Aren’t such roles the responsibilities of the government and/or

Development Financial Institutions (DFIs)? The economically inclines will point out that it

creates bureaucracy, inefficient leading to reduce profitability of IBs (studies showing that

IBs are more profitable if compared to their conventional counterparts). Is it not a distortion,

a regulation that increases the cost of doing business for IBs?

Before answering this, the author would regurgitate how previous Western scholars have

framed this question. They questioned the preoccupation of the early fuqahas on commercial

contracts. They saw certain fatwas as essentially being in favour of merchants. One such was

Imam Hanafi who a cloth merchant. However being inundated with values, the Imam was

reported to have knocked on every door in Baghdad to recover a set of defective material

mistakenly sold to a customer by his assistant. The Imam died in prison having been poisoned


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and he going to prison for failing to recognize an “unjust” ruler. All the above simply points

to values driven action.

To answer the present firstly it needs to be pointed out that all the concerns are couched in the

language of the conventional worldview. There are no satisfactory answers since the

foundations or belief-system leading up to the question differs. Some may opine that the

above does not deserve an answer since it shows the failure to understand Islam. Islam being

a religion grounded in values and Muslims are not ashamed of embracing values (this

essentially explains why academia could not run away from the normative as mentioned

above). Even if Muslims agree with rational self-interest, our maximization principle is

different. Ours will be geared at maximizing infaq and not consumption. Even Western

thought has questioned the “maximization” principle e.g. Herbert Simon’s “satisficing”

principle. In reality, we cite altruism e.g. Bill and Melinda Gates Foundation and Warren

Buffet charitable ventures. Next, there have always opinions calling for the need to review

Economics as a “value-free” science based on the works of Amartya Sen. Thirdly, the notion

of a “value-free” science is questionable since it can be argued that having no value is in

itself a value.

Our approach is the “socialization of private gains” and not to be mistaken as socialism. This

epistemologically is enshrined in the scriptures. Historically, this has also been demonstrated

via the institution of the “waqf”. It is also good to point out that the “waqf” influenced the

English “trust” system. Richard the First took an interest in it when he was not busy waging

war against Saladin. The “trust” system was used to finance the development of Merton

College, Oxford (Merton himself was a member of the clergy).


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From the standpoint of economic and political stability, The Pew Forum on Religion &

Public Life (2009) estimated that there 1.57 billion Muslims in the world making up 23% of

the world population. More than 60% of the global Muslim population is in Asia and about

20% is in the Middle East and North Africa. Two-thirds of all Muslims worldwide are living

in 10 countries, six are in Asia (Indonesia, Pakistan, India, Bangladesh, Iran and Turkey),

three are in North Africa (Egypt, Algeria and Morocco) and one is in Sub-Saharan Africa

(Nigeria). Although most of these have a functioning IB system (except India having

postponed IB implementation), most are still poor, not for lack of resources but through

plunder via corruption. And historically they share a common theme (dictatorship or military

rule). More recently we can tag instability to the ones in Italics. Leftist thought maybe incline

to apply Marxist interpretation. Superiority of Islamic knowledge have dealt with this over

1200 years before Marx e.g. do not let wealth circulate among the few, within the property of

the rich there exist the right of the deserving and so on and so forth.

The three paragraphs above simply state that the West or even Muslims must not see the

Islamic world from Western perspective. That why the notion of “regime change” is so

abhorrent to some. Also there is a clear vision of what Islam demands i.e. the methodology is

already there, it is the methods that we are searching for.


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Conclusion

Muslim life is essentially both mundane and spiritual. Values transcend both spheres. A

“value-free” system impoverishes not only Muslims but the global financial system itself. In

the long run none or only few Muslim states will go “cap in hand” to the IMF asking for aid

as did Pakistan. Also this resolve the issue with two education systems that exist i.e.

government run schools and the “madrasahs’ “ associated with breeding terrorism. Terrorism

imposes financial costs to all. Less will there be projects costing x million becoming x + y

million. The “y” is the cost of corruption paid out. The poor has no time to observe

“environmental” niceties. Sustainable “balance” and “value-driven” development (the

Prophet s.a.w. perhaps was the first environmentalist essentially advising against the cutting

of trees) mean less clean-up cost. Again this was over 1200 years before the book Silent

Spring by Rachel Carson. It was mentioned that knowledge flowed from the Islamic world to

the West. This was cost savings to Western civilization. Again Muslim philosophers and

scientists did not do this on an “empty” stomach. It is only the rich that have time to

contemplate and analyse subjects/objects. It was also the rich Muslim traders that drew bills

of exchanges (Suftaja), letters of credit and the cheque (Sakk). These were the same Muslim

traders that sailed into Malacca (subjected to the vagaries of the weather) spreading the

religion whilst trading. Can this analogy be applied to the merchant bankers flying 1st

Class to London and New York marketing their “sukuk”?

In the final analysis, Islamic civilization was all “value” driven. Not making the risk

management framework conduit for “values” essentially deprives Muslims as well as

humanity. In doing this, Islam and the West must come to points of agreement as well to

points where both “agree to disagree” without having to tear the bonds of humanity asunder.


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the current risk management framework in use by … · (kuran: 2003) blames the inheritance system...

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