A huge market developing literally with the speed of light, with believe to be having assets over trillion of US dollars under its umbrella referred as Sharia Compliant Finance or Islamic Finance being some time dwarfed by referring as Faith Based Funding. A fundamental question always bothers the souls like me, are we in a process to create a new world order of finance through the development and promotion of Islamic Finance or to create another product for the ever profit hungry some time unethical financial market players?

The perception with which all practicing Islamic Finance Professional come face to face at least once in there journey, whether Islamic Finance is renaming and packaging the prevailing financial products at the same time structuring the same in a way that it appeared to be not conflicting with Sharia, however yielding the same result and at the end. There will be no difference in the conventional secured debentures and Sukuk, if the structure does not strictly abide the return to the investor from earning of asset behind such Sukuk, and is paid back from the companies’ common pool. Secondly, when we keep apart a certain asset for Sukuk holders, these asset are basically related with the equity holders of that company. Ethically speaking they should be having a say into the issuance of Sukuk through a shareholders resolution as it directly effect there risk and return profile.

The purpose of the Islamic finance should be, to create the participatory financing world rather than creating a neo-profit hungry team of financial players replicating the existing conventional finance system.

The basic nature of Sharia is of the light, which guide people to accomplish the eternal and earthly goals in a correct manner, the way which was shown by Allah, through our beloved prophet (pubh). It enlightens us with the true identities of right and wrongs in our day to day life and our actions. The other angle to look at the Sharia, will be to simply say that it bring about correction in the way we perform certain actions or the means we utilize to accomplish our goals.

A close scrutiny of the guidance of Sharia about commercial dealings, it talks about correcting the certain anomalies and wrongs in the process in particular and the system at large. At one hand, it talks about prohibition of unjust enrichment at the other hand talks about fair market value of transactions or transactions at arm lengths and the same time it prevents from speculative activities which are becoming more and more prevalent in modern commercial legal frameworks. The another very important aspect of guidance of Sharia on the practice of financial market is complete disclosure and proper recordings of all factual information related with a transaction and an independent opinion by recommending presence and recording by an independent third party. In short Sharia provides a framework for creating a market which is just to all market players.

At the other hand, if we look at current financial markets and economies, the institutions like Stock Exchanges are loosing there character as a capital market and turning rapidly into centers providing platform for speculative activities through sophisticated concept like margin trading or index based trading and future selling etc. Instead of using the capital into productive activities it is being used as a tool of unjust enrichment. The well developed purpose based financial instruments basically created for curbing the uncertainties in the cycles of capital rotation are abused as the instruments for earning out of created stress in the market. Now a days, in some markets the prices of commodities are fixed not based on the real demand and supply but on the views of speculators to in the commodity markets.

If we compare the two paragraphs above, we find the financial norms based on Sharia have suggested the basic foundation for correction of market and restore the role of money as productive capital.

All of us will be agree that the foremost requirement of an economy following the Sharia is “Tawhid – a concept of over all vision, understanding and distinctiveness” through creation of a free market and widespread ownership of productive capital, bringing economic efficiency and establishing a direct connection between the money supply and real economics. This has been more or less the goal of any well balanced existing economy.

Now in light of above discussion should we not move towards establishing and enforcing disclosure requirements or standarsation of formats of Sharia opinion at least mentioning the proper authorization of shareholders instead turning our face from the compliance and disclosure pre-text on the ground of having four different schools of Sharia thoughts.

The practice and not the text really make a difference in any society or market. So it is high time we should start following the Sharia in spirit rather than letters to prevent it from becoming a product rather than a distinct way of financing.

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Friends, every history has its time of reckoning. The movement of a boat is smooth if you sail with the current, however it is not necessary the best route to the light house.

Today, when we talk about Islamic Finance, we visualize a huge market developing literally with the speed of light. Now at this juncture let talk about something which normally comes into mind of a lot of us: Are we in the process of developing two sets of parallel financial systems on our planet? Whether Islamic Finance is a separate discipline of Finance? A lot of financial thinkers are putting their thoughts on the probability of integration and bridging the gap between two seemingly different streams of financial systems. Before we start looking at the avenues of integrations, let’s talk about a fundamental question, Are they really different? If we look from the micro level its seems to be different however if we look from the macro level the Shari Based Financing Principals are a foundation for a movement towards establishing the true role of money envisaged in the economics. All of us will agree to the fact that, in the true sense money in economies should be a tool to provide an “Innovative and Productive Capital”.

Hence this is the right time we should start thinking to bring about the desired corrections in the current financial market, and I strongly believe once it is done, we have to think about improvements and not integration.

All of us will agree that the foremost requirement of an Islamic economy is “Tawhid – a concept of over all vision, understanding and distinctiveness” through creation of a free market and widespread ownership of productive capital, bringing economic efficiency and establishing a direct connection between the money supply and real economics. This has been more or less the goal of any well balanced existing economy.

Majority of the schools of economics claim the persuance of a long term goal to establish a society, which will ensure the well balanced growth of all, and on broader terms, the inventions in financial markets have this basic aim.

Let’s talk about one of the most talked about concept of recent time “ Derivatives”. This technique was developed to limit the loss of capital by managing the uncertainty from the transactions, however under the existing financial market, it proliferated more as profit making instrument than a risk mitigation tool.

Sharia Based Financing, the Islamic finance in true sense advocate bringing in the discipline in the market by promoting the use of money as “Capital” and making it avaliable as a support to budding entrepreneurs to bring efficiency ant true returns to the providers of capitals.

We know that the “Wheel of Change” moves slow and the changes effected slowly are long lasting. The development of Islamic financing concept has taken more than 30 years to come into its present form. Presently we are standing on a cross road to change the concept of Islamic Finance from the “Sharia Complaint” to “Sharia Based”. I firmly believe that this is the right time we all should start thinking about directing the industry on the roads to “Sharia Based Funding” which will bring the revolutionary change in the world of financial market.

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