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that “this trend to­wards greater use of debt-cre­at­ing fi­nance is not nec­es­sar­ily cre­at­ing the level of co­op­er­a­tion, trust-build­ing and so­cially ben­e­fi­cial risk-tak­ing that are re­quired for in­clu­sive and sus­tain­able eco­nomic growth”.

Is there a nat­u­ral link be­tween the cre­ation of shared val­ues and risk shar­ing?

Not nec­es­sar­ily so, says prom­i­nent syariah ad­viser and en­tre­pre­neur, Datuk Dr Daud Bakar, who is the chair­man of Amanie Ad­vi­sors and the Syariah Ad­vi­sory Coun­cils (SAC) of the SC and Bank Ne­gara.

For ar­gu­ment’s sake, he asks, how will we treat this theme if risk-shar­ing is found to be detri­men­tal in some Is­lamic fi­nance prac­tices?

To him, any dis­course must be steeped in the ap­pro­pri­ate le­gal ba­sis and sources of knowl­edge, which must be backed by divine rev­e­la­tion es­sen­tially to pro­tect the pu­rity of the mes­sage and its ethos.

It is also the democrati­sa­tion of ac­cess and par­tic­i­pa­tion in bank­ing, in­sur­ance and cap­i­tal mar­kets by or­di­nary peo­ple. In this case, fi­nance not only serves to be the great equaliser, but also the much-needed fa­cil­i­ta­tor. Do­ing it through shared val­ues and risk-shar­ing would be the ic­ing on the cake. How does one de­fine shared val­ues?

Daud de­fines val­ues as rep­re­sent­ing a set of be­liefs, ideals or ben­e­fits, which are de­sir­able by a group of peo­ple, which have a ma­jor in­flu­ence on their be­hav­iour and at­ti­tude.

To a large ex­tent, both risk and val­ues are hu­man in na­ture.

It’s up to hu­mans to as­sess and bear the risk ac­cord­ingly, ei­ther fully or par­tially, or even to de­cline from tak­ing the risk.

There are sev­eral op­tions and flex­i­bil­ity in risk mit­i­ga­tion — trans­fer from one to the other; shar­ing of risk; or a com­bi­na­tion of debt and eq­uity (Da­man).

But, are shared val­ues con­fined to the pro­vi­sions of maqasid al­syariah (ob­jec­tives of the syariah as in Is­lamic fi­nance), or do they in­clude the wider eth­i­cal fi­nance, en­vi­ron­men­tal, so­cial and gov­er­nance (ESG) and re­spon­si­ble fi­nance move­ments, or the stake­holder uni­verse of reg­u­la­tory, le­gal, op­er­a­tional, man­age­ment, share­hold­ers, cus­tomers and other such as­pects, or even the newer de­vel­op­ments in fin­tech, block-chain ledger man­age­ment and cy­ber­se­cu­rity?

For in­stance, the Is­lamic fi­nance in­dus­try is cur­rently ro­manc­ing the wider ESG/SRI/Eth­i­cal fi­nance move­ments.

There is a lot of talk about syn­er­gies. I am all for co­op­er­a­tion and dis­course to ad­vance the agenda of eth­i­cal Is­lamic fi­nance. But where do shared val­ues start and end?

It would be disin­gen­u­ous to the fu­ture gen­er­a­tion of Is­lamic bankers and their cus­tomers/stake­hold­ers to high­light only the com­mon­al­i­ties be­tween Is­lamic fi­nance and the eth­i­cal fi­nance move­ments — is­sues re­lat­ing to en­vi­ron­men­tal im­pact, labour poli­cies, es­pe­cially child labour and slave labour prac­tices, trans­fer pric­ing, anti-trust and spec­u­la­tive ac­tiv­i­ties, fair wage struc­tures, trans­parency in­clud­ing non-re­course whistle­blow­ing pro­vi­sions to re­port wrong­do­ing such as mis-sell­ing of prod­ucts, and to play down the dif­fer­ences which in many re­spects go to the core of the dis­course — that is the pro­scrip­tion of (non-dis­clo­sure),


Are there in­deed, from a maqasid point of view, shared val­ues in a Green Sukuk and a

con­ven­tional Green Bond? Is it a case of choos­ing ei­ther form or sub­stance, in­stead of both which are im­plicit in the maqasid al-syariah?

There is also the un­for­tu­nate ten­dency these days by some of de­mon­is­ing debt-based prod­ucts when these have been sanc­tioned by the syariah and fiqh lit­er­a­ture over the cen­turies.

In to­day’s com­plex econ­omy and so­ci­ety, most house­holds are be­holden to at least one type of what I would call es­sen­tial debt, such as mort­gages and car hire­pur­chases. Not all debt is bad and re­gres­sive.

How­ever, when some Mus­lim thinkers and economists el­e­vate eq­uity-based fi­nanc­ing to the higher sta­tus of maqasid al-syariah, and when some have gone to the ex­tent to even de­clare that eq­uity-based fi­nanc­ing is the only scheme that can ful­fil this as­pect of wealth dis­tri­bu­tion, Daud is not so sure. I tend to agree with him.

Maqasid al-syariah can’t be es­tab­lished in a vac­uum or be based on mere emo­tions and pref­er­ences, and must be backed by em­pir­i­cal data, which he stressed is “cu­mu­la­tive and com­pound­ing”.

In other words, there must be a num­ber of divine texts that carry the same mes­sage to re­in­force the su­pe­ri­or­ity of eq­uity-based fi­nanc­ing.

Both eq­uity and debt fi­nanc­ing have pos­i­tive and neg­a­tive as­pects. The Is­lamic fi­nance in­dus­try needs a bet­ter and bal­anced nar­ra­tive based on prag­ma­tism that can lever­age the ben­e­fits of both, and ad­vance the im­pres­sive growth of the in­dus­try to the next level.

There are sev­eral op­tions in risk mit­i­ga­tion — trans­fer from one to the other, shar­ing it or a com­bi­na­tion of debt and eq­uity.

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