How American is teaching the world investing in sukuk
Professor Michael McMillen is an American lawyer who learnt sukuk finance while practicing law in Saudi Arabia from 1996-2000.
He has continued to study and teach sukuk finance at the University of Pennsylvania Law School and The Wharton School of Business and delivering papers around the world.
Professor Michael McMillen was introduced to an infrastructure project that was financed in sukuk and this prompted him to enroll and studied the rudiments of the system for four years in Saudi Arabia, and he has continued to study, and practice sukuk since 1996. He is now an authority in the field coupled with being a lawyer of repute in project and infrastructure finance.
He teaches the system throughout the world, including at the University of Pennsylvania Law School and The Wharton School of Business. He has carved a niche for himself as he is always airborne, in and out of the Middle East, at a minimum of once every five weeks for two decades now, spreading the benefits of Islamic finance.
Professor McMillen said many investors embrace sukuk financial system with focus on the profitability of the investment. He said two things should be noted: One is that the ethical underpinnings of sukuk in Islamic finance are pretty much the same as in other financial ethical finance systems: for example, the Christian - Roman Catholic or Lutheran - and the Jewish.
He said, “Criteria provided by the similarities and differences between the Christian, Jewish and Islamic laws are that they all frown on alcohol, pornography and prostitution, among other kinds of elements that exist under the Shariah legal system. The critical element in all ethical funds is social justice and social responsiveness.
He traced the history of Islamic banking which started in the 1970 in the Middle East and later went into remission, but was later rekindled in Malaysia in 1983 and then later Islamic finance and investment, which came to the fore in the Middle East in the 1990s.
According to him, England was ahead of America in adopting Islamic banking and later sukuk, with more Islamic banks in London and Europe adopting the system. There is no Islamic banking system in America, but America has readily adopted Islamic finance in both the investment and banking context.
He says there is much more Islamic financing activity in America than in Europe with Ijarah or profit made from investment transactions primarily by hiring or leasing real estates, offices, warehouses, nursing homes among others. He said these activities are not well covered in the American press despite the extensiveness of the practice, particularly after the 9/11 attacks on the World Trade Centre and the sentiments that came after it.
Professor McMillen said African countries have been trying to adopt the system in earnest. In Algeria, Morocco and South Africa, among others. He spent last year in Tanzania working for the Central Bank in Dar Es Salaam to determine what they would have to do to start Islamic banking especially in Tanzania, including the semiautonomous region of Zanzibar Island which has a predominantly Muslim population. McMillen has worked in many other countries around the World that desire to start Islamic banking, including the Philippines.
On whether there are Christians in the United States as in Europe that use or invest in Islamic financings, including sukuk, he said that Islamic products, especially sukuk, are open and available to all without regard to religious affiliation. For example, large insurance companies and hedge funds in the United States and Europe invest in sukuk on the basis of their investment qualities.
They are, however indifferent as to whether or not the instrument is Shariah compliant. Large insurance companies buy sukuk to matchfund against long-term pension obligations that are managed by these companies.
He said, “I am calling on Nigerian entrepreneurs to engage in sukuk finance, and issue sukuk.” He expressed belief that Nigeria has an advantage that provides a huge head start because the legal system has a good bankruptcy and insolvency laws, collateral security regimes, special purpose vehicle capabilities and similar advantages which don’t exist in the Middle East.
“With determination and focus, Nigeria should be able to be leader in this process and the opportunities are huge,” he said.
“And regulators would likely disapprove of having such a large risk concentration in the sukuk banking and financing system. Conventional (interestbased) financing from other regional and international sources is desirable to achieve risk diversification and a broader funding base,” he explained.
He said Nigeria is a big market given its huge population of around 170 million consumers. And he wished the country well in its efforts.