Part 5 of 6: A Climate of Change — Regulating Shariah Standards Four Initiatives Islamic Finance Must Undertake to Keep Itself Relevant in Changing T

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Part 5 of 6: A Climate of Change — Regulating Shariah Standards

Four Initiatives Islamic Finance Must Undertake to Keep Itself Relevant in Changing Times

Copyright © 2014, Ethica Institute of Islamic Finance


Regulating Shariah Standards

Governments must now empower regulators to begin revoking Islamic banking licenses for Shariah non-compliance, just as they revoke Islamic banking licenses for violating conventional law. At the moment, in most jurisdictions around the world, for something to be labeled “Shariah-compliant,” it merely has to be called that, regardless of the qualification of the one making the claim.

This is unacceptable.

Unless we are prepared to relive the phantasmagoric mess the financial crisis of 2008 left us, complete with paperless, assetless, fly-by-night projects vanishing overnight, and unless we understand that there is a connection between bad banking and environmental degradation, we would do well to put some teeth into Shariah regulation.

Despite its economic woes, Pakistan does an excellent job of fostering Shariah compliance in its burgeoning Islamic finance sector where the specter of license revocation looms ever large and has on occasion been used to good effect. To this end, AAOIFI’s “Shariah Standards,” a document compiling rulings agreed upon by some of the world’s leading Islamic finance scholars, offers a minimum fiqh a product or practice must comply with and could be a good starting point for a given jurisdiction’s financial services authority to deem mandatory.

The End

A once common problem with explaining environmental degradation to the common man was the abstractness of it: outwardly, everything seemed fine in the 1970s, 1980s, and into the 1990s to the casual observer even though closer inspection revealed otherwise. But by the turn of the 21st century, and especially in the last five years, events are unfolding at a pace that makes environmental problems hard to ignore.

To use examples from Ethica’s own team, lifelong farmers we spoke with once predicted seasons down to the week. Now they have trouble timing harvests to the nearest month. Relatives who once enjoyed basic energy security throughout the year now regularly go days without gas and electricity. Forests we once played in as children have been wiped out forever by palm oil companies, and so on.

Given the inadequacy of the present world response to environmental degradation, it is unlikely that we will avert some of the more major disasters like global heating, which many climatologists already declare an inevitability even if we reduced carbon emissions to zero today. But better late than never. Some things are still very much in our control, and they do bear upon the shape of the world to come: currency, environmental standards, community-based finance, and the Shariah compliance of our institutions, to name just some of those mentioned in this article.

How can Islamic finance make a difference in the sweep of such global events? History is filled with examples of small tipping points making disproportionately large impacts. Though the Islamic finance industry accounts for only a fraction of global transactional volume, the real power of Islamic finance is in being able to galvanize the world’s 1.5 billion Muslims by providing them and their non-Muslim brothers and sisters with real solutions.

Corruption has appeared in the land and sea, for that
men's own hands have earned, that He may let them taste
some part of that which they have done, that haply so
they may return.
The Koran


Click here to see Part 1 of 6: Climate of Change — Four Initiatives Islamic Finance Must Undertake
Click here to see Part 2 of 6: Climate of Change — Launching a Gold-Based Currency
Click here to see Part 3 of 6: Climate of Change — Environmental Shariah Standards
Click here to see Part 4 of 6: Climate of Change — Regulating Shariah Standards

This article was approved by Mufti Ismail Ebrahim Desai.


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