By Habhajan Singh
There is concern in Hong Kong on the cost of retaining a Shariah scholar and also the cost of regular compliance, an international Islamic finance conference was told.
This was listed as one of the challenges facing the advance of Islamic finance in Hong Kong, a jurisdcition that has made known its intention to become an international hub for the fast-growing sector.
Amirali Nasir, a Hong Kong based lawyer, said another jurisprudence challenge facing the sector in Hong Kong is the perception that Shariah is a single code, which is interpreted and accepted consistently by all Muslims.
"Delegates are confused when they hear about the various schools of law and the varying interpretations applied," he told the Second Global Islamic Finance Conference (GIFC) 2008 in Kuala Lumpur last week.
The two-day conference, organised by GlobalPro Consulting Sdn Bhd in affiliation with the Institute of Bankers Malaysia (IBBM), was opened by Minister in the Prime Minister's Department Datuk Seri Dr Ahmad Zahid Hamidi. The Malaysian Reserve was the event's media partner.
Amirali also highlighted that there is a strong belief that many corporations go out "Shariah scholar shopping". This is refers to Islamic financial institutions looking for Shariah scholars whom they deem would interpret the Shariah favourably to their aims and objectives, though many corporations in the past have found that this may not be the case, as there are certain underlying Shariah principles which are sacrosant.
Amirali also said Hong Kong lacks legal advisors and auditors familiar with Islamic finance. "There is concern that legal advisors who are advising are simply mimicking conventional documentations with adjustments for restrictions," he said.
In a presentation on derivatives, Bursa Malaysia Bhd's Norfadelizan Abd Rahman noted that as long as the principles of Islamic commercial law are well observed, the possibility of allowing derivatives is highly anticipated. For the time being, it is noted that modern jurists have come out with various derivatives instruments and the decisions on their "Islamicity" varies from one jurisdiction to another.
"However, it must be stressed that more and more efforts are needed in advancing some other financial products that are needed for the smooth running of modern Islamic banking and finance, especially in the area of financing engineering, where financial derivatives can be used to manage risk," said Norfadelizan, who heads product development at Bursa Malaysia's Islamic capital market department.
Derivatives are instruments generally used for hedging, speculation and investment. Though Islamic laws view derivatives as sometimes inevitable, she said the decision whether a particular derivative product is Shariah-compliant or otherwise depends largely on various issues, including its purpose, contract used and settlement mechanism. (By Habhajan Singh, The Malaysian Reserve, Nov 3, 2008, Page 32)Any source
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