PETALING JAYA: A banking expert has defended the Malaysian practice of Islamic banking and financing (IBF) against critics who say it does not adhere to proper shariah procedures.
Zulkarnain Muhamad Sori, a professor and deputy director at the International Centre for Education in Islamic Finance, argues that IBF in Malaysia is on track to full compliance.
Speaking to FMT after a panel discussion at the World Bank Conference for Corporate Governance of Islamic Financial Institutions, he said the belief that Islamic banking is not really Islamic was probably rooted in false public perception.
“The shariah banking industry is improving,” he said. “There is no issue of non-compliance with the shariah.”
He claimed that the detractors were in the minority.
“That’s why our growth rate is almost 20% and the assets owned by Islamic banks are growing from year to year,” he said.
“Of course, during the first few years or the first decade of IBF implementation, we made mistakes. We overlooked certain things. But we kept improving over time. It is a process.
“We have a shariah advisory council at Bank Negara Malaysia (BNM), which regulates everything, and BNM is a very responsible regulator.”
He said regulation wasn’t easy because of the presence in Malaysia of all four Sunni schools of jurisprudence. Despite this, he added, IBF in Malaysia was on the right track although constant improvements were still necessary.
He spoke of the Bai’ al-‘Innah, one of the methods used for personal financing. It has always been perceived as a close substitute of interest-based conventional loan, which is not permissible under shariah law because it is considered usurious.
He said BNM had considered the feedback on the method and come up with newer products. “That shows how serious BNM is in ensuring everything is shariah compliant.”
Ahamed Kameel Mydin Meera, a former dean of the Institute of Islamic Finance at the International Islamic University Malaysia, had a different view.
He acknowledged that IBF in Malaysia had seen some progress but said it had a long way to go to be fully shariah compliant.
He spoke of IBF as the solution to the economic problems brought about by conventional banking, but not in the way it is practised today.
According to him, one of the problems with contemporary Islamic banking in Malaysia is that it is one of the money creators in the system. “When you create money out of nothing, you’re creating inflation.”
He said IBF, in its truest form, would deal only with tangible money and assets.
He also said the shariah scholars being consulted for Islamic compliance had a conflict of interest in that they are paid by conventional banks.