Islamic Banking Bilal Jakhura Honourable Shariah Board Members ...

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Islamic Banking Bilal Jakhura

Honourable Shariah Board Members, Mr Max Makhubalo, and colleagues of the Banking Industry Assalamualaikum and Good Morning It is indeed an honour to be part of this pioneering effort in the field of Islamic Banking and Finance in South Africa. At the outset I must commend BANKSETA and particularly, Mr Max Makhubalo for his vision and leadership in giving priority to this important project. Similarly, those key individuals who were instrumental in initiating this project and driving it to completion – Ahmed Moola – the previous CEO of ABSA Islamic, Richard Plant and Caroline King of BANKSETA and various steering committee representatives from the Banking Industry among others, are worthy of recognition for their efforts. Islamic Banking is based on Islamic Commercial Law (Fiqh Al Muaamalaat) – which has its sources in the complex body of Islamic Jurisprudence known as Fiqh. As is the case with any legal system, the classical scholars of Islamic Law have had material differences of opinion on various legal issues related to Commercial and other transactions. For example, the concept of Collateral/ Security in classical Islamic Commercial Law is dealt with in two very contrasting ways by the major schools of Islamic legal thought. Three of the four schools of thought state that a pledged article/collateral for a debt is not held in strict liability. The fourth school of thought states though that a pledge will be held in strict liability – i.e. the natural destruction of the pledged article would result in the debt being reduced by the value of the pledged article that was destroyed. It is obvious therefore, that before an efficient Islamic Banking system could be formed, certain standards would have to be accepted and adhered to by the industry participants. In this context, AAOIFI – the Accounting and Auditing Organisation for Islamic Financial Institutions has formulated detailed Shariah and Accounting Standards that are adhered to by the majority of Islamic financial institutions globally. This is significant for us in South Africa – since – whilst it may be possible for individual authoritative opinions on a specific matter to exist, the question of whether an organisation or its products are Shariah Compliant or not; is no longer a matter of subjective judgement. Those Banks that have been involved in the Islamic Banking market would

remember a period between 2005 -2007 when conflicting opinions on the validity/permissibility of Islamic products and Investments were circulating in the market. It is therefore significant that most providers of Islamic financial products in South Africa are members of the internationally recognized standards setting authority AAIOFI. The development of this training is another milestone in the standardisation process that can only have positive outcomes across the industry. The features and advantages of this training may be summarised as follows: Focus on the AAOIFI Standards ensures that the material conforms to the highest level of International Standards. The involvement of key industry players on the steering committee has ensured that the training caters for the needs across the industry. High standard training material that will ensure a sustainable method of developing human resources with entry level of knowledge required The training focuses on key concepts not on the details of the products of a specific bank. Albaraka Bank Limited, as the only fully fledged Islamic Bank in South Africa was honoured to be a part of this important project. Mr Shabir Chohan, CEO of Al Baraka South Africa has expressed his satisfaction with the successful completion of this project and has initiated Al Baraka’s willingness to support and play a role in further initiatives of this nature. Mr Adnan Yousif, CEO of the Albaraka Banking Group globally (with branches in 12 countries) and Islamic Banker of the year 2009 – has commended South Africa as a country with a minority Muslim population on having achieved this important milestone. At Al Baraka we plan to roll out specific levels of this training to all staff across the organisation in conjunction with our existing training programs. I wish to highlight that this training is not only an important milestone for those organisations offering Islamic Banking services. It is in fact a positive development for Banking and Finance in South Africa in general. This is in the context of National Treasury’s drive to position South Africa as the hub of Banking and Finance in Africa. As indicated by Mr Makhubalo in his speech, Africa has a Muslim population of between 40-45%. The importance, therefore of focusing on Islamic Banking in achieving this objective of Government is self evident. I am confident that the development of this training will serve as a important means for sustained development of human resource skills in the field of Islamic Banking and Finance in South Africa In conclusion, I wish to thank the training and service provider - Yusuf Suliman and his team at Shariah Financial Consultancy for the diligent and professional manner in which the project has been completed, BANKSETA, once again, for its display of leadership and vision and the members of the steering committee for their efforts and perseverance in bringing the project to completion. Thank You and Good Day