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Friday, 19 December 2008

Shari’ah advisory reaches India

In spite of India having a large number of religious scholars graduating from its top seminaries like Deoband, Nadwaa, Islah, Ashrafia, etc., finding a Shari’ah scholar who is exposed to financial issues is a herculean task.

The last few months have been good for those watching Islamic finance activities in India. It is a well-known fact that owing to its religious sensibilities India has been cautious in allowing Islamic financial activities. Despite having one of the largest Muslim populations in the world and a strong demand for Shari’ah-compliant products from the community as well as the business sector, India has not yet permitted Islamic finance at official levels, though some kind of Islamic financial activities or Shari’ah-compliant products have been on offer for some time now.
It appears that now the Indian government has made up its mind. First, a high-level committee appointed by the government to prepare India’s future financial structure recommended interest-free banking for inclusion of Muslims in the financial sector. The Report draws its significance from the fact that this is first time an Indian finance committee has said something on the issue, which hitherto was considered quite sensitive in political circles. The more important news on this front however, is that a couple of politicians belonging to the right wing Hindu Nationalist party, BJP, have also asked for increased business relations with the Middle East. Political consensus on this issue appears to be emerging now, at least at the national level. This is a good sign for Islamic finance in India.
India has always been a capital-deficient country which looked for her financing needs at western countries and institutions. However, the recent financial crisis in the West and the drought of liquidity in the region has made Indian policy makers realise that they need to look at other alternatives as well. The recent visit of the Indian Prime Minister, although at the fag end of his tenure, to a couple of GCC countries assumes more significance in this regard. The Indian PM visited the region along with his Chief Economic Advisor Professor Raghuram Rajan who had earlier recommended Islamic banking in his report to the government.
Taking a cue from these gestures, Indian corporates have started placing themselves to capitalise on the big opportunity. The foremost development in this regard is the establishment of a Shari’ah advisory firm. Since Shari’ah-compliance is the cornerstone of Islamic finance business and often a point of heated debate too, some top Indian professionals active in Islamic finance have formed a Shari’ah advisory firm called Taqwaa Advisory and Shariah Investment Solutions Pvt. Ltd. (TASIS).
In spite of India having a large number of religious scholars graduating from its top seminaries like Deoband, Nadwaa, Islah, Ashrafia, etc., finding a Shari’ah scholar who is exposed to financial issues is a herculean task.
Another issue which complicates matters in this nascent business is choosing the school of jurisprudence to which the scholar should belong. In India almost all schools of Islamic jurisprudence are active. To avoid any kind of confusion and counter fatwa, which is known as Shari’ah risk in Islamic finance jargon, TASIS has tied up with Dar Al Sharia of the UAE, which is a professional Shari’ah advisory firm with many firsts to its credit in Shari’ah advisory and product structuring.
At the same time TASIS has also started providing financial training to Shari’ah scholars chosen from various seminaries in India. This is mainly done to expose Indian Shari’ah scholars to financial matters so that reliance on foreign expertise can be minimised in the future. An important decision in this regard taken by the TASIS team is establishment of a non-profit trust in Hyderabad for training of Shari’ah scholars in financial matters. The trust works under the guidance of noted Mufti Maulana Khalid Saifullah Rehmani, who is Secretary of the Indian Islamic Fiqh Academy, a composite body drawing scholars from all schools of Islamic jurisprudence which deliberates on various Fiqh issues confronting the Indian Muslim community.
TASIS’ association with Dar Al Sharia has brought professionalism in the Shari’ah advisory business which makes Indian businesses more comfortable. They are satisfied dealing with a firm which is professional and understands their business. This is not possible in case of individual Shari’ah scholars who have little exposure to the intricacies of the world of modern finance. Often their opinion bases on their (limited, and at times flawed) comprehension of the selective or partial information made available to them. Sometimes these scholars have gone back on their own Shari’ah opinion, blaming the institutions concerned for not providing them all the needed information, thus putting the institutions in an embarrassing situation. The public too, especially the educated class, is more convinced when a professional body rather than an individual certifies a product.
Within a short period of its operation TASIS has got scores of queries from various parts of the country. Now TASIS is structuring a Rs.100 crore Shari’ah-compliant real estate fund for a company in Kerala. A portfolio management scheme by a reputed wealth management firm is already in the works. There are a few more assignments in the pipeline, which once finalised, will take the tally to over a thousand crores. This shows the vast potential India can tap into if it formally allows Islamic Banking in the country.
Dr Shariq Nisar, PhD in Islamic finance, is the founding CEO of Bearys Amanah India, which is recipient of India’s first Shari’ah-compliant realty fund.
(CPI Financial)

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