Kuala Lumpur: Global Islamic Finance may see a big change in coming days as an amateur body of Islamic scholars is willing to introduce a global code of ethics and a professional development program for scholars in the field of Islamic Finance.
The Malaysian-based Association of Sharia Advisers in Islamic Finance (ASAS) has taken up the task of launching reforms in Islamic Finance industry in order to improve standards in the industry across the globe.
Malaysian-born ASAS President, Aznan Hasan, informed that the body has planned to address the weaknesses in Islamic finance which are decelerating the industry's growth.
Boards of scholars at financial institutions rule on whether instruments and activities obey religious principles, but there is no single, commonly recognized set of qualifications for the scholars. This creates confusion when scholars’ rulings contradict one another. And because scholars are paid by the institutions whose products they evaluate, the industry is open to accusations of conflicts of interest.
ASAS was set up in April last year and now it is planning to launch a test for the financial literacy of scholars this year. Moreover, it has asked its members to sign up to a code of ethics; if they break the code, they may be reprimanded by ASAS.
Hasan, a scholar who sits on several shariah boards across the globe, clarified that both initiatives will initially apply only to Malaysia but the group aims eventually to extend it around the world.
He said, “We want to have a program that can have an impact on the industry.”
He described that ASAS, which currently has over 60 members, will offer guidance on issues such as how to appoint Shariah boards and address potential conflicts of interest.
The financial literacy test will form the basis of an accreditation program that could start as early as the first quarter of next year, aiming to encourage the professional development of scholars through a points-based system.
“This would address concerns that some scholars may be static in terms of their knowledge. If we are not careful, someone who claims to be a scholar could give wrong advice,” Hasan said.
ASAS members will be able to earn points towards their accreditation by enrolling in training courses offered by regulatory bodies, private providers or ASAS itself.
The body plans to build its membership of scholars on a voluntary basis in the first two years, and then propose that membership becomes compulsory for all scholars in Malaysia from 2015 onwards. Although its initial focus will be Malaysia, it aims eventually to have an international footprint that could encompass all shariah scholars.
“We need to lead by example first,” said Hasan, adding that it would be difficult to persuade other countries to join without proof that the system worked.
“ASAS will offer a venue for discussion and be proactive in shaping the role of scholars in the industry,” he added.
Malaysia's securities commission is also considering the possibility of developing an accreditation program for Islamic scholars, but this is only at the exploratory stage and could take no less than three years.