Kenya needs pool of scholars to advance Islamic finance

University of Nairobi senior lecturer Abdullatif Essajee (left) with NBK director (Islamic Banking) Musa Adan at a past event. photo | diana ngila | nmg 

By JAAFAR S. ABDULKADIR

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Summary

• To promote solid growth of Islamic finance, individuals who are well-versed in Sharia and its teachings should be facilitated to offer guidance and help align the actions of industry players with the expectations of the Sharia principles.
• The Sharia scholars have a divine duty to offer sound interpretations of the Holy Scriptures and exercise oversight on the applications of the same.
• The Sharia boards must have scholars who are well-grounded in Sharia jurisprudence, banking, finance, global trade and investment practices, law and economics among other disciplines.

Kenya’s decision to promote Islamic finance as part of the effort to enhance financial inclusion, develop financial markets and widen the sources of funding to meet the country’s financial needs is both timely and strategic.

Treasury secretary Henry Rotich in his latest budget statement supported that initiative with the expression of government commitment to develop the necessary infrastructure for the growth of Islamic finance.

That move is informed by the growing recognition of Islamic finance as one of the alternative financing sources with well-defined divine principles that outlaw the charging of interest and investments in ventures such as the making and sale of alcohol, gambling, and arms trade.

These divine principles seek to promote the collective wellbeing of society using transparency, justice and fair play as the core platform for human interactions and checks against greed, exploitation, speculation, dishonesty and related evils.

Successful promotion of Islamic finance in Kenya requires all stakeholders to be vigilant and ensure there are no gaps between the practice of the model and the teachings of Sharia.

The purpose and the intentions of the service providers should be demonstrated through solid commitments to Sharia values and principles.

The business practices should reflect the true values and spirit of Sharia principles in meaning, relevance, substance as well as impact.

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To promote solid growth of Islamic finance, individuals who are well-versed in Sharia and its teachings should be facilitated to offer guidance and help align the actions of industry players with the expectations of the Sharia principles.

The Sharia scholars have a divine duty to offer sound interpretations of the Holy Scriptures and exercise oversight on the applications of the same.

The standard practice in the industry is to have a team of scholars serve as independent board members of the entities offering Islamic finance for the purposes of approving the products as well as the business processes, auditing and reviewing business practices, offering guidance, supervisory services and helping in dispute resolution.

The quality of the boards definitely depends on having the right mix of talent and diversity.

The Sharia boards must have scholars who are well-grounded in Sharia jurisprudence, banking, finance, global trade and investment practices, law and economics among other disciplines.

The scholars should be people who can proactively engage in research and continuous learning and to exercise flexibility of mind without compromising their independence and Sharia teachings.

With the right combination of Sharia scholars with the ability to exercise independence, creativity and openness, there is no limit to what Islamic finance can achieve.

But for this to happen, the service providers ought to develop the capacity of Sharia scholars and promote interaction with others so as to harmonise their understanding of the emerging challenges and opportunities.

Institutionalising best practices and promoting openness through shared platforms should help curtail the entry of the selfish few who are driven by the quest to reap short-term benefits from the industry at the expense of what benefits the various stakeholders in the long term.
Recruitment of the Sharia scholars should be guided by sector regulators as is done for boards of conventional banks.
The regulators can in turn utilise the services of these scholars to obtain invaluable information touching on governance of the Islamic finance institutions as well as Sharia malpractices in the businesses they serve, with a view to taking corrective action before the stakeholders lose confidence and trust in the institutions.
Sharia scholars should also get empowered and facilitated by the institutions they serve through continuous learning and interactions with the board of directors and management to help with strategy formulation and execution.
Ordinarily, the scholars help conduct reality checks and embed Sharia standards that boards and management may overlook while executing business models that mainly satisfy their egos and those of shareholders with little regard to the ecosystem.
As Anthony Tjan, the New York Times bestselling  author of Hearts, Smarts, Guts and Luck says, “a successful  business should not only achieve the goal of realising and optimising long-term shareholder returns but also emphasise the means to that success — how sustainable it is and how the business impacts everyone it touches.