The Malaysian Bar - CAFTA 2011: Third Keynote Address, by Badlisyah Abdul Ghani, Executive Director and Chief Executive Officer of CIMB Islamic Bank Berhad

CAFTA 2011: Third Keynote Address, by Badlisyah Abdul Ghani, Executive Director and Chief Executive Officer of CIMB Islamic Bank Berhad

Thursday, 27 October 2011 09:21am

Contributed by Leong Zhi Hong, Co-Deputy Chairperson (Southern Region), Bar Council National Young Lawyers Committee

The third keynote address of the 5th China-ASEAN¹ Forum on Legal Cooperation and Development ("CAFTA 2011") was delivered by Badlisyah Abdul Ghani, Executive Director and Chief Executive Officer of CIMB Islamic Bank Berhad, at 2:30 pm on 26 Sept 2011 (Monday). His keynote address was entitled “Overview of Islamic Finance, Understanding the Foundation of Islamic Finance, Why We Do Islamic Finance: The Right Model that Financial Institutions Adopt to Do Islamic Finance and Issues Financial Institutions Face in Doing Islamic Finance”.

Badlisyah Abdul Ghani began his speech by giving an overview of simple facts regarding Islamic finance. He explained that Islamic finance was a comprehensive financial system that adhered to Islamic principles. Islamic financial structures, such as Mudharabah or Musharakah, had already existed during the Mesopotamian era, prior to the arrival of Islam. However, such structures were only formally established during the Umayyad and Abbasid empires. He went on to inform the audience that the modern operations of Islamic financial structures known today had been re-introduced and re-developed in the post-1960s.

Badlisyah Abdul Ghani elaborated that Islamic finance had been founded under the Syariah principle of muamalat, which governed commercial activities among human beings. He added that the operation of Islamic financial institutions in businesses observed certain prohibitions with regards to Riba, Gharar, impure goods, goods with no value or use, and gambling.

Badlisyah Abdul Ghani revealed that Islamic financial institutions had recognised that Syariah laws were not about limitations. On the contrary, Syariah laws were more about infinite possibilities, as everything was generally allowed under the principle of muamalat, unless expressly prohibited in the Quran and by the Hadith. The onus of Syariah committee deliberations was to prove that something was prohibited, instead of having to prove that something was allowed. Since there was no precedent under Syariah laws, there was no limit to innovation. There was no retroactive application of Syariah laws and no risk of financial loss when opinion on Syariah laws changed. He remarked that the most important point to bear in mind was that Syariah laws did not make any Islamic financial product “holy”, to the point that it could not undergo innovation. Noting that innovations were not blasphemous, he commented that Syariah laws were applied on a jurisdictional basis, subject to laws of the land, customs, conventions and circumstances that existed at any point of time.

Badlisyah Abdul Ghani emphasised that Islamic finance was not only about creating profit, citing that it was also concerned with meeting the expectations of stakeholders – such as customers, shareholders, regulators and employees – and maqasid al shariah in each activity undertaken by Islamic financial institutions. He further highlighted that stakeholders’ expectations would give rise to issues regarding integrity, outstanding corporate governance and real commercial benefits, which any business or operating model adopted by a Islamic financial institution must tackle.

Badlisyah Abdul Ghani concluded his speech by sharing his analysis of how Islamic financial institutions required effective legislation and regulations, and legal and Syariah frameworks, in order to promote sustainable and stable growth. He pointed out that to ensure Islamic finance was an effective public good, it needed legislative certainty, regulatory certainty, legal certainty and Syariah credibility.

¹ Association of Southeast Asian Nations.

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