Assalamualaikum and good morning to everyone.
Distinguished speakers and moderators,
Honourable guests,
Members of the Bar,
Ladies and gentlemen,
It is my great pleasure to welcome all of you today to the "National Symposium on Islamic Finance and Capital Market 2019". The symposium today is jointly organised by the Bar and the International Centre for Education in Islamic Finance ("INCEIF"). I would like to thank our Islamic Finance Committee, INCEIF and all the speakers today for their hard work and effort in making this symposium a reality. Education and awareness of Islamic finance is critical in this fast growing Islamic finance and capital market industry. On that note, the Bar looks forward to continue our partnership with INCEIF in future to bring more awareness on the latest developments and challenges facing the Islamic finance and capital market industry. I would also like to record my appreciation to the Asian International Arbitration Centre ("AIAC") for providing us the state of art venue of this symposium.
In fact, this symposium was planned when I was the Chairperson of Islamic Finance Committee but it didn't take place. I thank Mr. Lukman and his committee for making it happen.
Ladies and gentlemen,
Our experienced speakers today come from the legal fraternity, the banking industry and corporate body. They will speak to you on the development and growth of Islamic finance in Malaysia, with emphasis on sukuk governance, importation of Shariah and legal principles into FinTech contracts, legal documentation for Shariah arrangements of tawarruq products, and the progressive use of Hibah Amanah in Malaysia. A wide spectrum of topics will be covered, which will benefit participants, whether on a personal level –– for self–knowledge and education –– or to secure a professional advantage in the commercial arena.
To understand more about Islamic finance and capital market, one could look at the Malaysian Islamic finance regulatory framework which evidences Malaysia's aspiration to evolve into an international Islamic financial centre. In 1983, the Islamic Banking Act was passed and thus began the framework for a liberalised international finance marketplace based on the foundations of Shariah. In 2009, the Central Bank of Malaysia Act provided for the Shariah Advisory Council to be positioned at the regulatory level within the Central Bank of Malaysia. The supervisory Shariah committees at Islamic financial institutions as well as the regulation and supervision of Islamic financial institutions are enshrined in the Islamic Financial Services Act 2013. The AIAC i–Arbitration Rules 2018 on the other hand regulates arbitration of disputes arising from commercial transactions premised on Islamic principles. The Malaysian Islamic finance regulatory framework deserves credit for its comprehensiveness and sophistication. There is no doubt that our country's Islamic finance regime serves as a model to other countries who are keen to develop their Islamic finance regulations and laws.
However, misconceptions in relation to Islamic finance still persist. A general misconception about Islamic finance is that it is a religious product. That is, not true. Islamic finance is a financing activity that complies with the principle of Shariah. Some salient features relating to Islamic finance are the prohibition of interest (Riba) paid on loans of money, the prohibition of uncertainty (Gharar) such as premium and indemnity in conventional insurance, and the prohibition of selling or buying goods and services that are unlawful from a Shariah perspective such as non–halal food, gambling, pornography and Shariah non–compliant entertainment. In short, while Islamic finance and conventional finance can both achieve the same economic benefits, Islamic finance is distinguished by its Shariah driven morals as well as its transparent contractual and transactional features.
Subsequent to that general misconception, is the belief that non–Muslims are forbidden of using Islamic banks or their products. This is also not true. Non–Muslims are entitled to be involved in Islamic finance and in fact, non–Muslims have formed a significant customer base of the Islamic finance industry in Malaysia.
Further, there were misplaced allegations that Shariah non–compliance in Islamic finance avoids the repayment of the debt obligation of the customer. We have seen this defence being employed by customers in courts. This is again, a misguided argument. While Islamic banks treat their customers as business partners or trade parties instead of lenders or borrowers and tend to accommodate the customer in need of more time to repay the debt, you must pay what you owe if you have debt obligations under Shariah. Trust is important. To quote Sultan Nazrin Shah's speech at the World Capital Markets Symposium 2009:
"At its heart, Islamic finance is an inspiration towards good finance and good finance is about trust, and trust is a cornerstone of stability... Islamic finance can help break the vicious cycle of boom and bust that has come to characterise global finance."
Ladies and gentlemen,
I hope that I have dispelled some doubts you may have in mind about Islamic finance. It is due to the said misconception the public have that we lawyers have to do better and equip ourselves with the relevant knowledge so we can deliver the right and proper advice on Islamic finance and capital market to our clients. While Malaysia stands tall in the global market of Islamic finance, we have to ensure that we have the manpower and especially so in the legal profession, with the required skill and knowledge, to accompany the corresponding growth of the Islamic finance industry in Malaysia.
In this regard, the Malaysian Bar has granted Qualified Foreign Law Firm ("QFLF") licences to Trowers and Hamlins LLP and Herbert Smith Freehills LLP on 4 April 2015 and 10 December 2016 respectively due to their proven expertise in international Islamic finance. The liberalisation of legal services is the Bar's support towards the Malaysian Government's Malaysian International Islamic Finance Centre ("MIFC") initiative. The operation of these law firms here in Malaysia would provide support to financing opportunities through Sukuk, Islamic funds and other financial vehicles. It is an opportunity where the Malaysian legal services can benefit, through collaboration with foreign law firms to advise on aspects of Islamic finance such as Sukuk or Islamic funds. We can also use this opportunity to apply our collective knowledge on Islamic finance to ensure that Shariah–compliant aspects are adhered to in every product especially on the legal documentation process which distinguishes Islamic finance with the conventional process.
Further, against the backdrop of the Industry Revolution 4.0, it is also pertinent that the legal fraternity steps up along the rapid development of technology. The use of FinTech and smart contracts will complement our work as lawyers. It has come to my knowledge through my conversation with some of the speakers here today that there are currently talks and plans for Shariah–compliant FinTech and smart contracts. I must admit this is something which I did not know prior. It is important that legal practitioners have a good grasp of such technology and avoid being left behind by technology advancement.
Ladies and gentlemen,
The power of Artificial Intelligence is real and they are coming to our shore soon. If we stop learning, especially on Islamic finance which is expanding at a rapid pace on a global scale, we stop moving. And our work will be rendered obsolete and replaceable by Artificial Intelligence. This is why, I implore all my learned friends, my learned brothers and sisters today to seize the opportunity to learn from our distinguished speakers today.
Lastly, for those who are unfamiliar with Islamic finance, it is hoped that Arabic words such as Riba, Gharar and Maisir will be more accustomed to you after the session today. Once we overcome the Arabic terminology, it will be much easier to learn about the principles of Islamic finance and capital market industry. I hope that this symposium not only provides the opportunity for Members of the Bar to expand their horizon of knowledge and learning in this field, but also that it serves as a catalyst to allow Malaysia to continue to enhance its position in the forefront of Islamic banking and finance worldwide. I wish all of you an enjoyable, fruitful and edifying symposium today.
With that, thank you.
Abdul Fareed Abdul Gafoor
President
Malaysian Bar
7 Oct 2019