Page 46 - PakAccountant-April_June-2017

CA Signa Signature Qualificationture Qualification CA that Empowers to Leadthat Empowers to Lead P PAKISTANAKISTAN with Islamic banking and through them to the masses and general Further, the depositors and the potential customers need to be public. This can help bring everyone on to the same wave length and educated regarding certain concepts/agreements specific to the create awareness of what to expect. profit and loss distribution mechanism, including the following: ▪ Agreements on which profit and loss distribution mechanism is based (for example, Modaraba and Musharaka) ▪ Basic requirements/characteristics of these agreements ▪ How the different aspect of existing profit and loss mechanism To achieve can be traced with the requirements and characteristics of the the goals and agreements objectives of an Islamic economic system Response to specific apprehensions/queries relating To provide Shariah to profit and loss sharing mechanism (deposits) compliant and prudent banking opportunities, avoid riba and other Does pricing/benchmarking make the substance of the prohibited elements transaction haram We need to understand that there are certain areas, where the borderline between haram and halal is very thin, most common examples would be: ▪ taking the name of Allah Almighty upon an animal at the time of Realisation regarding status of Islamic Banking slaughter makes it halal and permissible, while not doing makes it First of all we i.e. everyone, from the regulator to the Shariah haram scholars to the management of Islamic Financial Institutions (IFI) ▪ or by just a few words of acceptance in Nikah, in the presence of to the Islamic bankers, need to accept and realise that Islamic witnesses, a man and woman become halal for each other banking, in its current form, is not in its ideal state (as mostly products are made as a replication of conventional products with Similarly, if a transaction/product is structured in such a way that it elements which makes them Shariah non-compliant/Haram). remains in the ambit of being Shariah compliant then it should not be They need to reach to the ideal state and not exhaust all energy considered being non-compliant to Shariah principles only because to justify the existing model. However, what is now being offered of its similarity to the conventional banking product. is taking care of transactions, matters, dealings, structures, agreements and subject matters which are specifically prohibited As per the Shariah principles: Substance of a transaction makes the by Shariah. transaction Shariah compliant or otherwise, neither the pricing model nor the repayment structure. To achieve the ideal state, responsibility does not fall only on Islamic banks and people associated with them but also on the general The fact to be realised is that the Islamic banking or for that matter public to support them to achieve that goal. Islamic economic system cannot work in isolation from the overall environment which includes different factors such as the global Category Understanding required Action required political, legal, economic systems. General Public To realise that Islamic To support Islamic banking in Meeting the expected rate of return through Hiba banking even in its current comparison to conventional Agreeing on the profit sharing ratio before the contract period/ form takes care of matters banking. Modaraba/Musharaka which are prohibited by Shariah. Usually, when a bank creates a pool at the start of the month, they have a fair idea of what will be the approximate deposit Whereas, same cannot be base and what will be their asset base and how much they will said about conventional be investing in Sukuk or placements. With the aid of forecasting banking. a profit sharing ratio, a weightage is arrived at before the start of Islamic Banks To realise that Islamic Accept and work towards the contract (i.e. the month) which is computed keeping in mind Regulators banking has to evolve and improving the Islamic the market return. Practitioners, etc. improve. Target the ideal banking practice including state and not be complacent products. At the time of constructive liquidation of Modaraba with the current state. (Musharaka)/culmination of contract At the end of the contract/month when the actual Basic concepts/agreements at the back of the numbers for the pool are arrived at and the return for product in question the depositor is less than what was expected, the Masses need to be made aware regarding the basic concepts and same is compensated by the bank by letting agreements/products of Islamic banking operations in general and go/gifting portion of its share of profit to profit and loss distribution in particular for their apprehensions to the deposit holders (which is called Hiba). be addressed. Awareness of the following should be provided to the customers: Hiba is by no means ▪ Concept of Islamic economic system forbidden nor a practice ▪ Basic concepts of Islamic finance and banking contradictory to the ▪ Difference between conventional banking and Islamic banking Shariah principles. April-June 2017pril-June 2017 44 T44 The Pakistan Accountant he Pakistan Accountant A