UK - Specialist proposes fatwa bypass on Islamic products

www.ftadviser.com - UK investors should consider self-certification of Sharia products to bypass the lengthy approval process, a leading designer of Islamic finance propositions has claimed.

Trevor Norman, director of Jersey-based fiduciary specialist Volaw Trust and Corporate Services, was speaking at the International Islamic Banking Finance summit in London. He suggested that UK investors and their advisers should be allowed to research products themselves instead of having to obtain a fatwa, or judgement, from a Sharia board. (source)



He said he had worked on one case where a client wanted a fatwa on a product that took three months to be approved by a Sharia board. The client then wanted to sell the product to an Islamic bank that needed its own fatwa for approval.

Mr Norman said: “We had two scholars in separate hotel rooms and I was running between both. In the end we had a two-page document that did not say much, and I questioned if that added value.

“If a product is based on a basic Sharia principes, do we need that fatwa?

“Investors may want to bypass the Sharia board and do their own investigations. I am not aware of products that do this yet but it could go that way.”

Mahmood Faruqui, senior adviser for the Bank of London and the Middle East and former vice-chairman of the Institute of Islamic Banking and Insurance, said another issue with the current system was the lack of transparency from the Sharia board in providing its judgements.

However he said the fatwa process was a marketing tool that provided legitimacy.

Mr Faruqui said: “If there were a bond issue and an investor had to choose between a rated and unrated product, they are more likely to choose the one with a rating.”

Brigid Benson, director and chairman of Manchester-based Gaeia Partnership, said: “I did show an interest in Sharia finance many years ago. I am not aware that many products have endured.

“To be relevant for IFAs there will need to be enough Muslim clients to warrant the product. We are multi-faith and very multicultural, but not many Muslim clients have come our way.

“Sharia-type funds would be most relevant to Muslim clients but if a fund happened to have other ethical criteria we would give it investigation.

“Some Muslims with money and resources may be more accustomed to investing in family enterprises.

“Many would feel more comfortable with that route rather than investing in a fund run by people they may not know. These factors seem to have held these types of funds back.”

Source :  http://www.ftadviser.com/2012/03/29/investments/alternative-investments/specialist-proposes-fatwa-bypass-on-islamic-products-qy5igkk0xBMWaPhu4H5TsO/article.html - March 29, 2012