The book is an added asset to the wide spectrum of literatures on Islamic finance and displays an intellectual osmosis. It encapsulates the critical views of both academic and practitioners regarding burning issues on the instruments and markets of Islamic finance. The plethora of high calibre authors has not only highlighted the problems faced in developing Islamic financial instruments and markets but also attempt to provide practical solutions. One positive point of the book is that each chapter is complemented with a rich compendium of additional reading materials to quench the thirst of readers.
The book is divided into four parts. Part one deals with “best practice – instruments” and part two deals with “best practice – markets”. These two parts are written by experts in their respective fields. On the other hand, parts three and four deal with checklists for instruments and markets, respectively. Hence, the reader gets the gist of specific topics and is also helped via the checklists to make decisions. The book does meet the aspirations of academics, practitioners and investors to a great extent. However, it only covers selected topics which are very relevant to modern day Islamic finance industry which is understandable because it is not possible to address all the discussions in one book. The common themes one will identify in parts one and two are mainly sukuk, risk management and criticism against Shariah scholars.
Part one deals with the best practices regarding the financial instruments used in the market. However, the focus lies mainly on the sukuk products, which catapulted Islamic finance on the world market. Sukuk has its own teething problems which the authors addressed from various angles such as from the regulatory and risk management paradigm. Other pertinent areas covered are: risk management, Islamic microfinance, auditing of Islamic financial institutions and Islamic finance litigations. These are areas which need urgent attention because, as the articles indicate, the industry is quite big enough to be driven by investors' needs. If these issues are not resolved, they may stifle the expansion of Islamic finance globally. The article by Killian Bälz is a timely one as it addresses the issue of “litigation in Islamic finance”. As Islamic Finance is joining hand with main stream finance, the legal risk is escalating from various angles. The case study he raises, Beximco, is food for thought as to how to resolve the legal issue of Shariah in secular courts? He advocates the Malaysian Central Bank's (Bank Negara) model of an apex body for Shariah Advisory Council that approves the products for regulatory purpose. He rightly pointed out that the “waiver of Shariah defence clauses” in standard Islamic loan agreements is not a just approach and suggests that arbitration might be the way forward to resolve many legal issues. One can also appreciate the concern of Andreas Jobst who points out that Islamic finance “entrepreneurial investment” features creates its own space which is often difficult to be accommodated in conventional finance legal and regulatory ethos. This is echoed by Latiff and Crowford in their article on risk and the need to pay heed to the Shariah risk element.
Part two deals with best practice of the markets. The articles engage with a number of topics of major concerns for practitioners and investors alike. As far as the financial practitioners are concerned, they will benefit from topics such as the Capital Adequacy Requirement (especially now that Basle III is on), the market pulse of the emerging markets in the Middle and North African Region, Procedures for Reporting Financial Risk in Islamic Finance and Islamic Finance Global Financial Crisis. Investors will appreciate the following topics: investment risk in Islamic finance, managing Shariah‐complaint portfolios, bankruptcy resolution and investor protection in Sukuk market. The article authored by Andreas Jobst, “The international role of Islamic finance”, is quite objective in its analysis of the problems in Islamic finance but it gives hope for a brighter future.
It is noticed that a common thread among many of those articles is the criticism levelled against the divergence of opinions among Shariah scholars. It is submitted that most of the authors are unfortunately not Shariah scholars and they are blowing things out of proportion. Most Shariah issues are well managed by SSBs and the AAOIFI Shariah standards is a good platform for reference as well as the Shariah Advisory Council of Bank Negara. One cannot make the issue of sukuk or derivatives the focus of Islamic finance. Even conventional finance is infested with differences of opinion; though it is highly regulated yet it has its global negative contagion effect. This proves that despite no certainty in conventional finance, it is still functioning. Second, if one ponders on the USA or the EU, which consist of many jurisdictions with different legal frameworks, and yet they all operate under one banner. In Islam, there are only four or five schools of law that mould Islamic finance, hence these few differences of opinions should not be amplified unnecessarily!
Part three and four equip the readers with checklists for ensuring that they take some basic precautions when involving in Islamic financial instruments and markets. Part three basically sets up some minimum guidelines for avoiding riba, choosing Shariah compliant banking products such as Murabaha and also addresses the issue of determining the Shariah compliance of funds and possible Islamic derivatives. Issues of the objectivity and independence of Shariah Supervisory and the extent of viability of Takaful are also discussed.
Part four covers some basic Shariah law, ethics, joint ventures, and Islamic microfinance that prevail in the present markets. The book ends with a very brief depiction of the various potential countries as targeted markets for Islamic finance. However, the reliability of those data is premised on the Central Intelligence Agency source.
Overall, the book is a handy one for practitioners, academics and investors. Its complementary reading list adds value to it, and the critical analysis enriches the readers understanding of both the practical and academic endeavours of Islamic finance industry.
