Professional Documents
Culture Documents
By Danie
el Chandrana
ayagam Malaysia
a and the Asia
a Pacific Rim. For
our edittorial content, clickhere. The
e
As the year turns jus
st fourteen da
ays old, more
e and more people
p and
Digest is also currentlly a free
business
ses are turnin
ng to centuriies old religio
ous tenets fo
or the
distribution electronic
c digest, so fee
el
regulatio
on of their fin
nancing. Proffessor Bala Shanmugam
S of
o Monash free to s
send your conttent or press
Universitty Malaysia was
w reported recently to have
h said, releases
s to us at edito
or [at] csrdiges
st
dot com
m.
Islamic finance is also kknown as socia ally responsib
ble banking
because w we tend to thinnk of what thee consequencces are of
Pages
this. It’s no
ot just lending
g money for tthe sake of len
nding and
making prrofits off of this. • About th
he CSR Digest
• Sign Up For CSR Diges
st Newsletter
Understa
andably, with
h crumbling financial
f marrkets, an ethical Searrch
financiall framework based on fairness sounds desirable. As
A such,
the grow c Finance in institutional finance mark
wth of Islamic kets is
unsurpriising. In November 2006, Ethical Corp
poration repo
orted that Subscrribe to CSR Digest
D
hydrocarbons conglo
omerate, Saudi Basic Indu
ustries Corpo
oration, Sub
bscribe in a rea
ader
issued a three billion
n Saudi riyal (USD800
( mill) Sukuk, Isla
amic
Finance’s equivalent of a bond. At
A that time, it was also sttated that Categorie
es
Kuwait Finance
F Hous
se was to issu
ue a USD200
0 mill Sukuk for
f a
• Commun
nity
Chinese company fin
nancing expa
ansion of a po
ower plant.
• CSR Dige
est Editorial
• CSR Dige
est Interviews
• Environm
ment
• Marketplace
• Transparrency
• Workplac
ce
Tags
accidents
s announcementts CSR
initiatives
s development
employm
ment erosion ethn
nicity Fuel health
h
and safetty human rights integrity logging
g
Malaysia Melamine migra
ant
workersreporting sustain
nabilityToll union
ns
©2008 C
CSR Digest. All rights reserved,
except w
where indicated. Copyright
C
also add
ded that the number
n of Sh
hariah-based
d unit trust fu
unds had
increased to a net as
sset value of over USD5.2 bill.
Page
Why?
According to Malaysia’s central bank governor, Dr. Zeti Akhtar Aziz, the strengths in Islamic Finance
are derived from Shariah principles. During her keynote address at the State Street Islamic Finance
Congress 2008 in Boston, Dr. Zeti stated that these principles, based on Islamic law, “require that the
financial transactions be accompanied by an underlying productive activity, thus giving rise to a close
link between financial and productive flaws.”
Because gambling and the exacting of interest are prohibited, Islamic financiers are required to
innovate in order to come up with comparable instruments to lend, invest and insure. The instruments
for these activities are usually based on contracts that require both parties to share profit and loss
equitably.
Dato’ Vaseehar Hassan Abdul Razack, Chairman of Unicorn International Islamic Bank, was reported to
have said that Islamic banks “will follow through exactly what you want to do and be your partner
holding your hands from day one, until the project is completed, and then make sure it is properly
completed and that the cash flows are generated according to what they are projected, and then they
share an equitable proportion of the profit.”
There’s more…
It is said that Islamic laws covers the entire social order. Islam protects the right to private property,
but these rights should also take into consideration the rights of others in the community, including
the right to proper natural resources. Because these natural resources, like water, forests, air and
sunlight, are the property of society (and the world at large), an individual is held accountable for its
2
It has been noted that some Islamic Finance products provides better deals than those of conventional
banking. Managing Director of DVA Consulting Sdn Bhd, Daud Vicary Abdullah, was reported to have
said, “… an example that I often use is a deposit-based product, where you are penalised if you break
a fixed-term deposit in the conventional world and you get less interest. But in the Islamic world, you
get the profit that you’re due, up to that point in time when you break the deposit.”
Formerly the Chief Operating Officer of Asian Finance Bank, Mr. Daud was also quoted on INSEAD
Knowledgeas saying,
There is a significant potential for socially and ethically responsible financing … not
just in terms of ethics, but also the opportunity in terms of the structure in
development of some of the green funds, waste recycling, green forms of energy, and
so on. There is under the tenets of Islam a clear alignment between what Islam
represents and what is ethically and socially responsible.
Credibility Problems
On the basis of the tenets discussed above, it can be said that Islamic Finance products, through their
very nature, are eco-friendly. However, there are some challenges to Islamic Banking. For one thing, it
has been suggested by industry practitioners to the CSR Digest that some Islamic Finance Institutions
possibly “close one eye” as to whether or not what they are funding will cause detriment to the
environment.
Furthermore, Ethical Corporation comments in its Special Report, “Islamic finance - Ancient values in a
global economy” that the “lack of transparency even on contractual compliance matters is
disquieting”. Ethical Corporation pointed out in 2006 that Shariah board members, at least in the UK,
are paid by banks to deliver fatwah (Shariah rulings). Although, institutional clients might be advised
on the reasons behind the rulings, private consumers and affected communities were usually just left
to accept the fatwahs made by people “chosen and paid for by the other team”.
Norton Rose’s
R Head of Islamic fin
nance and an
n adviser to the British go
overnment wa
as reported to
t have
said onthe Huffingto
on Post:
A very ta
all order, and
d the world watches.◊
w
Written by
y Daniel Edit
January 14
4, 2009 at 11:15 am
Posted in CSR Digest Edittorial, Marketplace, Transpare
ency
Tagged with ethical finan
nce, Islamic Finance, Malaysia,, reporting
« Stop the
e CSR Spin
One Re
esponse to 'Socially Re
esponsible Banking?'
Subscribe
e to comments
s with RSS or TrackBack
T to 'S
Socially Respon
nsible Banking?'.
1. As you kn
now a rough co
ousin to Islamic banking and
d finance in th
he west is ethic
cal investing.
For anyon
ne interested I have a site that covers the latest
l arch on ethicall investing, as well as
global news and resea
occasiona
al reports on Is
slamic finance
e. It’s at http://
/investingforth
hesoul.com/
Ron Robins
15 Jan 09 at 12:44 am Ed
dit
4
Page