Finance & Banking


In the midst of the ongoing crisis emanating from the Global COVID-19 pandemic, we asked some of the leading
experts of Islamic banking and finance to share their views on the need for reforming Islamic banking and finance.
These experts come from different backgrounds, i.e., academia, practice and research; but there is a loud and
clear message. There is a definite need for the industry to take the COVID-19 pause as an opportunity to
redefine its value proposition. While the practitioners like Asfand Zubair Malik take a sympathetic view on the practice of Islamic banking and finance, others like Faizan Ahmed are not optimistic about the change in direction of Islamic banking without a deliberate intervention by the stakeholders to do so. There are others who take a philosophical view of the whole matter. Pauline Vaz shares her perspective based on the experience she accumulated working in one of the most reputed product development teams.

Senior Economist, Islamic Research & Training Institute
Islamic Development Bank

Amidst the current global pandemic, compassion, shared solidarity and selflessness have stood out to become novel values that unite all humanity across the globe irrespective of nations, ethnic backgrounds and religions. And the principles of Islamic economics and finance have the natural ingredients to be at the vanguard to put those values in place. Although, on the level of implementation Islamic finance has been perceived to have failed in delivering its promises on fairness,equity and inclusion; it shouldn’t come as a surprise though since the industry is built upon the traditional model of finance.

Malaysia’s movement of Value-Based Intermediation in Islamic finance can be considered as evidence of such a change. Another one is the issuance of the Khazanah Sustainable and Responsible Investment (SRI) Sukuk. Waqf-linked Sukuk is another breakthrough championed by the Ministry of Finance Indonesia, in partnership with Badan Wakaf Indonesia (BWI) and Bank Indonesia.

It is becoming apparent that the drivers of the change are now no longer influenced by an entirely profit geared motive; rather are emphasising on creating social and environmental impact.

However, given the current pandemic, which has multifaceted casualties permeating into social and economic spectrums of life, is it still realistic to expect the same kind of Islamic finance? It may be premature to have an affirmative answer right now.

But there are five dimensions, which I think, can play a role in shaping the portrayal of Islamic finance post-COVID-19:

1) Social norms and values may evolve; which can bring about entirely different preferences, and perception about life
in general, in which social, economic and financial interactions are a part. Heavy reliance on the traditional model of
finance and financial system that has resulted in what El-Erian calls inequality trifecta1 – inequality of income, wealth,
and opportunity – needs a reality check. This could ignite the global community to question the relevance of the existing institutional set up of financial intermediaries.

2) Changing methods of conducting business coupled with the pervasiveness of digitalisation: As social interactions may shift to a new equilibrium, coupled with the pervasiveness of digitalisation, the way of doing business, work methods and financial dealings may drastically change as well. Automation of processes will unsurprisingly be just a matter of a split second. For Islamic financial transactions, this will surely pose a new territory of challenge. Countless traditional fiqh rulings may then be challenged as a result.

3) New Assets Classification may likely emerge: The new digital reality may likely alter the notions of assets. For an asset to qualify as ‘mutaqawwam’ or lawful under Shari’a may also change as a result. A different characterisation of asset types that can constitute a debt is a sheer possibility. If this materialises, the set of Shari’a parameters as guiding principles for Shari’a-compliant products will inevitably shift to a new equilibrium. Consequently, the building blocks of contracts and the landscape of Islamic financial transactions are expected to be different from what we have now.

4) The birth of a new global currency is not to be ruled out: The hype of cryptocurrency and the use of blockchain technology over the past few years coupled with the increasing prominence of the digital economy should not go unnoticed. Going forward, the use of means of payment other than fiat money may find its utmost momentum.

5) Moving from globalisation to regionalisation: The pandemic has unravelled the world’s precarious dependence on China as it controls one-third share of global supply chains2. This can trigger a massive restructuring as production and sourcing move closer to end-users and companies localise or regionalise their supply chains. And in the context of Islamic finance and halal industry, this can pave the way for the effective realisation of South-South cooperation among OIC member countries.

Chief Finance Officer
Islamic Bank of Afghanistan

COVID-19 is changing the dynamics of the world. Islamic banking and finance is not an exception. I believe it is time that all the stakeholders of the industry come again on the drawing board and appraise the implementation of Islamic banking that is governed by the principles of Shari’a.

I remember the time when Islamic banking was in the initial phase and it was emphasised by everyone that it is essential that a lenient view is taken while giving Shari’a-compliant solutions similar to conventional transactions. The reason was to give simplicity to the transactions and most importantly to get acceptance by the market.

During the last two decades, many innovative Islamic banking transactions have been structured to satisfy the needs of
the market. Unfortunately, in my personal opinion, we have been trying our best to make transactions Shari’a-compliant but lacking a focus on Maqasid al-Shari’a (or Higher Objectives of Shari’a also abbreviated as HOS) to establish equality and ultimately making Muslim Ummah prosperous.

There is no argument on the Shari’a compliance of the industry, as Shari’a experts and scholars are undoubtedly following Shari’a principles and laws. In my humble view, Islamic banking is still lacking in fulfilling the HOS as we are still serving the same market segments as conventional banks rather than the masses.

To elaborate my point, let us look at the balance sheet of any conventional bank, which has deposits mainly made up of retail, and individuals either directly or indirectly, however, on the asset side major investments and advances are to the government and corporate sectors. Similarly, if we now have a look at the balance sheet of an Islamic bank, there hardly is any difference in the composition of financing.

In my personal experience, while structuring big-ticket transactions, the focus is generally towards ensuring that the
transaction is Shari’a-compliant at its minimum level. I would like to illustrate this with an example. During the structuring of Sale and Lease-back transactions with big corporate clients, the major issue is always the transfer of assets from the books of the seller (corporate) to the buyer’s book. In many transactions, the fair disclosure of assets is not available as corporates generally are not ready to transfer their assets and transactions are merely executed on documents. The main reason for this unfavourable arrangement is that corporates have strong bargaining power due to their business size and the availability of conventional alternative.

In the current pandemic situation faced by the world, it is time for Islamic banking to promote small and medium-sized
businesses of the society who are contributing towards 50% of the employment worldwide.3

Therefore, stakeholders should focus on securing and promoting small and medium-sized enterprises (SME) sector with Shari’a-compliant solutions; as it will not only help the Islamic banking industry to increase profitability but also fulfil the spirit of Shari’a. There are many challenges in catering widely to the SME segment, however, if all stakeholders with conviction are willing to start from scratch and seek alternative ways than they will definitely find concrete solutions, which will be able to protect many businesses hit by the COVID-19.

Once this pandemic situation is over, several businesses will not be able to reinstate themselves easily. To resolve the issue, Islamic banks may come up with some propositions on both Depository and Asset sides of the balance sheet.

As we know many Muslim countries are generally contributing funds for charitable causes, additionally, in the current
pandemic situation, individuals are also contributing generously in charities to feed people. This is an opportunity for
Islamic banks to play a positive role and offer a solution driven by Maqasid al-Shari’a. I propose an arrangement in this

As per my proposal, Islamic banks should introduce an innovative investment product on the balance sheet whereby
investment account holders can deposit money that they are already contributing towards charity. That deposit is placed in the Investment Account Holders’ Funds that will be allocated to a high-risk pool. Subsequently, that deposit can be deployed to SMEs as financing without collateral (as many of them may not have collaterals available).

Following will be the benefits of this proposed model to the economy.

• The charity given otherwise can feed a family once or twice but will not contribute towards the economic development
of the family nor the society. However, if the business of the same family is reestablished from Islamic financing, it will
be a continuous source of income to them.
• Further, by starting one business several employment opportunities can be created as well as independent industries,
which will create more employment thus becoming responsible for the income of many families.
• The major benefit will be the achievement of higher objectives of Shari’a by entering into true Mudaraba model
whereby the investors are willing to take a high risk on their investment.
• Although there is a higher rate of default in such financing, the amount contributed was already for charity so it will
not affect the investors’ expectations.
• In case the recovery rate is good, then the Islamic banking industry can change their business models permanently to
satisfy the requirements of shareholders and improving the perception of Islamic banking.

In the wake of COVID-19, many organisations are receiving a lot of funding to feed people. However, in my view, efforts should be concentrated on utilising funding to re-ignite the engine of economy. Therefore, if we channellise the same funding as per the aforementioned proposed model it may help kick-start the economy as well as fulfilling the higher objectives of Shari’a. It might be a game-changer for the Islamic industry!

Head of Product Development & Shari’a Support
Askari Bank Ltd. – Ikhlas Islamic Banking

The world has witnessed an unprecedented challenge due to COVID-19 – the mayhem we could not have even imagined before. Loss of loved ones and precious lives, economic meltdown, closure of large conglomerates as well as small and medium-sized businesses, ports, transport, pay-cuts and lay-offs have seriously tested and put a question mark on the morality and ethics of the civilised world. Islamic financial industry, being part of the same socio-economic environment, is no exception. The industry, despite relatively small in size, felt shocks in a similar way as its conventional counterpart.

Islamic banking and finance is acclaimed to be a system that claims to deem profit maximisation as a legitimate objective only along with values such as justice, equitable distribution of wealth, transparency and fair treatment of all stakeholders. COVID-19 is a litmus test for this notion.

If you ask me, I would rather say that from my vantage point, forming an opinion as to “if there is a need for going back to basics to reform Islamic banking and finance as an industry driven by Maqasid al-Shari’a in the wake of COVID-19”, would not be prudent amidst the pandemic, and we would need to wait a little more to reach a conclusion by the time the pandemic capitulates to human life. However, I would not hesitate from appreciating the collective response of the Islamic banking and financial services industry, the top-management, Shari’a personnel and those charged with governance in upholding the true-spirit of Shari’a specifically with regard to dealing with debtors in financial difficulty.

There are several verses in the Quran, supported by the sayings of the Prophet Muhammad (peace be upon him), which instruct the believers to be kind to debtors who are in financial difficulty. For example, Verse 280 of Chapter ‘The Cow’ states, “And if someone is in hardship, then (let there be) postponement until (a time of) ease. But if you give (from your right as) charity, then it’s better for you if you knew”. Similarly, Prophet Muhammad (peace be upon him) said, “He who gives respite to someone who is in straitened circumstances, or grants him remission, Allah will shelter him in the shade of His Throne, on the Day of Resurrection, when there will be no shade except its shade.” (Al Tirmidhi).

The modus operandi of Islamic banks is that on the liability side, they collect deposits from the general public primarily on the basis of profit and loss sharing (Mudaraba & Musharaka). The funds thus generated are thereby invested, on the assetside, in different Shari’a-compliant transactions such as Murabaha, Salam, Ijara and Istisna’.

The statement is eloquent of the fact that the Islamic banks work under a fiduciary relationship whereby the protection
of investment account holders’ funds is their foremost duty while ensuring equitable treatment of all stakeholders. This
implies that Islamic banks cannot make a donation out of investment account holders’ wealth or waive an earned profit
since it does not have the right to do so.

For the purpose of brevity, a major challenge faced by an Islamic bank is striking out a balance for fair treatment of its
stakeholders. I would emphasise the readers to clearly understand the foregoing statement since it would help analyse the performance of Islamic banks in light of the Higher Objectives of Shari’a (HOS), consequent to COVID-19.

On the assets side, a significant number of debtors of Islamic banks have had difficulty in timely repayment of their debts
due to lack of business activity and seek rescheduling of their financings. Meanwhile, on the liabilities side, investment
account holders continue to expect smooth profit payouts on their deposits in line with their profit expectations. In my
opinion, Islamic banks have been quite successful in meeting their customer requirements while ensuring compliance with Shari’a values. For this, product structuring, Shari’a compliance and business teams deserve praise for enabling Shari’acompliant debt rescheduling options, which not only help their debtors to manage their cash flows but also enable their depositors to earn Shari’a-compliant profits for these restructured debts.

Another commendable act by some Islamic banks is considering Qard Hasan based financing at zero per cent for special segments such as hospitals and testing labs from their own equity. Moreover, channelling of charity funds for segments of society affected by COVID-19 is also observed at some Islamic banks.

In contrast, a debatable practice is observed whereby it is reported that few Islamic banks are unduly pressing the customers using Shirka al-Aqd based working capital financing (also known as Running Musharaka or RM in Pakistan) to provide consent to terminate RM contracts in order to avoid any potential loss to them as a result of loss to the client at gross level consequent to COVID-19. This is something that appears at least against the gist of Shirka al-Aqd.

Lastly, I would also like to point out the fact that there is still a lot of work required to be done in order to move towards a truly Shari’a-based system from a Shari’a-compliant one. While there is nothing wrong in maximising profits in a Halal way, the industry should strive and come up with unique and robust performance appraisal models where “profit increase on a year to year basis” is not the only measure to gauge performance but the higher Shari’a values are also permeated down the grid right from the top.

Assistant Director
Riphah International University Islamabad

The development of Shari’a governance frameworks across the globe, particularly strong governing rules pertaining to
Shari’a boards, have enabled Islamic banking to gain more trust amongst the current and prospective customers and all stakeholders. This has certainly contributed to the success of the industry . This success can further be extended if Islamic finance can be a part of the COVID-19 response through offering a range of financing instruments well-suited for each stage in this pandemic condition. This may only be possible if we revisit Islamic banking principals in light of the Maqasid alShari’a and fill the gaps that have arisen from continuing compromise on the fundamentals of Islamic banking and finance.

It is important to stress that reforming Islamic banking and finance in light of the Maqasid al-Shari’a must enable us to
lead from a linear economic paradigm to a circular/ecological paradigm, and construction of a global financial architecture consistent with the change. This must also help us to synchronise local aspirations, national goals and Sustainable Development Goals (SDGs). Furthermore, it must remove the structural risks in the design of financial products to encourage integrated reporting, denominated by a commitment to Maqasid al-Shari’a.

However, restructuring complete Islamic financial industry may derail the focus on offering Shari’a-compliant products to cater to the current Islamic financial market suffering from COVID-19 and its effects. Rather a smooth cautious approach with a clear focus and objective may be introduced or developed by the key decision-makers and stakeholders for the achievement and recognition of Maqasid al-Shari’a. To summarise, a careful and candid consideration is needed as “in the midst of every crisis lies great opportunity” goes for the Islamic financial industry as well.

Founder and Chief Executive Officer
PT Magna Cita Marlin

Among the efforts that have been called for and carried out by the world to reduce the spread of this outbreak are social or physical distancing. Unfortunately, this has resulted in a decline in overall economic activity. This has far-reaching implications for the real economy, which at least in principle is the ultimate focus of Islamic banking and finance. The breakdown of the economic chain will not only cause shocks to the fundamentals of the real economy but will also damage the smooth functioning of the market mechanism between supply and demand in order to run normally and in balance. Hence, there will be a New Normal we all have already started talking about.

Given that the vital aspects of the economy, namely supply, demand and supply-chain have been disrupted, the longrun impact of the crisis will be felt equally across all socio-economic levels. As the resilience of each layer or level is different, the middle to lower economic community, especially micro and informal workers earning daily wages, will be most vulnerable. Other segments will take their own hits. The crisis may get accentuated if the problems in the real sector then spread to the distressed financial sector, e.g., due to a large number of investees having difficulty in paying to investors

Referring to my own country, Indonesia, which has the largest Muslim population in the world, maybe heading towards
some challenging times. However, a vibrant social sector and philanthropic movement is expected to play a role in the crisis at hand, and this is where Islamic banking and finance should also focus during and the post-COVID-19 era.

The following could be some of the solutions that can be offered within the framework of Islamic social economics and
finance. In my view, Islamic banks and financial institutions should start looking into what possible roles they can play in this respect.

Firstly, Zakat collection and disbursement. Islamic banks and financial institutions must negotiate a role in Zakat collection and disbursement. There are countries with the well-established Zakat collection and disbursement systems. Islamic banks and financial institutions must learn from these systems to assess their possible role in this respect. This social role of Islamic banks will be vital for their relevance and sustainability in the post-COVID-19 era. In Indonesia, BAZNAS is the national Zakat management body. However, its effectiveness can be improved by greater institutional cooperation with Islamic banks and other social sector institutions.

Obviously, Islamic banks can only do limited things, given the regulatory and other constraints. Hence, there is a need to develop Islamic finance outside the banking sector. In Indonesia, Baitul Maal wa Tamweel (BMT) model is a good example in this respect. I would recommend making mosques as the centre of BMT for the surrounding community. This may necessarily involve registration of mosques as Zakat Collecting Units under the coordination of the Zakat Management Organization.

Secondly, strengthening of cash waqf either through cash waqf schemes or sukuk-linked waqf. The Indonesian Waqf Board needs to work with Islamic financial institutions to promote awqaf so that it can be used in part for the construction of various waqf-based infrastructures such as hospitals specifically for victims of COVID-19, personal protective equipment (PPE) like masks, polyclinic, isolation houses, ventilators, universities and others.

Thirdly, provision of venture capital assistance during a crisis like COVID-19. In the midst of a crisis, Micro, Small and
Medium Enterprises (MSMEs) struggle for continuity of their businesses. These businesses face a survival crisis due to their limited capital. Therefore, providing capital to such businesses is a means of reducing the impact of the crisis. Provision of capital can be done with several policy alternatives, such as providing additional stimuli in the form of relaxation of payments by way of restructuring or suspension of credit/financing payments. The provision of capital from banks/Islamic financial institutions needs to be supported and strengthened with assistance so that it can be accounted for.

Fourthly, the financing can simply be made as a Qard Hasan loan, which does not allow interest charging but may require repayment of loans. This may prove important in supporting recovery or sustaining the economy. Among the channelling options are: (1) Islamic microfinance institutions in financing nano businesses; and (2) direct loans without margins for both business and consumption distributed by companies (private or government) to employees or partners (such as online motorcycle taxi drivers). The funds can come from several sources: general public, private companies, and Corporate Social Responsibility (CSR) funds. To increase CSR funds, the government needs to reinforce CSR obligations and higher contributions from SOEs and private companies.

Fifthly, apart from the Islamic banking sector and Qard Hasan, some of the funds collected by Zakat collection units or
organisations, especially those in the regions, can be used to strengthen MSME businesses. Saving MSMEs that are in
crisis or threatened with bankruptcy because of the economic impact of the COVID-19 outbreak, can be categorised as
asnaf (Zakat recipients).

Sixthly, the development of Islamic financial technology to smoothen liquidity of online market participants, and an increase in focus on social finance must also help.

In the end, if the above programmes, especially direct cash assistance, alms, donations, or CSR, both for the community and the business sector or MSME, can really be promoted, then these efforts are expected to increase aggregate demand and aggregate supply to the right (in the demand and supply curve) is followed by the development of an online market that focuses on MSMEs that bring together demand and supply, so that the economic surplus is reshaped and helps accelerate economic recovery.

Chief Executive Officer
Investment Account Platform

Why do we do what we do? This is basic introversion that one must undergo. This question has been posed in the realm of Islamic finance, mainstreamed by Islamic banking, investments, and Takaful. The same question is highlighted in the midst of this global pandemic we are in. The Covid-19 virus that disrupted every corner of the globe takes us to the same question. What is Islamic finance and how do we utilise it?

The fundamentals of Islamic finance stem from the Quran. So much emphasis on the matter; highlighting its extreme
importance and yet it has been taken lightly. Sometimes even excused under the guise of the promotion of the common good or because there was no choice but to engage in it. Quite a scary slope we are treading, detrimental precedence we are setting and above all, the consequences when we are held accountable.

mam Abu Ishaq al-Shatibi (d.1388) wrote about Maqasid Al-Sharia in his work Al-Muwafaqaat fi Usul al-Shari’a. He
defined Maqasid al-Shari’a as “the attainment of good, welfare, advantage, benefits and warding off evil, injury, loss of the creatures”.

We have a blueprint to success, a proven success blueprint, in it are contracts that have been tested for centuries. The
shackles preventing us from re-living such prosperity seem so insurmountable. However, we may have reached a tipping point where the system that has corrupted it, is beginning to fail. We are beginning to see its decline. The superpowers of the west are not exempt and are being brought to pits they have never seen before: death, unemployment, hunger, unrest. This COVID-19 disruption and further disruptions that will cascade after it will force us to turn to the reliable Islamic ecosystem and its proven concepts.

The scheme of things depicted in the accompanying diagram is the solution – the main raisin d’etre of Islamic finance. The role of technology in its implementation is key and allows it to reach far and wide. The streamlined process in the digital realm has allowed speed to market in record-breaking time. The youth that has awakened to the capacities of technology now have access to knowledge that was scarce to prior generations. It has opened their eyes to what is valuable and priority. All these coupled with the Islamic foundations both codified and passed on from traditions and ways of life may provide us the salvation we all long for, where we truly safeguard human necessities of faith, life, intellect, prosperity, and wealth.

The current pandemic has perhaps offered an opportunity to Islamic finance to go back to basics and implement what it has not done so with significance so far.

Product Development
Abu Dhabi Commercial Bank
Islamic Banking Division

COVID-19 has redefined the paradigm of banking. We are privileged to practice our trade under a government as
responsive and responsible as the United Arab Emirates: with Abu Dhabi Commercial Bank as an industry leader and one of the most trusted brands in the market. ADCB Islamic Banking has endeavoured to address the economic and social fallout that has naturally resulted from this pandemic; keeping in the forefront the health and safety of its employees, customers, business partners and community.

For practitioners, as we are defining Islamic Banking & Practice within the framework of Islamic Economics is a fundamental mission. It is fortunate indeed that we operate under the aegis of ADCB and in the UAE.

The response and relief measures rolled out due to COVID-19 is a demonstration of putting theory to practice.

The UAE government through various groundbreaking economic and social schemes targeted at a cross-section of the
economy set the tone for bankers to follow.

ADCB leveraged its financial strength and expertise and was the first bank in the UAE to roll out a comprehensive programme of relief measures for customers including:

• Deferment of facility payments,
• Fee reductions and waivers
• Rescheduling of working capital and
• Temporary Rate reduction for businesses.
• The bank in association with the Ministry of Education supported distance learning scheme for students and
• Invested in a programme to express gratitude and alleviate the burden of frontline healthcare professional.
• Banking services remain uninterrupted delivered through the bank’s highly committed frontline and those working
• The bank pledged to its employees that there would be no redundancies in 2020 on account of COVID-19.
• In line with our commitment to service excellence and continuity of operations select ADCB branches remained open;
majority of ATMs remained operational and services enhanced and delivered through digital capabilities.
• Vendor relationships were honoured with zero disruptions.

Through the financial crisis a decade ago, mergers & integration and the response to the pandemic’s challenging macroeconomic landscape the bank has emerged steadfast in adversity and more determined than ever to support all its stakeholders.


While the green shoots of economic activity re-emerge and promise cautious hope for a better tomorrow; we are tasked with applying Maqasid al-Shari’a to design thinking to tirelessly enhance the ever-evolving customer experience. An experience delivered through simple safe and practical technological solutions by sensitised and humane bankers.

Post pandemic society and especially “Gen C” will expect nothing less and it is incumbent upon us to deliver nothing

Stay safe, stay positive and be kind to yourself.

Alles volat propris.

Head of Islamic Finance Centre

The Bahrain Institute of Banking and Finance (BIBF)

The impact of the global Coronavirus disease (COVID-19) has been vast and will change the manner in which people live their lives as well as business operations. The pandemic is a reality for all organisations and will cause and reinforce new forms of transformation, far beyond those that may have already been envisioned in organisational strategies and forecasts.

It is probably safe to assume that this pandemic will eventually pass, but it is now also appropriate to assume that the
financial services industry, be it Islamic or conventional, will go through a seismic shift. Regardless of the cause, a crisis
requires immediate and appropriate actions to mitigate and prevent irreparable harm. In this opinion piece, however, I will not be discussing the policies or risk mitigation strategies the Islamic finance industry needs post-COVID-19, rather, I will be discussing what the potential new normal could be for the Islamic banking industry.

As a first step, we need to step back and assess what was normal pre-COVID-19 and more importantly, was it working. The Islamic finance industry was growing, yes, however, if we compare the growth rate from 2000 – 2009 and 2010 – 2019, we see that post-2009, the growth rate of the industry started to taper off. One of the reasons for this was the global commodities “super-cycle” that prevailed until the financial crises hit the globe. Affluent Muslim countries had exposure to commodities in terms of production, which had resulted in a positive spillover on the Islamic finance industry.

However, other underlying issues were facing the industry, such as the lack of innovation of products and services. Here I am not alluding to FinTech, rather new products (especially pertaining to retail banking); for example, the go-to product for the industry when it comes to financing activities has been Commodity Murabaha/Tawaruq. I will not go into a discussion on the legality of the product as per the Shari’a, given that AAOIFI standards allow it (albeit as a last resort). On top of this, given that only two companies facilitate a majority of the Tawaruq transaction (mostly DDCAP but IGER as well), this poses an institutional risk to a USD3 trillion industry. It is baffling that, given the size of the industry as well as the number of research papers and conferences that are held, for 20 years we have been unable to find a viable alternative to Tawaruq.

The promise of Islamic finance to address some of the shortcomings of the conventional financial system (especially
post-2008) has largely been unfulfilled. Most countries where Islamic banking is relatively popular still have low levels of financial inclusion. Islamic financial institutions have also not leveraged on the fact that globally Muslims are the youngest demographic, and financial products and services should target young adults. Also, Muslim majority countries have huge exposure to remittances (both outward and inward) and financial products aimed at these are again largely missing.

The Islamic finance industry was at the third inflexion point in its evolution when the COVID-19 pandemic, as well as low oil prices hit, which I believe will expedite the much-needed development.

The first stage of Islamic banking was in-fact answering the question if there could be a bank base on Islamic principles. This was answered by the founding figures of the Islamic finance industry (although what the industry would become, even they could not envision!). Then the torch was passed onto the second generation of Islamic finance leaders, who faced the challenge of scalability and expansion with much success. Currently, the leaders are faced with a new challenge: to prove that Islamic banking belongs at the world stage and has a global value proposition, rather than being limited to a Muslim or Shari’a sensitive consumer base.

This is where Maqasid al-Shari’a fits in perfectly. If we look at another sub-sector of finance that has taken off since the ‘90s, especially in the Western countries, it is ethical finance or Socially Responsible Investing (SRI). Given the basic tenants and objectives (Maqasid) of Islamic finance that are based on fairness, ethics etc. Islamic banking and finance should already be considered ethical finance in most cases. The challenge, however, is how to position the Islamic finance industry to truly be ethical as well as sending this signal globally. This is where the United Nations Sustainable Development Goals (UN SDGs) come into play; a collection of 17 global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030, with 193 countries as signatories. Most of the SDGs are also in-line with the ethos of Islamic teachings and multiple research papers have linked Maqasid al-Shari’a as being in line with the SDGs.

Therefore, if the global Islamic finance industry needs to evolve into something that is truly in-line with Islamic teachings while signalling to a wider consumer base that Islamic banking is indeed ethical and socially responsible, the new normal must be adherence to the SDGs. To this end, technology should be leveraged to find innovative and efficient ways for Islamic financial institutions to be in line with the SDGs. The BIBF Islamic Finance Centre in patronship with the UKbased technology provider Cogneum has started developing the first-ever software solution that will ensure a financial institution’s Shari’a governance as well as adherence to selected SDGs.


Navigating a World of Risk

As a member of the Islamic Development Bank (IsDB) Group, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) facilitates trade and investment between member countries and the rest of the world through Shari’a-compliant risk mitigation tools.

With ICIEC’s insurance support, exporters and investors can enter new markets and grow their businesses. In its 26 years of existence, ICIEC has catalysed over USD50 billion of exports and USD12 billion of investments across its 47 member countries.

To fulfil its mandate, ICIEC provides risk mitigation solutions to member country exporters, by protecting them from commercial and political risks, and enabling them to sell their products and services across the world. ICIEC also provides risk protection to investors that seek to invest in its member countries.

The Benefits of ICIEC Solutions

The rationale for ICIEC’s involvement in insuring trade is to stimulate
exports where there is market failure in commercial lending or private
credit insurance coverage, due to high country risks, substantial buyer
risks or long financing tenors.

When exporting, it is not always easy to predict
from where the risks will arise. Insurance
coverage therefore gives companies peace of
mind and confidence, allowing them to maximise
their export business volumes and to invest
in new markets. In addition, the coverage is
crucial for access to financing. ICIEC offers a
full product suite, including short-term whole
turnover insurance (up to one year), which covers
an exporter’s whole book of buyers, and specific
risk insurance covering individual buyers. This is
done through ICIEC’s Comprehensive Short-term
Policy (CSTP) and Specific Transaction Policy
(STP). ICIEC can also provide a medium-term
insurance facility (2-7 years) for clients involved
in longer-term, capital-intensive projects.

ICIEC also provides mitigation against losses
resulting from two risk categories to banks
and financial institutions through Investment
Insurance Solutions. The two categories of risks
ICIEC covers are political risk and commercial risk.

The political risk insurance products are designed
to help cover non-commercial risks such as
country/political risks in the host countries.
Guarantees provided by ICIEC cover political
risks of cross-border loans such as currency
inconvertibility and transfer restrictions, non-payment caused by expropriation, non-payment caused by war and civil disturbance, breach of contract and the nonhonouring of Sovereign Financial Obligations by sovereign or sub-sovereign entitie.

Cover for commercial risks include protection against losses caused by insolvency of the buyer or LC issuing bank, failure or refusal of the buyer or LC issuing bank to pay, refusal of the buyer to accept goods after shipment and cancellation of the contract arbitrarily by the buyer.

As the only multilateral Export Credit Agency that provides Shari’a-compatible export credit insurance, ICIEC is uniquely
positioned to partner with Islamic financial institutions. The Corporation has specific policies to address the various
needs of Islamic banks, such as the Bank Master Policy, which is designed for both conventional banks and Islamic banks involved in financing export operations. ICIEC also provides a Documentary Credit Insurance Policy (DCIP) where banks of exporting countries are covered against the risk of non-payment by host country banks for commercial or political reasons.

Driving Economic Growth
Stimulating Exports

Given the current uncertainties in global and OIC
export trends, access to reliable trade finance is crucial
in developing and sustaining a resilient and successful
export sector. ICIEC’s mandate is aligned with many
member countries’ visions to build and expand their
industries, improving diversification and increased
economic security.

Enhancing Market Appeal

Accessing new markets can be daunting for investors for
a variety of reasons. Many investors consider ICIEC’s least
developed member countries to be high-risk destinations
and remain hesitant to enter these markets. Promoting
business with, and investment into, its member countries
is central to ICIEC’s mandate. ICIEC is committed to
providing risk insurance for transactions with businesses
in these countries and their insurance products provide
investors with the solution and assurance of entering
new and potentially riskier markets.

ICIEC’s insurance is not only useful to firms seeking to
access new markets but also for firms looking to increase
investments and service delivery to their existing markets.
Expansion in existing markets can also entail risks given
the various economic, political and social uncertainties.
The insurance ICIEC provides gives these firms the
protection they need to expand their market share.

Over the last two decades, ICIEC has promoted sector
growth by enabling over USD2.6 billion in economic
activity for labour-intensive sectors, like agriculture and
textiles, and over USD7 billion in total business insured
in the low income and least developed nations. Member
countries are finding ICIEC products to be essential to
growing their industries as over the past five years, the
number of export transactions facilitated by ICIEC has
more than doubled.

Promoting Intra-OIC Trade & Investment

Strengthening trade and investment links is at the core
of both ICIEC’s mandate and 10-Year Strategic Plan.
ICIEC encourages businesses to explore the many
exciting opportunities in fellow member countries.
Since inception, ICIEC has facilitated more than USD24
billion in exports among its member countries, and over
USD5 billion in intra-OIC investment. In 2019 alone, the
Corporation insured a total of USD10.86 billion of intraOIC business, involving 36 member countries.

Advancing Sustainable Development:
Backing the SDGs

The SDGs encompass social, economic and environmental dimensions of development internationally and are signposts for ICIEC’s development story. The goals play a critical role in ICIEC’s strategy and shape the development outcomes they seek to achieve. Though many projects contribute to more than one SDG simultaneously, ICIEC’s development role in member countries is most relevant to 6 of the 17 goals

Supporting Development Agendas

ICIEC’s ultimate objective is to support the socioeconomic development of its member countries, in line with each
country’s strategic priorities and ICIEC’s institutional mandate. This approach allows member countries to identify their
most crucial needs and take ownership in addressing those needs. In addition to providing infrastructure development
for member countries, ICIEC’s insurance support often facilitates job creation, supports the local economy via local
procurement of services and equipment, and fosters technology and knowledge transfer.

Apart from aligning itself with the respective member countries development plans, ICIEC as an investment insurer
seeks to enhance the overall attractiveness of its member countries as recipients of other FDI sources. Through the
execution of successful investments, ICIEC seeks to achieve a demonstration effect, meaning that third parties, such
as commercial banks, private insurers and investors gain confidence to enter sectors and markets formerly deemed too

Empowering Infrastructure

Improving access to infrastructure is among the top priorities of ICIEC. Across all age groups, population is expected
to increase in ICIEC member countries. This means there will be higher demand for basic goods and services such
as education, health, water, and energy. Consequently, ICIEC member countries have to develop infrastructure to
keep up with the growing population. This can prove difficult for lower income and/or high-risk investment countries,
where mobilising large sources of finance can be perceived as risky without adequate mitigants. Their multilateral and
preferred creditor status make ICIEC an attractive partner for investors and stakeholders who are willing to embark on
these projects.

Improving Access to Healthcare

ICIEC has insured over USD1.4 billion toward medical facilities, supplies and pharmaceuticals, allowing exporters to
supply markets and health care systems within member countries and globally beneficiaries of this support include
women in the developing member countries where only half of the women have access to the health care they need,
and where the maternal mortality ratio is 14 times higher than in developed regions.

Enabling Access to Clean Energy

The energy sector is a high priority for many of ICIEC’s member countries, given the growing demand for energy that
comes with the demographic changes and economic growth most have witnessed over the recent decade. Since its
inception, ICIEC has been an integral player in assisting member countries to gain better and more efficient access to
clean energy sources. Providing over USD21.9 billion to energy support in its 26 years so far.

Growing Islamic Finance

Facilitating the introduction and growth of Islamic finance products and services, including takaful, is an intrinsic
component of ICIEC’s mandate. ICIEC is committed to expanding the reach of Islamic finance in member countries, in
terms of both consumer awareness and access. Healthy regulatory environments, increasing wealth in Muslim countries, economic diversification efforts and population growth in member countries all present potential for large-scale growth in the Islamic finance industry.

For more than two decades, ICIEC has been providing trade credit Takaful services to support member country exports,
and foreign investment Takaful to support the inflow of foreign direct investment. Takaful has the potential to provide
growth in untapped markets that show low insurance penetration for both general and family takaful businesses. Since
its inception, ICIEC has insured over USD42 billion through trade credit Takaful.

ICIEC is also a pioneer in Sukuk insurance, deploying its first product back in 2013. The Sovereign Sukuk Insurance
Policy provides credit enhancement in transactions involving sovereign and sub-sovereign entities. It insures the Sukuk
investor against default on Sukuk issued by sovereign entities of member countries. The product enables member countries that are unrated or rated below investment grade, to gain access to international capital markets and mobilise resources by providing insurance cover to investors. By accessing Sukuk, companies can increase their investor base through stronger ratings, raise loan tenors and decrease borrowing costs. The Corporation now provides third party guarantee as an essential component of today’s export credit, investment and Sukuk insurance mix.

Leveraging FinTech

A significant factor in the stunting of trade and foreign direct investment growth in ICIEC member countries is that
financial institutions are hesitant to invest in countries who can’t provide strong and accurate reporting data. Statistically, only 11% of the adult population of OIC countries are registered in a credit reporting system, falling far behind the OECD average of 66%.

Propelling FinTech within OIC

In order to combat this gap in capacity, ICIEC and COMCEC initiated a feasibility study into creating the OIC Business
Intelligence Centre (OBIC), which has since been approved. The OBIC is envisioned to be a powerful IT platform
that will combine Blockchain and Artificial Intelligence to facilitate data-driven solutions and decision-making with
greater convenience, accuracy and speed. Applying this technology in financial services – known as fintech – has the
potential to reduce costs and increase efficiency, allow firms and individuals to transact seamlessly and instantaneously, and improve institutions’ understanding of its customer’s actions and needs, allowing for the deep personalisation of
financial services. The use of technologies will ensure that end users of the OBIC services can make evidence-based
decisions when assessing member countries as places to do business.

Mitigating Risk, Advancing Recovery

ICIEC is deeply concerned about the tragic losses, socio-economic disruptions and the strain on member countries
caused by the prevailing COVID-19 pandemic. In the process of overcoming this crisis, they are not shying away from
supporting clients. ICIEC will continue to be a steadfast partner of businesses across all 47 member countries and
stands ready to extend all possible support. Even as the private insurance market is wary of providing cover for exports
and investment, ICIEC’s support remains in full effect. ICIEC is fortunate to have the leverage of a strong credit rating
to ensure that supply chains to and from member countries remain intact, preventing already challenging times from
becoming catastrophic for lower income countries.

In order to support member countries in this time of need, IsDB Group has set up a special ‘Strategic Preparedness
and Response Facility’ of USD730 million to mitigate the negative health and socio-economic impact of the COVID-19
pandemic. This includes USD150 million from ICIEC for insurance coverage. ICIEC will provide credit and political risk
insurance to sustain imports of strategic commodities, investment protection, and to minimise volatility.

Many countries are now turning to how best to re-start their economies while containing the coronavirus. Ensuring
international trade and investment continue to flow will be a key part of the restart, which in turn requires access to
insurance cover and credit. Continuing its rich tradition, ICIEC can play a critical role in addressing market gaps and
meeting the immediate needs of priority sectors.


Governance, in its etymology, represents practices that govern or direct a group of people, an
organisation or a country. The term governance can apply to corporate, international, or national
governance, or to the interactions between alternative sectors of society. Traditionally, good
governance has been used to refer to public sector organisations, however, it now also covers
private businesses as well as the social sector. Ideally, good governance is partaking, conspicuous
and accountable.

Good governance is imperative for sustainable
growth and welfare in a global world. It is a
concept, policy and practice without boundaries.
Governance isn’t just about making the right
decision; it is about the process of decision
making. It is about promoting corporate fairness,
transparency and accountability.

As part of its social responsibility initiatives
and to promote good governance practices
world over, Cambridge IFA is spearheading a
comprehensive initiative to promote governance
and sustainability in the form of the Global Good
Governance Awards or 3G Awards, which is
organised annually.

While good governance has been well-established
in the developed countries of the world, it is only
due to the initiatives like 3G awards that it is
observed to be gaining grounds in the most of
the emerging and other less developed countries
of the world. Economic growth and good
governance go hand in hand. The direction of
causality may be subject to debate and discussion
but there is no denial of the fact that growth and
governance help and strengthen each other. The
3G Awards recognise this strong relationship and
the participants expect that explicit recognition
of good governance will help economic growth
and subsequent prosperity.

The 3G Awards celebrates individuals,
governments, public and private institutions, and
NGOs that demonstrate making governance and
sustainability a strategic priority. As a premier
awards programme, the 3G Awards highlight
excellence in good governance and commitment
to social welfare in 3 major streams: Government
& Politics, Corporate Sector and Social Sector &

There is no “one-size-fits all” meaning to
good governance but one key theme that
stands out amongst the various definitions
of good governance is ‘sustainability’. The
interrelationship between good governance and
sustainability is central to long term success be it
public sector programmes, corporate profitability
or social sector programmes.

In essence, good governance and sustainability is
about better managing assets and resources with
the objective of making them more inclusive,
transparent and participatory.

The 3G Awards promote good governance and commitment to social welfare by:

• Recognising leadership efforts of individuals, governments, corporations and NGOs in practicing good governance principles in their functioning;
• Recognising implementation of innovative practices, programmes and projects that promote the cause of good governance,
transparency, sustainability, and social responsibility; and
• Enthusing governments, corporates and NGOs in focusing on good governance and social responsibility practices.

Since its debut, over 150 awards have been
presented to exceptional individuals and
institutions drawn from more than 25 countries
in different continents. These include public
sector individuals and organisations, businesses
from the airlines industry, tourism, financial
services, manufacturing, education and energy;
and social sector organisations serving different
causes in health, women empowerment and
children welfare.

The inaugural 3G Awards ceremony was held
in the historical city of Istanbul, Turkey in
2016, followed by Dubai in 2017 and Kuala
Lumpur, Malaysia in 2018.The 3G Awards 2019
ceremony was hosted by the Ministry of Tourism
Indonesia and was attended by more than 200
guests and participating organisations from over
18 countries.

This year’s award ceremony was scheduled to be
held on April 7, in Bali but due to the COVID-19
pandemic, technology was used to host an
online awards ceremony that was watched by
thousands of people from all over the world
on different platforms from the comfort of their
offices or homes. This year’s 3G winners came
from around the world but the focus has been
on encouraging participation from the emerging

The 5th Global Good Awareness (3G) Awards
online award ceremony was organised by
Cambridge IFA and was held virtually in London,
the capital of the world. This would certainly not
be the first or the last online award ceremony
as the awards committee would be making this
a regular feature alongside the physical award
ceremony post COVID-19.

The award nominees went through a rigorous
process of selection, and winners were
selected based on the 3G score card developed
by Cambridge IFA, consisting of 5 pillars:
Transparency, Social Responsibility, Sustainability,
Impact and Innovation.

Transparency: commitment to operate ethically
and legally with integrity, transparency and

Social responsibility: promote best practices
in social responsibility, economic viability, and
environmental stewardship.

Sustainability: promote sustainable practices
and initiatives that embrace the triple bottom
line: economics, social equity and environment.

Impact: initiatives or contributions resulted in
improved outcomes to community or industry or

Innovation: development of new ideas, practices,
or products that promote and/or improve
business practices in the realm of governance.

Individuals and institutions from over 15
countries across 5 continents were honoured for
their leadership roles and sustainable practices in
good governance and social responsibility.

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