Significance & Impact of Shariah Compliance in Islamic Leasing Finance
This session highlights the importance of Shariah compliance in Islamic leasing finance, emphasizing the role of Shariah rules and principles in transactions. It explores the responsibilities of management and the Shariah Supervisory Board in ensuring adherence to Shariah standards. The session also delves into maintaining Shariah compliance at the highest level and the significance of Shariah awareness among staff.
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Presentation Transcript
Presented By: Sadaqat Khan, Senior Ex cutive VP Head of Sharia Advisory, Audit, Compliance & Ex cution AlHuda Centre of Islamic Banking & Economics (CIBE) ISLAMIC LEASING FINANCE IJARAH SHARIAH AWARENESS SESSION ON SIGNIFICANE & IMPACT OF SHARIAH COMPLIANCE
Islamic leasing Ijarah Finance Significance & impact of Shariah Compliance Shariah Compliance is; The identity of Islamic Finance
Significance & impact of Shariah Compliance A transaction is considered as Shariah Compliant? If completed by applying the; Shariah Rules and Principles And Shariah Process steps As determined by the Sharia Board 18 May 2015 3 DIFC - Dar Al Sharia Trainings
Islamic leasing Ijarah Finance Significance & impact of Shariah Compliance Significance & impact of maintaining Sharia Compliance at the highest level. A Transaction is considered as Shariah Compliant? If Completed by applying: The Shariah Rules and Principles And Shariah Process steps, As determined by Sharia Supervisory Board
Significance & impact of Shariah Compliance Islamic leasing Ijarah Finance
Islamic leasing Ijarah Finance Significance & impact of Shariah Compliance Role & Responsibilities of the Management To manage/ensure implementation of Shariah Rules and Principles, relating to the products & services, as determined by the IFI s Shariah Supervisory Board. By defining Shariah compliant procedures & policies, in line with SSB guidance; By providing Shariah Training to staff
Role & Responsibilities of Sharia Supervisory Board To provide necessary Sharia guidance, directing, reviewing & supervising the business activities To ensure that they are in compliance with Shariah Rules and Principles & Fatwas as issued by SSB: Regular Sharia review of business activities Sharia Audit of financial transactions Spreading Shariah Awareness amongst staff
Islamic leasing Ijarah Finance Significance & impact of Shariah Compliance Role & Responsibilities of Sharia Supervisory Board To provide necessary Sharia guidance, directing, reviewing & supervising the business activities; to ensure that they are in compliance with Shariah Rules and Principles & Fatwas issued by SSB: Regular Sharia review of business activities Sharia Audit of financial transactions Spreading Shariah Awareness amongst staff
Significance & impact of maintaining Sharia Compliance at the highest level. Avoiding the forfeiture of non-compliant income: Not following Shariah defined process steps during the transactions; may result in forfeiture of income derived from these transactions
Significance & impact of maintaining Sharia Compliance Achieving the satisfaction / confidence level of the Board of Directors & Shareholders Regulatory Authorities & Shariah Board Customers & General public, convincing more
Islamic leasing Ijarah Finance Significance & impact of Shariah Compliance Significance & impact of maintaining Sharia Compliance at the highest level Religious Obligations: Most importantly, fulfilling the Religious Obligations , towards implementing the Shariah Rules & Principals rightly.
Islamic leasing Ijarah Finance SHARIAH RESTRICTION ON IJARAH FINANCING It is not permitted to provide Ijarah financing to Sharia repugnant / non- compliant business activities: Trade in all kinds of Alcohol/Liquors/wine etc. Trade in Pork or its by-products Trade in Tobacco or its products
Islamic leasing Ijarah Finance SHARIAH RESTRICTION ON IJARAH FINANCING Sharia repugnant / non-compliant business activities: Gambling / Casinos / Night clubs etc. Adult Entertainment / Pornography Financial Services dealing in interest Conventional Insurance Cos. All other Sharia repugnant businesses
Islamic leasing Ijarah Product structure & Process flow Transfer of assets to customer at the end of Lease Period 5 1 Promise to Lease by Customer 3 IFI / Bank (Lessor) Customer (Lessee) Lease Agreement 4 Payment of Lease Rental by Lessee Purchase of Asset Payment of Price Seller of Asset 2 14
Islamic leasing Ijarah Finance Shariah Compliant Process flow of Ijarah 1. Promise to Lease by the Customer 2. Purchase of Asset by the IFI: Payment of price and possession of the assets by IFI 3. Execution of Lease Agreement: Between IFI and Customer for agreed Lease Period & Rentals 4. Payment of Fixed & Variable & Rentals by Customer to IFI 5. Transfer of Asset ownership to Customer: At the end lease period by way of Sale or deed.
Thank you for your Attention Sadaqat Khan, Senior Ex cutive VP Head of Sharia Advisory, Audit, Compliance & Ex cution AlHuda Centre of Islamic Banking & Economics (CIBE) Authored by Sadaqatullah Khan sadaqatg@hotmail.com It is Not allowed to copy or use the contents of this presentation without author's prior permission
