Event Review: Islamic Finance For All Conference 2012
Where: Sultan Mosque
When: December 15th 2012
By: Amanah Assets[/box_dark]
For the first time in Singapore, a public conference discussing the various aspects of Islamic Finance was held and it received a healthy response. With more than half of the participants being young men, the lower deck of Sultan Mosque’s Auditorium was almost filled, reflecting the Singaporean Muslims’ thirst for more knowledge on Islamic Finance. Such a conference was in fact necessary for Muslims living in Singapore, with our country boasting to be the financial hub of South East Asia, and our neighbor Malaysia, a growing centre for services in Islamic Finance.
There is an urgent need to know how we can get involved in the financial world without crossing the boundaries of religion. The conference was carefully planned with topics discussing Islamic Finances at the community level, like how Islamic Finance fits into the development of the Ummah, right down to the individual level of personal investments and the need to have a Wasiat, thus giving a holistic picture of Islamic Finance in the world today.
With experienced professionals in the field as key note speakers, sharing their experience bringing up the industry in Malaysia, as well as a few local speakers who gave more down-to-earth advice about what Singaporeans can do, the conference on the whole proved to be a strong start to increasing Singapore Muslims’ knowledge about Islamic Finances, and a positive step in the development of a stronger Islamic Finance industry in Singapore.
How Islamic Finance Fits Into The Development of a Community
The conference started off with the first invited speaker: Dato’ Mohd Fadzli Yusof, who was the founding CEO of Malaysia’s pioneer Takaful (Islamic Insurance) operator, Syarikat Takaful Malaysia Berhad in 2005. Having more than a decade of experience in developing Islamic insurance in Malaysia as well as in the region, Dato’ Mohd Fadzli was well in position to explain the need for Takaful and how it would help the Muslim community at large in the long run.
He began by quoting several Hadith and several verses from the Quran to shed light on the concept of wealth in Islam, and that saving up is encouraged in the religion. Having established this, he then went on to explain in simple terms, conventional investment and why it is impermissible for Muslims to take part in, especially if they have the choice of takaful.
Despite sometimes having to use technical jargon of the financial world unfamiliar to the layman, Dato’ Mohd Fadzli was overall very clear in informing the people of the realities of conventional insurance and Takaful, even drawing a comparison table at the end of his talk. He did express regret that he was giving the lecture after the only Takaful package in Singapore had been withdrawn by HSBC, leaving the Singaporean Muslims unable to act on the knowledge they had just acquired.
However, he stressed that as a people, we can and should express a demand for Takaful products so that insurance companies will recognize there is a sizeable market in Singapore and will be convinced to develop and offer Takaful products. InshaAllah, Singapore Muslims will be able to push for a supply of more shariah-compliant financial products.
Global Islamic Finance Development and Islamic Wealth Management
The next speaker was Mr. Wan Abdul Rahim Kamil, the director and principal consultant at the First International Consulting Sdn Bhd which is a firm in Malaysia that specializes in Islamic Finance consulting, training and advisory. Mr. Wan Abdul Rahim has been involved in Islamic Finance for three decades and is a highly respected individual in the industry.
He began by addressing some common questions people would be asking about Islamic Finance: its performance globally, how it has fared during financial crises and why even the non-Muslims are looking into it. He gave a fair response to these concerns, in saying that Islamic finance is still very small compared to the global market, which is one of the reasons why it seems to not be very affected by financial crises, besides it being resistant.
For most of his talk, he presented figures and facts about the growth of the Islamic Financial market in Malaysia, from the Sukuk Market to Shariah-compliant stocks. However, perhaps due to his expertise in the area, he tended to use a lot of technical terms which made it difficult for the commoner like me to follow his discussion. Even so, he would always restate the conclusion for the figures he was presenting, making it clear to the audience the hard facts of Islamic Finance.
Question and Answer
The question and answer session for the key note speakers was a very engaging one, with so many questions coming from the younger crowd. One of the questions posed to the two speakers was why there wasn’t a full Islamic Bank in Malaysia, considering the growth of Islamic finances in the country. This is in comparison to the full Islamic Bank in Britain, a country with a much smaller Muslim population.
Mr. Wan Abdul Rahim addressed the question by simply saying that even though Malaysia is a majority Muslim country, most of the population is not involved, nor interested in Islamic Banking, unlike the UK where the Muslim community is very much involved and united in seeking halal alternatives for their financial activities. Perhaps if the Muslims in this region were more united in opting for halal alternatives, then we would see the development of such institutions.
Before the break, there was a brief investment update given by the Chief Investment Officer, Mr. Chong Sze King from CFA. Despite having to go through a lot of technical details, Mr. Chong was able to drive across his points in explaining the trend of the investment value of Islamic equities as compared to the conventional ones. After giving the audience a rough idea of how the Takaful market was faring in the global market, he presented some graphs showing the investment value of Islamic equities next to conventional and ethical equities. It was particularly interesting when he explained the difference between ethical and Islamic equities and to see the performances of both.
While the first half of the seminar was more focused on showing the bigger picture of Islamic Finance and its effects globally, the second half was focused on the individual, what we Muslims can and need to do with regards to Islamic Financing, as well as advice on investment. The guest of honour, MP Mr Zainul Abidin Rasheed, started off the second half on a refreshing note by reminding the audience of the importance of learning more about Islamic Finances.
In his address, he recalled the initial stages of the development of Islamic Finance in Singapore, and emphasized to the audience that as Singapore Muslims, we need to pick this up. Though short, his address was essential in tying the entire seminar together as it reminded the audience of the correct intention (niat) in attending the seminar as well as the importance of having such discourse within the Muslim community of Singapore.
The Development & Future of Islamic Finance in Singapore
The next speaker was Mr. Sani Hamid, who is the head of the Financial Alliance Islamic Wealth Advisory. Mr. Sani’s lecture gave the audience a clear picture of the development of Islamic Finance, right from the time it first took root in Cairo in the 1970s to the present day and even what we could expect for the future.
He explained that though the Islamic Finance Industry is the fastest growing segment of the global financial system, it is still considered to be in its infancy, as compared to conventional financing. Some of the main challenges it faces is the management of risk, lack of contract standardization as well of lack of standardized opinions amongst the scholars of Islamic Finance.
Moving on to Singapore, after flashing a general timeline of the introduction of Islamic Finance products in Singapore, he highlighted a very interesting point that the industry has been somewhat ‘unlucky’ as the products happened to be introduced right before major global or regional financial crises. This gave a very negative impression of Islamic Finance, giving rise to misconceptions. As such, the subsequent uptake of the products was low and eventually there was a withdrawal of products from the market.
Mr. Sani then spent the next part of his lecture dispelling major misconceptions about Islamic Finance. This part of the lecture was to me one of the most enlightening parts of the seminar, as this empowered the audience with knowledge when talking to Muslims who are against Islamic Financing.
He began with the misconception that Islamic Investments are high-risk by nature. Risk is something inevitable due to the basic law in Islam that in investments, there should be a risk factor as well as a profit factor. However, he pointed out that Muslim investors should be taught how to create portfolios for themselves to suit their level of comfort in taking risks. This is a clear and simple way of overcoming this problem, especially for Muslims just starting in the industry. He then showed a graph to prove that Islamic products can indeed make money, to dispel the second misconception that Islamic Investments never make money.
His third point was a crucial point in addressing comparisons between Islamic and Conventional Investment. Simply put, some of the biggest money-making industries in this world are non-halal by nature, like entertainment, gambling, and tobacco, which is why it would be illogical to try to compare the two.
Mr. Sani went on to show that today, with the development of software like IdealRatings, it is easier for the individual to screen stocks in Singapore to know which would be halal investments. Also, there is more information now available online and also in the newspapers covering Islamic Finance.
Mr. Sani stressed that a lot more products could be offered, such as Ar Rahnu, which is Islamic Pawn Broking, interest-free money lending, and debt advisory. However, this is only possible with greater support from the community. Support would include opening up an Islamic savings account to spreading correct information on Islamic Finance. With greater support, financial institutions would be more confident in offering such products and services to the community.
The programme then moved into the presentation of several products and services that the average Muslim in Singapore might want to look into.
IdealRatings is a company that has developed a software that enables anyone interested in halal investments to determine how halal a company is. Mr. Ariff Sultan, the Regional Director for Ideal Ratings, gave a very detailed presentation of the use of the software. He showed that this software has a portal to screen SGX listed stocks, which makes it very easy to use for Singaporeans.
There are several rule books also programmed into the software so that the user can choose which rule book he is most comfortable with or even find out the number of rule books that approve investment in a certain company. A person is even able to make his own criterion for what he would want to be screened of, especially for those who believe in ethical investment. Though short, Mr. Ariff gave a very clear and detailed demonstration of the software.
Ms Cherry Ding, co-founder of SRDC Worldwide began her presentation by explaining the difference between buying gold and buying silver. Simply put, though the same ounce of Gold would cost more in the future, its buying power is more or less the same, as the price of things also tend to increase through time. So people thinking that Gold is a good investment based on its price always increasing is actually a misconception. Gold is just a good way of saving as the value will not decrease as how currency does.
However for silver, it is an investment because its value is able to appreciate substantially. This was the most interesting thing I learnt about buying gold and silver, and it was great that she was able to bring across this point so effectively. There was also a display of dinar and dirham by SRDC outside the auditorium, which caught the interest of many of the participants.
Wealth Advisory Services (FAiWA)
Wealth Advice is one of the services offered by FAiWA. Their representative, Mr. Asmadi bin Ahmad, the Business Development Director of FAiWA, went through the 4 main areas of Islamic Finance management: Investment, Protection, Zakat, and Estate Planning, and explained how it is important for Muslims to seek professional advice with regards to financial planning. He then went on to explain exactly what kind of services they are able to provide for each of the 4 areas. This presentation was important in letting the public know that there are such services available in the market and they do not have to feel like they are entering the Islamic Finance world blind.
IRB Law LLP
As we Muslims know, no matter how much wealth we amass in the world, it stays in the world after we leave. The next service presented is especially for this: What happens to all our wealth when we leave. Mr. Abdul Rahman, a partner at IRB Law LLP, explained to the audience the several ways a person’s wealth could be handled after his death. Many Muslims, including myself, always assumed there was nothing we could do with regards to inheritance because it has all been spelt out for us clearly in the Quran and Sunnah.
However, as Mr. Abdul Rahman explained, in a will, or wasiat, in Islam, a person has the freedom to give 1/3 of his wealth to non-beneficiaries under fara’idh law, including other relatives or charitable organizations. He emphasized that wills are highly encouraged in Islam and clearly presented in table format the benefits of having a will as opposed to not having a will.
He also explained the concept of Hibah and Nuzriah, and their differences, as assets that do not form part of the estate to be distributed by fara’idh law. These two concepts are especially important in Singapore where husband and wife can have joint ownership of a house or a husband is the sole owner of the house. This service of writing wasiat, including nuzriah and hibah, offered by IRB Law is essential in our community as our community has seen so many families break apart in fighting for inheritance, and Muslims questioning the fairness of Islamic fara’idh law without understanding it fully.
The seminar was a really positive start to increasing awareness on Islamic Financing in Singapore. It covered all the important aspects of finance, especially at the individual level. Though the lectures on the history of Islamic Finance and how it is performing in the global market tended to be too technical for the layman, the conclusions given at the end of each lectures were enough to sum up for the audience what were the important take-aways from each lecture.
Also with all the powerpoint slides provided in the event booklet, people are able to do their own personal research back home to understand the more technical lectures better. The products and services segment in the second half was highly beneficial as they were directly related to what the individual Muslim Singaporean could do in switching from conventional finance to Islamic finance. Even for people who are not looking at investments, essential things like having a wasiat or just a simple Islamic Savings account were emphasized, which I personally believe every Muslim should opt for, were emphasized.[divider]