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Home arrow Business & Finance arrow The art of RF (riba-free) Islamic banking and finance


It is the author's deep-seated belief that the public and businesses in the West will gradually become greatly interested in real added value offered by the services and products of the new RF brand of banking. In addition, bankers will be drawn to the concept because it exercises prudence in financing by considering it a true investment and not a mere process to rent money, reduces overhead to a reasonable level, and keeps loan and lease losses to a minimum, and because RF banks deal with those people who are well known to the RF bankers who serve them in the local communities. Hence, the RF banker will be fulfilling the know-your-customer rule of banking and finance. All these and the trust of the community will expand the RF bank's business and increase its profitability. That is why it is important to prepare the groundwork, starting now, for this new brand of banking — RF banking.

My vision of the twenty-first-century Shari'aa Board for an RF bank will be renamed as a Shari'aa Advisory Committee, which will not only include Muslim scholars but also scholars from the Jewish, Christian, and other faith-based communities. The idea of a united Judeo-Christian-Islamic approach to RF banking will make it very attractive and highly credible.

The Shari'aa compliance officer, or the Shari'aa Advisory Committee supervisor, will ideally be a scholar who is trained in formal scholarly sciences in an accredited religious studies department at a major institution or seminary, such as Al-Azhar in Cairo, the Hawzah (means seminary) in Qum (Iran), the Hawzah in Al-Najaf (Iraq), International Islamic University in Pakistan, Aligarh University in India, King Abdul Azeez University in Jeddah, McGill University in Canada, Princeton University in New Jersey, or Claremont Graduate University in California. These graduates should not only be well versed in the Islamic law but also in the Jewish Bible, rabbinical laws and traditions, and in the Christian Bible(s) and traditions. These graduates should also have obtained a degree in economics, finance, and/or banking from an accredited university, making them well versed in banking and finance as well as religious law. It is true that it will take many years to achieve this, but the rewards will be worth the investment of time, money, and effort. This process is reminiscent of preparing securities lawyers in the United States. Securities lawyers specialize in the laws of the Securities and Exchange Commission (SEC) in the United States. Many of them start as graduates from universities in the fields of economics, business, or even in the sciences or in history. They often work as financial consultants or stockbrokers in an investment bank to gain hands-on experience for a few years, and then return to college to study for another advanced degree in law to qualify as a securities attorney.

In addition to the requirements listed, an operating license in the field of compliance with the law (Shari'aa) should be made necessary, as is done when licensing a stockbroker, an attorney, or a medical doctor in the United States. There are currently a number of pseudo-regulatory organizations like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in Bahrain[1] and the Islamic Financial Services Board (IFSB) in Malaysia.[2] My vision for the process of producing the qualified RF scholar will be the same as that used to produce attorneys, medical doctors, and certified public accountants in the United States. It also involves annual or periodic renewal of licenses by conducting required examination to keep all of them informed of the latest regulations and developments in the field of RF banking in particular and banking and finance in general.

The Central Bank and the Regulatory Shari'aa Compliance Committee

To minimize confusion and conflicting opinions passed by different Shari'aa scholars and different Shari'aa compliance boards of different institutes, the Malaysian model of having one Shari'aa Board appointed, run, and supervised as an independent entity in the central bank of the country involved represents an attractive option to emulate. This central bank Shari'aa Compliance Board is responsible for issuing legal opinions and will be in charge of examining the RF bank's compliance in the same way all operating banks are examined for compliance by the central bank (or the Treasury Department's Office of the Comptroller of the Currency in the United States). However, in this case, testing and examining for compliance will be about adherence to the fatwas (edicts) and legal opinions that comply with Shari'aa as stipulated in the charter of the RF bank.

  • [1] Please visit their websites: and IslamicBanking
  • [2] Please visit their websites: and IslamicBanking
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