Islamic Banking Industry: Concept, Transactions and Supervision

Islamic Banking Industry: Concept, Transactions and Supervision

 The Gulf Cooperation Council Countries (GCC) Experience

Glossary of Arabic Terms

Sharia: Islamic Law rules and provisions.

Fatwa: A legal opinion or pronouncement made by a Sharia board, or an Islamic scholar on any matter pertinent to sharia law.

Gharar: Describes a risky or hazardous sale, where the details of the sale contract are unknown or uncertain.

Haram: Forbidden

Ijarah: Leasing contract

Maysir: Gambling

Riba: Usury

Murabaha: Crediting Financing

Mudaraba: Profi t and loss-sharing and trust financing

Musharaka: Joint partnership or equity participation

Sukuk: Islamic bonds

Sukuk al-ijrarh: Lease-back Islamic debt instrument

Takaful: Islamic insurance

Qardhasan: Interest-free financing


Abbreviations

GCC: Gulf Cooperation Council

PLS: Profit-Loss Sharing

BMA: Bahrain Monetary Agency

OIC: The Organization of Islamic Cooperation

IFSB: Islamic Financial Services Board

SPV: Special Purpose Vehicle

UAE: United Arab Emirates

    

 I.              Introduction

Recently, Islamic banking has become a very important part of the global financial services industry.

This paper aims to clarify the concept of Islamic banking, highlight most popular features of Islamic transactions; how these transactions in practice are similar to the conventional banks transactions, and the experience of the Gulf Cooperation Council (GCC) in Islamic banking field.

Many writings argue that the practice of Islamic banking is so far from its theory. This paper also investigates the question of whether the key issue in Islamic banking is to meet certain procedures or to achieve the goals of Islamic law.

II.            Definition of Islamic Bank

Islamic banking stems from Sharia Law and all Islamic banking transactions should comply with Sharia Law provisions.

The Organization of Islamic Cooperation (OIC)[1] defined Islamic Bank as “a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Sharia and to the banning of the receipt and payment of interest on any of its operations[2]”

The key feature in Islamic banking is the Profit-Loss Sharing (PLS) which means that the role of the bank is not lending money to clients but participating in the business with the clients as a financier in different financial positions.

To understand the concept of Islamic banking it should be noted that the reference of Islamic banking "sharia law” emphasizes ethical, moral, social and religious factors to promote equality and fairness for society. Thus, the philosophy of Islamic banking does not consider money as an earning asset by itself; but it is used to evaluate commodities[3].

According to Sharia law provisions paying interest (which is called “riba”[4]) is prohibited, rather the Law encourages trading and investment on SPL basis. Therefore, the main purpose of Islamic banking is to achieve welfare for all society and not to earn money[5].Of course, this is the theory in Islamic banking; we will investigate whether the reality of Islamic banking matches the theory.

III.           Beginning and Development of Islamic Banking in GCC

The first private Islamic Bank, the ‘Dubai Islamic Bank’, was set up in 1975 by a group of Muslim businessmen from several countries. In 1977 the Kuwaiti Government set up the ‘Kuwait Finance House[6].

In the 1980s Bahrain implemented Islamic banking within the framework of its existing system. As of early 1999 Islamic financial institutions were present in more than 70 States, and their assets exceeded the USD 200 billion mark. Since the turn of the century, global assets of Islamic financial institutions have increased significantly. State sukuk emerged around 2001-2002 and quickly created a large market in several States, particularly in the GCC region[7].  GCC markets showed that customers are more attracted to the use financial instruments offered by Islamic banks.

The GCC has a dual banking system where Islamic and conventional banks are operating side by side[8], other countries have different system where Islamic banks are separated from conventional banks, such as Jordan and Palestine.

The key challenge facing monetary authorities in GCC is how to bring the Islamic banks and activities under the same supervision imposed on conventional banks[9].

The development of Islamic finance industry since 1975 encompasses Islamic Takaful (insurance), sharia-compliant asset management and investment banking.

GCC legislations and regulations have facilitated the development of Islamic banking[10].However, other countries, like Malaysia; have done much to encourage Islamic banking through legislations, tax exemptions and subsidies. In 1983 the Islamic Republic of Iran also introduced legislations to make its entire banking system sharia-compliant, a precedent that none of GCC states have done yet[11].

However, that does not mean Iranian Islamic banking is system better than its counterpart in GCC. Islamic banks in GCC have been more innovative than their Iranian counterparts in terms of product development and providing a much more attractive range of services, because of the need to compete with conventional banks in their domestic markets and because the Iranian banks are state-owned, which makes them more bureaucratic than innovative banks[12].

GCC Islamic banks have rapidly expanded their branch network in the world. The Saudi Bank Al Rajhi Bankhas established subsidiaries in Malaysia where it has a network of nineteen branches. Dubai Islamic Bank has established branches in Pakistan, and it purchased the Bank of Khartoum in Sudan as well as three real-estate companies in Egypt. It also has a 27.3 per cent stake in Bosnia International Bank, 31 per cent of a bank in Northern Cyprus and 18.5 per cent of Saba Islamic Bank of Yemen. Dubai Islamic Bank has also a 43 per cent investment stake in real-estate companies in Turkey, Lebanon and the United Kingdom[13].

IV.           Features of Islamic Banking Transactions

The essential feature of Islamic banking is the interest-free principle[14]. However, there are other features. The Islamic finance transactions must avoid the following matters:[15]

  • • Interest (riba): the sharia law treats interests as act of exploitation and injustice by the strong party to the weak party. With interests the rich get richer and the poor get poorer.

The nature of interest is not complying with sharia law, it is fixed and certain and the risk of loss is not available and the Islamic banking based on PLS. The PLS principle assumes that the return is not predetermined but the profit-sharing ratio is predetermined.  The rule that says “if there is no risk then there is no gain” was established under PLS principle[16].

  • • Haram activities: transactions involving forbidden goods and activities (haram), like transactions in dealing with alcohol, gambling, drugs, pork or anything else that the sharia law considered unlawful.
  • • Sales of items not in possession or agreeing to contract without specifying material terms of the contract (gharar).
  • • Speculative transactions or enrichment without labor (maysir), these transactions are seen in Islamic perspective as kind of gambling.
  • • Any transaction should not exploit any party.

In general, any transaction should comply with the justice principles in the sharia law and some risk must be assumed to justify returns in the transactions; unconditional returns are not compliant with the sharia law. 

Many people cannot differentiate between Islamic transactions and normal transactions in conventional banks. The following example clarifies the difference: 

X wants to buy a car in an amount of 50,000$ and he does not have the amount of the car. If he resorts to the conventional bank, he will get a loan in an amount 50,000$ plus fixed interest 3% (for example). If X resorts to an Islamic bank, he will not get the money, instead the Islamic bank will purchase the car in the amount of 50,000$ and resell it to X by 50,000$ plus fixed return 3% (for example).What is the difference between two transactions? In the Islamic transaction the bank possesses the car then resells it to the client which means that the bank bears a risk of loss. In the conventional bank case it has no risk at all; the bank lends only money and gains money and does not deal with commodities.

The question whether the Islamic bank takes a serious risk is a critical question and the answer is addressed in the next section.

V.            Islamic Banking Instruments

Muslim population, from Muslim communities and Western countries, used to use Islamic bank services. The Islamic bank deals with various types of instruments, the following instruments are the most popular in Islamic banking field:  

1.     Murabaha (Crediting Financing)

In this transaction the bank (financier) purchases a good or asset adding a mark-up before reselling it to its client on a “cost-plus” basis. In such case the mark-up is permitted because it is a trade transaction with the risks associated in the sale of goods[17].

In practice, Islamic banks take actions to reduce the risks in murabaha transaction; such as:[18]

  • • Reduce the time between sale and purchase to the minimum by appointing the client as a bank agent to buy the goods.
  • • Reduce the risk of buying a commodity to the minimum by reselling the commodity immediately to the client on a mark-up basis.

By using the above mentioned actions the return becomes fixed and predetermined; however, the transaction is still compliant with sharia law even by taking such actions.

Regardless to any action taken by the bank to reduce its risk; Mohamed Arrif, an Islamic researcher, says “What makes the murabaha transaction Islamically legitimate is that the bank first acquires the asset and in the process it assumes certain risks between purchase and resale[19].

The Islamic scholars did not address the actions that the bank may take to reduce its risk. However, when the question was addressed to a Sharia Supervision Board, the reply was that “speed” is required in commercial activities and these actions make murabaha more effective and fast[20]. 

2.     Mudaraba (Trust Financing)

In this transaction the bank (owner of capital/lender) allows an entrepreneur with ideas and expertise to use the capital for productive purposes. Both parties will share the profits, if any, and losses, if any, however, will be borne wholly by the bank[21]. 

There are two aspects of mudaraba for the Islamic bank; the first one is the popular side in which the bank plays a role in the investment portfolio side. The second aspect is not popular, in which the bank uses mudaraba in trade finance and investment projects[22].

3.     Musharaka (Equity Participation)

In this transaction the bank and its client use their capital jointly to generate a surplus. Both parties will share profits or losses according to how they agreed in the contract depending on the equity ratio[23]. Musharaka is similar to the idea of partnership and joint stock ownership.

4.     Ijarah (Lessing Transactions)

Ijarah is a contract under which the financier (bank/lessor) purchases the required equipment or machine and leases it to its clients (lessee). The parties may agree upon expiration of the period of the lease contract, the title of the equipment or machine may be sold to the lessee[24].

In ijarah transaction the ownership remains with the lessor (bank) and its usufruct transferred to the lessee for specific rental payments incorporating with profits. The fixed leasing charge is allowed under sharia law because the financier assumed risks like a duty of repair and revoke the lease contract by the lessee.

Some writings made analogy between the rent on property and interest on loan. Indeed, such analogy is rejected by Islamic scholars, because the benefit to the lessee is certain, while the benefit for the borrower is uncertain[25].

However, the Islamic banks in lease operations take the following actions to reduce the risks to a minimum[26]:

  • • Appoint the lessee as a maintenance agent,
  • • The lease period enables the bank to recover of principal plus rate of return,
  • • In most cases the lessor would conclude a verbal agreement with the lessee to renew the rent period at a new rent payment. Such agreement falls under gharar[27], which is prohibited under the sharia law, but the banks bypassed it by verbal agreement.

In practice there is a difference between what Islamic rules want to achieve and what the Islamic banks are doing to get around these rules to reduce their risks.  

5.     Sukuk (Islamic Bonds)

The name sukuk is similar to certificates and it’s known as Islamic bonds. In 1988 the OIC legitimized the use of sukuk, but the development of sukuk market took some years.  The Malaysian government issued the first Islamic global bond in 2002. Sukuk may be issued on behalf of governments and also on behalf of corporations. Issuing sukuk is not restricted only to Islamic countries, the German state of Saxony-Anhalt issued a €100 million sukuk in 2004 and the World Bank issued its first sukuk for 760 million Malaysian ringgit ($202 million) in 2005[28]

There are various types of sukuk, but the most popular one is sukukal-ijrarh because each security (bond) is pro-rata ownership of physical assets and trading sukukal-ijrarh in secondary market is permitted[29].

The key idea in sukukal-ijrarh referrers to securitization; although the concept of securitization is derived from conventional bond application, Islamic securitization has distinctive features that distinguish it from asset securitization. According to the sharia law Islamic securitization must be free from riba, gharar and maysir and Islamic securitization must involve the funding or the production of real assets[30].

The uniqueness of Sukuk al-ijarah is that it’s facilitated by Special Purpose Vehicle (SPV) which acts on behalf of the investors, Sukuk al-ijrarh set up as follows[31]:

  • • Originator holds assets that are the basis of return.
  • • Assets are sold to SPV and leased back to originator.
  • • SPV sells sukuk certificates to investors.
  • • Each certificate is a share in ownership of assets.
  • • Periodic distributions funded by rental payments.
  • • Returns on sukukal-ijrarhcan are fixed.

It was not expected to have Islamic bonds with fixed returns until Bahrain Monetary Agency (BMA)[32] issued Islamic leasing securities. The procedures of issuing sukukal-ijrarh by BMA is related to the International Bahrain Airport and was done by the following steps[33]:

  • • BMA issued sukuk al-ijrarhin of a total amount of 40 Million Bahraini Dinar.
  • • The subscription in sukuk started on June 20th,2004 and ended on June 20th,2014
  • • The rent amount was fixed; each subscriber gained a (5,125%) every six months.
  • • sukuk al-ijrarh represented governmental assets (part of parcel of the International Bahrain Airport).
  • • The sukuk issued for the investors who were represented by Bank of Bahrain. The Bank purchased the parcel from the government and lease it back to the government, such lease usually ends with possession as the government was committed to re-buy the parcel from the bank at the end of sukuk period at the par value price. 

In practice, sukuk al-ijrarh is similar to conventional bonds except in ownership of the assets.

Some writings criticize sukukal-ijrarh issued by BMA claiming that such sukuk are not different from the conventional bonds and the only difference is the naming and that the issuing process was non-compliant with the sharia law because[34]:

  • • The capital of sukuk was guaranteed to repay by the government at par value price.
  • • The returns were also fixed and guaranteed.
  • • If the capital and returns are guaranteed then there is no PLS and no risk.

However, the Sharia Committee in Bahrain issued a Fatwa to legalize the sukuk process and presented arguments to show that the process is totally compliant with the sharia law[35].

There is a controversy between Muslim scholars surrounding the question: what is considered compliant with sharia law and what is non-complaint with sharia law. The controversy is not only in sukuk, but in every single Islamic transaction. This returns to the existence of different Islamic jurisprudence schools, different explanations to the sharia law’s provisions and different sharia opinions.

6. Islamic Credit Cards

The Islamic banking industry is looking to provide all the banking services existing in conventional banks, and credit cards are of the important services to bank’s clients. 

According to sharia law the debt cards are permitted since there is no grace period and no interest (riba), but the problem with this type of credit cards is that it lends clients an amount of money and the client is committed to repay the amount with interest. Some Islamic financial organizations developed liberal rulings to adopt Islamic credit cards for longer periods than the usual one-month grace period. With these cards purchases are automatically financed over a fixed period, usually 12 months[36].

In 2002, Bahrain’s ABC Bank announced that it was to launch the first credit card conforming to sharia law. In 2002 also, Bank Islam Malaysia Bhd claimed that it launched the first Islamic credit card[37]

The OIC issued a fatwa legalizing credit cards if they are compliant with sharia law's principles. The fatwa draw up the conditions of credit cards from Islamic perspective and these conditions are[38]:

  1. Islamic credit card is not allowed to charge any interest (riba) to payments even if the user is late on payment. 
  2. The bank is permitted to charge fees on the issuance of credit cards.
  3. The bank is permitted to charge commission on each transaction done through the card.
  4. The bank is permitted to charge fixed fees on the using the credit ceil in the card (loan), but such fees must not be linked to the loan amount or period.

However, in practice there are several forms of applying the Islamic rules on credit cards. For example, some Islamic cards involve a transaction that consists of two agreements. In the first agreement the customer buys merchandise from the bank at a stipulated price, the bank buys back the merchandise from the client at a lower price. The bank’s profit from this transaction is derived from the difference of the two prices. The profit rate levied by Islamic banks is known in advance[39].

There is another form of using Islamic credit cards, in 2003 the Kuwait Finance House issued credit cards to be used specifically to buy consumer durables from selected shops, these cards were based on ijarah[40].

Some writings criticized the manner of using credit cards and claimed that the only Islamic way to use credit cards is by giving a loan without interests (qard hasan) and the only permitted fees are the fees of providing the service and any charge of profit is considered as riba[41].

VI.           Regulation and Supervision Structures of Islamic Banks

There are various system structures of Islamic banking:

(a) Dual system: like Malaysia and Indonesia; in this system the conventional banks setting up Islamic window operations or even Islamic banking subsidiaries.

(b) Dual system with clear separation between the conventional banks and the Islamic banks like Bahrain, Palestine and Jordan.

(c) Full Islamization of the financial system: in this system only Islamic banks are licensed to operate in a country like Iran and Pakistan, there is no license for the conventional banks.

As a practical matter, Islamic banks are currently governed by the same regulations that govern conventional banks; such regulations generally follow the guidelines of the Basle Committee on Banking Supervision. But Basel instructions do not consider the nature of Islamic banking transactions[42].

Conventional banks generally follow the Basel Committee[43] rules. The Committee in 2004 issued Basel II which is a set of recommendations on banking laws and regulations. The purpose of Basel II is the creation of international standards for banking regulators to be used for the creation of regulations respecting the amount or ratio of capital that banks should put aside or reserve as a cushion against the types of financial and operational risks which banks confront. These international standards act as a measure of protection for the international financial system against the possibility of a major bank. To achieve this goal, Basel II sets up rigorous risk and capital management requirements designed to ensure that the banks hold capital reserves appropriate to the risk exposure of the particular bank inherent in its lending and investment practices. Accordingly, under these rules the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold in reserve to safeguard its solvency and overall economic stability[44].

After the worldwide financial crisis, Basel III was issued to provide a new global regulatory standard on bank capital adequacy and liquidity. The Basel Committee does not take in its account Islamic banking transactions. However, some Islamic banks have attempted to follow Basel II. But the case is different with Basel III, which was a reaction to a banking crisis that Islamic banks find themselves not relevant to react to since they were in the safe side during the crisis[45].

The Islamic Financial Services Board (IFSB)[46], encourages Islamic financial services industries and institutions worldwide to follow its recommendations. The IFSB issued many instructions, standards, and guidelines, such as Core Principles for Islamic Finance Regulation (Banking Segment) in April 2015, Standard on Risk Management for Takāful (Islamic Insurance) Undertakings in December 2013, and Guiding Principles on Stress Testing for Institutions Offering Islamic Financial Services in March 2012[47].

One of the most important recommendations of IFSB that Islamic banks must be subject to the same supervisory rules and requirements same to these rules govern conventional banks. The IFSB also encourages Islamic banks to integrate into global markets as it will encourage banks to compete with all other financial institutions, motivate them to meet the needs of customers, expand their scope of work, and not to be linked to a specified category of customers[48].

VII.         Conclusion

The key characteristic of Islamic banking is the interest-free rule which came out from the holy Quran provisions. The Profit-Loss Sharing (PLS) is a key concept to understand the Islamic banking instruments. In theory, Islamic banking transactions are different from the conventional banks transactions. In practice they are similar, due to the actions taken by Islamic banks to reduce the risks. While the sharia law aims to promote equality and fairness in the society, the reality of Islamic banks performance is focusing on gaining money.

IFSB aims to set up standards and guidelines to promote the stability of Islamic banks over the world.  However, the manner in which Islamic banking services are currently provided in Muslim countries, GCC in particular is not likely to transform Islamic banking into a true universal banking system; it is more likely to remain as a specialized form of banking services.

The experience of GCC and other Islamic countries in Islamic banking industry appears I that such industry will remain a small segment of the global banking market, supported primarily by GGC oil money. The Islamic banking industry remains a niche market, despite its spreading in the Middle East and throughout the Muslim world and even in parts of the West countries.

To make a real competition between Islamic banks and conventional banks in the market world, Islamic banking industry needs to adopt the requirements of the global financial system and reinforce its structures.

The acceptance of Islamic banking worldwide and its spread over the world is faced by serious obstacles, such as the agreement on what is and what is not acceptable as sharia compliant throughout the Islamic industry.

_________________________________________________

[1]The Organization of the Islamic Cooperation (OIC) is an inter-governmental organization grouping fifty-seven States. These 57 States decided to pool their resources together, combine their efforts and speak with one voice to safeguard the interest and ensure the progress and well-being of their peoples and those of other Muslims in the world over;(Sep 24, 2015, 2:00 PM) http://www.oic-oci.org/oicv2/page/?p_id=52&p_ref=26&lan=en

[2]S. Nazim Ali and Naseem N. Ali, Information Sources on Islamic Banking and Economics: 1980-1990(Routledge, NYC, 2010); (Sep 27, 2015, 2:30 PM) http://bankessentials.blogspot.com/2012/09/islami-bank-definition-history-and.html

[3]Hadeel Abu Loghod, Do Islamic Banks Perform Better than Conventional Banks? Evidence from Gulf Cooperation Council countries, API-Working Paper Series, Arab Planning Institute, Kuwait Information Center.1(2013);(Sep 25, 2015)http://www.arab-api.org/images/publication/pdfs/297/297_wps1011.pdf

[4]"The prohibition of riba is mentioned in four different revelations in the Quran. The first revelation emphasizes that interest deprives wealth of Gods blessings. The second revelation condemns it, placing interest in juxtaposition with wrongful appropriation of property belonging to others. The third revelation enjoins Muslims to stay clear of interest for the sake of their own welfare. The fourth revelation establishes a clear distinction between interest and trade, urging Muslims to take only the principal sum and to forgo even this sum if the borrower is unable to repay." Mohamed Ariff, Islamic Banking, Asian-Pacific Economic Literature, vol. 2, 2-3 (September 1988).

[5]Hadeel Abu Loghod, Ibid, pp.1.

[6]Mohamed Ariff, Ibid, pp. 46-62.

[7]AIDA MAITA, ARBITRATION OF ISLAMIC FINANCIAL DISPUTES, Golden Gate University School of Law, 20 Ann. Surv. Int'l& Comp. L. 35,3 (Spring, 2014).

[8]Hadeel Abu Loghod, Ibid, pp.1.

[9]Ibid. pp.4.

[10] For example the United Arab Emirates enacted a Federal Law No 6 of 1985 regarding Islamic Banks, Financial Institutions, and Investment Companies.

[11]Islamic Republic of Iran enacted Law on Interest Free Banking of 1983; (25 Sep, 2015, 1:00 pm) file:///C:/Users/Sunny/Downloads/LawforUsuryE.pdf.

[12]Centre for the Study of Global Governance, The development of Islamic finance in the GCC, Working Paper, Kuwait Programme on Development, Governance and Globalisation in the Gulf States, Rodney Wilson, 5 (May 2009) (Sep 29,2015, 3:00 pm)http://eprints.lse.ac.uk/55281/1/Wilson-2009.pdf

[13]Ibid.

[14]Mohamed Ariff, Ibid, pp.49.

[15]Hadeel Abu Loghod, Ibid, pp.4.

[16]Hadeel Abu Loghod, Ibid, pp.50.

[17]Mohamed Ariff, Ibid, pp. 52.

[18]Interview with Mohmmad Buzzor, Director of Banking Facilities Department, Palestine Islamic Bank (Oct. 22, 2015).

[19]Mohamed Ariff, Ibid, pp.52.

[20]Interview with Mohmmad Buzzor, Director of Banking Facilities Department, Palestine Islamic Bank (Oct. 22, 2015).

[21]Hans Visser, Islamic Finance Principles and Practice 54-55 (Edward Elgar Publishing Limited, U.K, 2009).

[22]Mohamed Ariff, Ibid, pp.52.

[23]Hans Visser, Ibid, pp.56.

[24]Hans Visser, Ibid, pp.59.

[25]Mohamed Ariff, Ibid, pp.50.

[26]Interview with Lena Gbesheh, Mortgage & Leasing Directorate, Palestine Capital Markets Authority(Oct. 22, 2015).

[27]In order to avoid gharar the parties to a contract must make sure that both the subject and prices of the sale exist, and that parties are able to deliver and parties must define the quantity, quality and date of future delivery, if any. See: Hans Visser, Ibid, pp.45.

[28]Hans Visser, Ibid, pp.63-64.

[29]Hamed Hasan Mohmad Ali Mera, Sukuk Al-ijrarh: Practical and Theoretical study307-310 (Dar Almeman, Saudi Arabia, 2008).

[30]Muhammad Ridhwan Ab Aziz,The Structure of SukukIjarah, 7 (Conference Paper Sep 2013); (Oct 7,2015, 5:00 pm)http://www.researchgate.net/publication/257811888

[31]Hamed Hasan Mohmad Ali Mera, Ibid, pp. 391-396.

[32]The Bahrain Monetary Agency is now the Central Bank of Bahrain.

[33]Ibid, pp.397-403.

[34]Ibid, pp. 404-410.

[35]Fatwa issued by the sharia Committee in Bahrain for Issuing SukukAlijarah for the Bahrain Government, Macca, Feb 5, 1999.

[36]Hans Visser, Ibid, pp.67.

[37]Ibid, pp.67-68.

[38]Fatwa No. 108 (12/2) from OIC for Issuing Credit Cards compliant with the Sharia Law, Macca. (Oct 10, 2015)http://islamqa.info/ar/97530

[39]Ilham Reza Ferdia, Miranti Kartika Dewi, and Faried Kurnia Rahman, The Practice of Islamic Credit Cards: A Comparative Look between Bank Danamon Indonesia’s Dirham Card and Bank Islam Malaysia’s BI Card, IAEI International Conference, Indonesia, 2-3 (Aug 2008).

[40]Hans Visser, Ibid, pp.67.

[41]Fatwa related  to an Islamic scholar, available in Arabic Language at: http://ar.islamway.net/fatwa/34034/

[42]Frederick V. Perry and Scheherazade S. Rehman, Globalization of Islamic Finance: Myth or Reality?, International Journal of Humanities and Social Science,  Vol. 1, No. 19, 112 (December 2011).

[43]“The Basel Committee is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability” Seehttp://www.bis.org/bcbs/

[44](Oct 10, 2015, 11:00 pm) http://www.bis.org/

[45]Anita Hawser, The Relevance of Basel III to Islamic Banks‖, Global Finance, (Feb 2011); (Oct 15, 2015, 8:00 am) http://zulkiflihasan.wordpress.com/2011/02/16/the-relevance-of-basel-iii-to-islamic-banks/

[46]The Islamic Financial Services Board (IFSB) is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors.See: http://www.ifsb.org/

[47]See: http://www.ifsb.org/

[48] Frederick V. Perry and Scheherazade S. Rehman, Ibid, pp.116.

 Ibrahim Fares received his L.L.B in law from Al al-Bayt University, Jordan (2006), his master’s Degree in Law, BirZeit University, Palestine (2009), his L.L.M Degree in Law from University of Pittsburg, the United States (2013), and his L.L.M Degree in Law from LAZARSKI University, Poland (2014). He is a member of the Palestinian Bar Association (2006), and he is an Arbitrator in Commercial and Civil transactions (2015).

He has over 8 years’ experience in corporate law and finance as senior associate at one of Palestine's most prominent law firms (Husseini and Husseini Law Firm) where he specializes in commercial transactions, mergers and acquisitions, contracts (other areas include intellectual property, banking, labor and employment, investment and taxation).

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