1. THE NEED FOR REGULATION OF SHARI’A ADVISORY IN ISLAMIC FINANCE ISSUES & CHALLENGES PROFESSOR HUMAYON DAR CHAIRMAN, EDBIZ CONSULTING

2. What is Shari’a advisory? Its need Regulatory approaches to Shari’a advisory Preferred approach Shari’a advisory in Kazakhstan Conclusions Introduction

3. According to Chancellor Guide to Legal and Shari’a Aspects of Islamic Finance (2009) “[It is] the overall process through which interested parties such as banks, financial institutions, businesses and individuals seek to obtain Shari’a advice and approval for, and the formal and legal sanction to benefit from, their desired products/services” (p.358) What is Shari’a advisory: definition

4. “Shari`a Governance System refers to the set of institutional and organisational arrangements through which an IIFS ensures that there is effective independent oversight5 of Shari`a compliance over each of the following structures and processes: (a)Issuance of relevant Shari`a pronouncements (b)Dissemination of information on such Shari`a pronouncements / resolutions to the operative personnel of the IIFS who monitor the day-to-day compliance with the Shari`a pronouncements / resolutions vis-à-vis every level of operations and each transaction Shari’a governance system: IFSB approach

5. (c)An internal Shari`a compliance review/audit for verifying that Shari`a compliance has been satisfied, during which any incident of non- compliance will be recorded and reported, and as far as possible, addressed and rectified (d)An annual Shari`a compliance review/audit for verifying that the internal Shari`a compliance review/audit has been appropriately carried out and its findings have been duly noted by the Shari`a board Shari’a governance system: definition

6. Assurance of Shari’a authenticity Promotion and development of Islamic banking and finance in line with its philosophy and objectives Standardisation of practice Marketability of Islamic financial services Need for Shari’a advisory

7. Embedded Shari’a advisory boards Shari’a advisory firms Fatwa shopping Models of Shari’a advisory

8. Laissez faire Managed Shari’a advisory Central regulation Regulatory approaches to Shari’a advisory

9. Central regulation Malaysia offers the best possible example of central regulation of Shari’a advisory All the regulators (BNM, SC and LOFSA) have their own Shari’a advisory councils Preferred approach

10. Managed Shari’a advisory to start with A National Shari’a Advisory Council to develop a Shari’a governance system (in light of AAOIFI and IFSB standards and guidelines) To supervise individual financial institutions for Shari’a authenticity Pakistan may serve as an example Central Shari’a governance (after 3-5 years) Malaysia may serve as a good example Shari’a advisory in Kazakhstan

11. Shari’a advisory plays a crucial role in Islamic banking and finance, and hence it must not be left in the private hands, unregulated and unsupervised It is in the best interests of all the stakeholders of the Islamic financial services industry to develop a comprehensive Shari’a governance regime and to strict to it There are already steps being taken to evolve a global Shari’a standard Kazakhstan may decide to play a role in this Conclusions