Law Harmonisation Committee
Chairman's Speech on Ethics and Finance Round Table, at Kuala Lumpur Islamic Finance Forum (KLIFF) 2011
Everything I read and heard about Islamic Ethics in relation to finance is beautiful, theoretically and on paper. But where do we go from there? My concern is what happens in practice? Are the ethics being practiced? Is there any authority to supervise and to ensure that they are followed? What happens in case of breach?
The first thing we must always remember is that the fact that Islamic ethics are part of the religion itself does not necessarily mean that they will be followed all the time and by everybody. It is true that the idea of Islamic banking and finance in its modern form was mooted by pious Muslims who wanted to avoid committing a sin in their financial transactions. In the early stage, even the people who implemented it could have the same goal. But, when Islamic finance became a big business, the not-so-pious Muslims and even non-Muslims joined in, not out of fear of committing a sin, but to make money. In the heat of the competition, even the pious might have become less pious.
So, in respect of the non-Muslims, the faith factor does not exist: they don't even subscribe to the religion. With regard to the Muslims, we cannot expect every one of them, be they Board Members, employees or share holders to be as knowledgeable and as pious as the paper writers that they would insist on compliance with the ethics strictly all the time. After all, even God's injunctions are broken every day by Muslims, including ourselves, sometimes.
So, there might be a need to codify the ethics, to have an authority to enforce them, to supervise their compliance and to take some kind of disciplinary actions against those who breach them.
What I have in mind is something similar to the Advocates and Solicitors Etiquette Rules which codified the etiquettes and established the Disciplinary Board to take action against members of the profession who breach the rules. The Board has power to impose punishment, including suspension and striking off the Rolls. Whether such a thing is practical or suitable, I do not know. But, I think it is worth making a study.
At least, in a country where the Central Bank and the Government is committed to ensure that Islamic finance follows the Islamic rules strictly, there may be some kind of supervision carried out, even now. Still, I do not know how effective it is. But, what about in a country where neither the Central Bank nor the Government has such commitment and leaves everything to the financial institutions "to regulate themselves"? Bearing that in mind, besides having the code of ethics and the authority at national level to implement them and supervise their compliance, is it feasible and possible to have a standard international Code of Ethics for Islamic finance and an international authority (or body) to implement them and to supervise their compliance?
Tun Abdul Hamid Mohamad