(MENAFN- Arab Times) The Waqf Fund, a Bahrain-based special fund to support Islamic finance training, education and research, hosted its fourth Shari'a Scholar session with leading Islamic finance scholar Shaikh Abdulsattar Al Kattan from Kuwait. The topic under discussion was "Investment Wakala". Internal Shari'a Reviewers (ISRs) and Shari'a Auditors from Bahrain based Islamic financial institutions attended the session, which was held at the Central Bank's premises. Shaikh Al Kattan made a presentation on the key issues regarding Investment Wakala and its increasing use by Islamic banks. This was followed by an interactive session during which the participants asked questions and gave their comments.
Shaikh Al Kattan started the presentation by defining the general Wakala and in particular Wakala as a method of investment. Most of the Islamic banks traditionally accept deposits in the form of Mudaraba; however, it has been observed that Wakala has become attractive to Islamic banks recently due to its feature that they can determine fixed upfront fee unlike Mudaraba where the income and fees are determined subsequent to the success of the investment. He then elaborated on references from Shari'a on the eligibility of Wakala. He clarified that Islamic banks cannot enter into a Wakala contract with conventional banks where the Islamic bank is the Muwakkil and the conventional bank is the Wakeel.
However, it is permissible if the conventional bank is the Muwakkil and the Islamic bank is the Wakeel.He also clarified that it is very important to disclose the Wakala fees in the Wakala contract; in case no such disclosure is made the fees must be charged as per the market norms. Later in the presentation Shaikh Al Kattan discussed various issues relating to Wakala and answered participants' questions on convertible Wakala (convertible into shares), termination of Wakala before maturity, overdraft product structure based on Investment Wakala contract and market practice of Islamic banks compensating for the difference between expected and actual returns.
Earlier at the start of the session Khalid Hamad, Chairman of the Waqf Fund welcomed the guest scholar and the participants to the session. He emphasized on the importance of the Internal Shari'a Review and Audit functions and the need to further develop these in order to ensure Shari'a compliance of Islamic banks and windows. He underlined the importance of gaining knowledge of not just Shari'a issues but also the contemporary issues and practices which is necessary for Internal Shari'a Reviewers and Shari'a scholars to do justice to their job. The participants provided positive feedback about the session and praised the Waqf Fund for this initiative
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