“This global standard documentation is developed to be used in the Islamic inter-bank market between financial institutions in order to manage their liquidity requirements. It is also aimed to minimize the over reliance on the use of the Commodity Murabaha in the inter-bank market transactions,” Ijlal Ahmed Alvi, Chief Executive Officer, IIFM, said.
“This much awaited documentation standard is another milestone in the standardization and harmonization of Islamic finance industry across the globe. He reiterated that this welcome achievement by IIFM will spur the use of Unrestricted Walakah in the Islamic Inter-bank market and will encourage all the jurisdictions to implement this IIFM standard as well as address any accounting or regulatory requirements in their respective jurisdictions,” Khalid Hamad Abdul-Rahman Hamad, Executive Director-Banking Supervision, Central Bank of Bahrain and Chairman of the IIFM said.
“This standard documentation has been developed in accordance with IIFM comprehensive procedure in developing global standards i.e. consultation with IIFM Shari’ah Advisory Panel from the early stages, market consultative meetings, forming global working group and appointment of external legal counsel, Norton Rose LLP,” Ijlal Alvi said.
The key main features of this Agreement is that the Investor, the Muwakkil, will appoint the Wakil as its Agent to invest its funds in a Shari’ah compliant manner in exchange for a fee, the Wakalah pool can be managed on a segregated asset pool or comingled asset pool basis at the Wakil’s discretion, early termination which can be caused by the occurrence of default by either party, the calculation treatment of these events are well defined in this documentation, the Wakil is obliged to notify the Muwakkil if the anticipated profit cannot be achieved etc.,
“The Operational Guidance Memorandum for the Wakalah agreement is one of the unique features of IIFM efforts to enhance the development of Islamic finance industry. The industry will find this Memorandum very useful whereby it explains how the standard to be used and in addition to that it provides very comprehensive recommendations,” Alvi, added.
“IIFM has taken a pioneering role in producing standard documentation in specific areas for the Islamic finance industry in order to provide Shari’ah harmonization, best practices, transparency and clarity for sound business activities. On this occasion, the IIFM Management and the IIFM Shari’ah Department would like to thank the IIFM Shari’ah Advisory Panel for their indispensable and greatly appreciated support,” Dr. Ahmed Rufai, Head of Shari’ah, IIFM said.
Alvi said the role of IIFM Board of Directors and IIFM member institutions for their invaluable support and guidance in IIFM market unification initiatives where support of the industry is essential for implementation to ensure sustainable growth of the industry.