Deputy Governor of the Central Bank of Iran Akbar Komijani has announced imminent changes in the makeup and decision-making process of the bank’s Fiqh (Jurisprudence) Council.

Komijani said late Saturday that the council would resume its sessions after a brief hiatus with new members and a new mission to keep its “successful tradition” in safeguarding the tenets of Islamic banking.

“During its last tenure, the council made some good progress and new financial tools were taken up for discussion,” Komijani said. “Now with a new mandate approved in late March (at the end of the Iranian year) the council will convene again with a new mission.”

The new mandate states that the council would work to “analyze” and “give counsel and advice” about banking issues in light of the Sharia or Islamic Law.
Komijani said the council continues to grow in importance as usury-free banking is becoming ever more prevalent.
Changes
Joining the new council are members of CBI’s board of directors who were mostly absent from previous assemblies. The governor of the bank presides over the meetings, accompanied by the bank’s deputy governor and its supervisory head, all of whom hold permanent voting rights. Four of the bank’s senior executives are also required to participate in the meeting but without voting rights.

Other members will include four Islamic jurisprudents well-versed in monetary and financial topics, two public sector and private bank CEOs plus two Islamic banking experts.

Komijani hoped the presence of the bank’s top policymaker, his deputies and other top officials of CBI would enhance the “executive dimension” of the council.

Responding to critics who claimed the power of Fiqh scholars have been curtailed in the new council, Komijani said, “The council’s meetings need a minimum of 10 participants to have a quorum, three of whom should be accomplished theologians.

“Just as two-thirds of the total votes are needed for a decision to be passed, the majority consent of Islamic scholars is also needed, which means no legislation is passed without the majority yes vote from Islamic jurisprudents.”

Islamic Banking on the Move
CBI’s initiative to promote Islamic banking and make it more disciplined is a timely decision considering the renewed attention Islamic finance has gained in global economic powerhouses.

A report released by the International Monetary Fund in April showed the fund’s growing interest in Islamic banking, which is expanding throughout the world. Last October, the IMF launched discussions with an external advisory group of Islamic finance experts and industry bodies.

The IMF’s report noted that because Islamic banking forbids pure monetary speculation and stresses that deals should be based on real economic activity, it could pose less risk than conventional banking to the stability of financial systems.

This has long been established by proponents of Islamic finance seeking to drum up business; the IMF’s endorsement is likely to add weight to their arguments.

An influential institution in this area has been Islamic Development Bank, which has 56 member countries, including Iran, Saudi Arabia and Libya, which are its largest shareholders.

IDB recently increased the ceiling of its Islamic bonds (sukuk) program to $25 billion from $10 billion, as it aims to expand its financing across member states. In 2013, the bank more than tripled its authorized capital to $150 billion.

According to Reuters, in the last two or three years, profit-sharing investment accounts have gone from around 2-3% of Islamic banks’ balance sheets to around 15-20%, and they are continuing to expand.

The G20 group of nations has also included Islamic finance in its annual agenda for discussion.

By Financial Tribune