The IIFM Board Members at the Launch of the Wakalah Agreement
At the 4th Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2013) in Singapore, Bahrain based international standard-setting body the International Islamic Financial Market (IIFM) recently announced the launch of IIFM Inter-Bank Unrestricted Master Investment Wakalah Agreement. The conference was held under the patronage of the Monetary Authority of Singapore.
This global standard document is supplemented with an Operational Guidance Memorandum.
Mr. Ijlal Ahmed Alvi, Chief Executive Officer, IIFM explained that this global standard documentation (supplemented with an Operational Guidance Memorandum) 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 minimise the over reliance on the use of the Commodity Murabaha in the inter-bank market transactions.
Mr. Khalid Hamad Abdul-Rahman Hamad, Executive Director-Banking Supervision, Central Bank of Bahrain and Chairman of the 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”.
Mr. Alvi said that the 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.
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 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,” said Mr. Alvi.
Dr. Ahmed Rufai, Head of Shari’ah, IIFM said that, “IIFM has taken a pioneering role in producing standard documentation in specific areas for the Islamic finance industry in order to provide Shari’ah harmonisation, best practices, transparency and clarity for sound business activities.
Mr. Alvi noted 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.
In the meantime, the IIFM Islamic Inter-Bank Unrestricted Master Investment Wakalah Agreement documentation is available on IIFM website: www.iifm.net for its members. All IIFM standard documentations are available in both Arabic and English.