Dr. Mahmoud Said Abdalaal, CEO of Aafaq Islamic Finance tells IFM about the challenges facing Islamic finance and banking
What sets Aafaq apart from other finance companies?
Aafaq’s role as a finance company is strategic in meeting the visionary approach of HH Sheikh Muhammad Bin Rashid Al Maktoum. Our strategic approach matches the growing economy of the UAE, and by extension the requirement of our customers.
Aafaq is the only key organisation among all the other finance companies offering one-stop shop windows for providing almost all services with optimum quality.
Aafaq has 50+ windows including Ministries, Tas’Heel centres and other key government entities across the UAE where it can sell its products and services. These windows work for extended business hours throughout the UAE. The strategic locations of these windows for doing any government transactions are very significant.
In order to have an effective, exceptional presence, Aafaq has operational synergic alliances with esteemed UAE government entities, like the Ministry of Finance, the Ministry of Labor, Dubai Economic Department, Fly Dubai, and Air Arabia among many others. Our customers have access to the many advantages of these operational synergic alliances during our extended business hours across the UAE.
What role does Aafaq see itself playing in establishing Dubai as an Islamic capital hub?
The role of Aafaq is to follow the strategic pillars of Islamic financing on an individual, collective and corporate basis to support the direction of the UAE government and increase the overall portfolio.
The strategic vision of Aafaq is also to introduce more attractive products and services to draw the attention of stakeholders at a local and international level from conventional financing towards shari’ah compliant financial products and services.
Moreover, out of the seven strategies, Dubai has already achieved the required foundations to become a shari’ah compliant hub. However, due to competitive pressure, the need of the hour is to constantly grow and align our strategies.
The seven separate strategic directions, each aiming to make Dubai a global leader in one aspect of the Islamic economy are:
· Finance
· the halal food industry
· family friendly tourism
· the digital economy
· fashion
· arts and design
· Economic education standards and certification.
And at Aafaq, we believe we contribute in some way to each of these vital sectors
What more (or differently) does Dubai need to do to help it achieve its ambition?
The strategic policies put in place for the political and economic landscape should be consistent with projected future goals and provide an open forum for all stakeholders.
There’s a large gap between federal law and Islamic law within the context of the Emirati economic system. Dubai, in my opinion, should introduce an independent shari’ah zone where Islamic law prevails over federal law due to the strategic vision of building Dubai as an Islamic Capital Hub. This Shari’ah Zone should constitute all facets of the Islamic economy – a model that will surely be mirrored by other countries.
What do you believe to be the largest challenges in ‘selling’ Islamic finance to individuals?
First, there’s no centralised forum to discuss or advance shari’ah opinion as relates to the economy.
Second, perhaps the different schools of thought in Islam hamper stakeholders and consumers from differentiating between conventional thought and shari’ah compliant ones.
Third, Islamic finance is viewed as not the most transparent of financial industries. This may be attributed to the developing nature of the industry.
You were recently invited by the Tunisian Ministry of Economy to participate in the Gulf Tunisian Investment forum. Do you think North Africa is coming around to the idea of Islamic banking and finance?
The concept of Islamic finance is one many Islamic states are eager to implement. However, in order for it be effective as well as successful, it needs to be addressed within a long-term strategy; i.e. how it would work within the existent political, socio-economic and technological standpoint. This stands true to for all states interested in implementing Islamic finance regardless of religion or region. Furthermore, the North African region, we feel, is severely lacking market confidence as well as unstable PEST factors.
Tell us a little about the E-dirham.
Aafaq is playing a strategic role with the Ministry of Finance & National Bank of Abu Dhabi to provide E dirham services in the UAE.
We offer the E-Dirham to provide the government and public with a secure and convenient service that operates according to the latest technology available. It’s been designed as an alternative to collecting government revenues rather than financial stamps and/or income receipts.
How did the ‘Wages Protection System’ come about?
The WPS was introduced by the UAE Ministry of Labor, in conjunction with the Central Bank of the UAE, through a Ministerial decree (No. 788) issued in July 2009.
WPS facilitates salaries to be paid electronically over a secure system through banks, financial institutions and exchange houses, and enables monitoring of timely payment of wages to employees. The decree mandates all employers to register with the WPS; non-adherence would result in penalties being enforced on the employer.
WPS comes about to protect the right of the employees to receive their wages across the United Arab Emirates
The system, developed by the Central Bank of the UAE, allows the Ministry of Labor to create a database that records wage payments in the private sector to guarantee timely and full payment of agreed-upon wages.
The WPS covers all institutions registered with the Ministry across all sectors and industries and will benefit different categories of labor.
What other products and /or services from Aafaq?
Aafaq has a strategic vision to provide excellent services and flexible products which meet the customers’ requirements
The products and services are:
Corporate finance
Aafaq has currently signed an agreement with DMCC to extend our corporate vision further.
Retail finance
· Dubai Economic Department – Dubai
· Labor guarantee issuance
· Air Arabia
· Fly Dubai
· WPS
· E dirham
What are some of the challenges to Islamic banking expanding globally at a steady pace?
Islamic finance faces many challenges, including recent regulatory changes, illiquidity issues, liquidity risk management concerns, a need for harmonised regulation, regulatory disparity amongst national supervisors, and lack of a level playing field.
There’s a lack of appropriate monetary policy for Islamic banks – something desperately needed due to the different nature and foundations Islamic banking operates on. Islamic banking and finance relies on different financial instruments and measures – this ought to be reflected in future policy. The most immediate concern may well be the low numbers in human resources as far as the Islamic economy is concerned. This needs to be addressed foremost.
Dr. Mahmoud Said Abdalaal is the Chief Executive Officer of Aafaq Islamic Finance and also serves as the Managing Director and Professional Advisor of Arab Accounting services centre (AASC). He is recognised as an Islamic Finance and a variety Corporate Strategy expert. His career to date has focused on many areas and sectors, including Smart Electronic Payment Systems, Corporate Finance and Retail products and services.
His substantial academic credentials include a Doctorate in Islamic Finance from the American University of London and doctorates in Islamic Financing from Al Shams University in Egypt and Omdurman Islamic University in Sudan.
AdvertorialIn addition, Dr. Mahmud holds a B.A in Commerce from Mansura University, Egypt, MBAs from Belford University in Australia and Preston University in the USA as well as being a Certified Public Accountant from the Arabic Institute of Public Accountants
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