According to recent reviews on the Islamic Finance Industry of Sri Lanka, LOLC Al-Falaah, the Islamic Business Unit of Lanka ORIX Finance Company Ltd., has made significant progress in terms of taking Shari’ah compliant Islamic financial services to the masses.
At a recent gathering of the members of its Shari’ah Supervisory Board (SSB), business activities and processes of LOLC Al-Falaah were reviewed. At this review meeting, LOLC Al–Falaah was lauded for its commitment to Shari’ah compliance, and the progress it had made as an industry’s trend setting Islamic financial entity.
The review committee was comprised of Chairman of the SSB, Ash-Shaikh Fazil .M. Farook, and members of the SSB, Ash-Shaikh Murshid .M. Mulaffar and Mufti Shafique Ahmed Jakhura, Group Deputy Chairman Mr. Ishara Nanayakkara, Group Managing Director Mr. Kapila Jayawardena, Managing Director and CEO of Lanka ORIX Finance Company Ltd. Mr. Brindley de Zylva, CEO of the LOLC Al-Falaah Islamic Business UnitMr. Krishan Thilakaratne, Manager of LOLC Al-Falaah Mr. Shiraz Refai and the staff members of LOLC Al-Falaah were also present for this review.
Emphasizing on the functions of the Shari’ah Supervisory Board, the members said, “The Shari’ah Supervisory Board is an independent body which supervises and guides a financial institution in terms of Shari’ah compliance. The SSB of any Islamic Financial Institution or an Islamic Finance window operation of a conventional financial institution is a body that is absolutely independent of that institution. Their role is very much similar to the role of an external regulator or an auditor.” The Shari’ah supervisory board is chaired by industry leading Shari’ah scholars, who supervise, carry out periodic Shari’ah audits and lend advice on business matters related to Islamic Financing.
Implementation of Shari’ah compliant financing requires the practice of Shari’ah principles, which is the total and absolute adherence to guidelines stipulated by the Holy Quran. The SSB members also emphasized that the responsibility of adhering to Shari’ah principles lies with the Management and members of staff. The progress therein is periodically reviewed by the SSB where advice and guidance are offered so that transactions considered to be haraam (prohibited) are not conducted.
In 2010, LOLC Al-Falaah recorded a phenomenal growth in business volumes where it recorded an impressive 180% growth in the Ijarah portfolio, over 250% growth in the Murabaha and Diminishing Musharakah portfolios and a near 400% growth in Mudharabah investments. The catalysts which prompted this impressive growth is the Company’s stability together with island wide reach and brand image which has contributed much towards strengthening customer confidence and reliance.
When inquired about this progress, the members added further, “Indeed there has been progress and a fair amount of development. Based on the audits that have been conducted so far, together with the interactions we have had with the Management and staff of LOLC Al-Falaah, we find that by and large the progress of LOLC Al-Falaah is due to their competency in taking Islamic Finance to the masses and consistent adherence to Islamic Finance principles. Therefore, we find that even in our ordinance, the Islamic Business Unit of Lanka ORIX Finance Company Ltd., LOLC Al-Falaah, by and large have complied with Shari’ah principles.”
In 2007, LOLC Al-Falaah commenced its commercial operations offering an alternative financial system which was in harmony with Shari’ah principles. In keeping with the financial regulations established in the financial industry, LOLC Al-Falaah obtained a special approval to function within the framework of Lanka ORIX Finance Company Ltd., which is a registered finance company under the Monetary Board of the Central Bank of Sri Lanka (CBSL).
At present, LOLC Al-Falaah offers product concepts such as Mudharabah (Profit –Sharing Investments and Savings), Ijarah (Leasing), Murabaha (Trade Financing), Diminishing Musharakah (Property/Project Financing).The Mudharabah savings account is Sri Lanka’s first fully integrated Shari’ah compliant and regulated savings account accessible through more than 45 service centers and over 400 local ATM machines island wide and has enabled global accessibility to the accounts through the Maestro network.
Members of the SSB have local as well as global expertise on Shari’ah compliant financing and have been on the review board of LOLC Al-Falaah during the past 2-3 years. Chairman of the SSB and Scholar, Ash-Shaikh Fazil .M. Farook is a member of the Banking Advisory Committee of All Ceylon Jamiyyathul Ulama (ACJU) and is a leading Islamic Banking and Finance consultant in Sri Lanka. Fellow member and Scholar, Ash-Shaikh Murshid .M. Mulaffar is the Assistant General Secretary to the All Ceylon Jamiyyathul Ulama (ACJU) and a member of its Banking Advisory Committee and also a leading consultant in Islamic Finance in Sri Lanka. Fellow member of SSB and scholar, Mufti Shafique Ahmed Jakhura currently serves in the Fatwa Department preparing and issuing Islamic Juristic Rulings at the Darul Ihsan Centre in Durban, South Africa. He is a leading International consultant in Islamic Finance with many years of expertise on Shari’ah compliant financing.
Providing a perspective to the progress of Shari’ah compliant financing in the global sphere and Sri Lanka’s performance in line with these developments, Mufti Shafique Ahmed Jakhura made the following observations; “The overall global Islamic financial industry is progressing at a fast paced rate. Perhaps from the financial sector, Shari’ah compliant financing was the least affected during the global financial crisis, when compared with conventional financial counterparts. Therefore, Islamic financing is something that is performing quite positively in the global context. As far as Sri Lanka is concerned, we find that Islamic financing in the country is very progressive. In terms of new product development, the number of institutions that are opening up etc., it is very encouraging to see progress being made towards its development in Sri Lanka.