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Differences between Sharia standards, statutory laws and judicial rulings on Ijarah application within Islamic banks in Bahrain can be reconciled without fundamental changes, a leading expert has said.
This was the view of Bahrain Islamic Bank head of Sharia co-ordination and implementation Dr Hamad Al Shaikh in a presentation delivered during a Waqf Fund event, where he compared the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Sharia standard on Ijarah with the relevant laws and judicial rulings in Bahrain.
Dr Al Shaikh, whose doctoral thesis was on Ijarah, then presented the key findings of his study, stating that while there are 54 per cent similarities between the standards and laws, there are 13pc contradictions.
He was of the view that most of the differences can be reconciled without fundamental changes.
His study also showed that after the mandatory adoption of AAOIFI Sharia standards as part of the law in Bahrain, the judicial rulings increasingly referred to AAOIFI standards in settling disputes involving Islamic banks and Sharia compliant banking.
The programme included a Q&A session and 36 people from the senior management of Waqf Fund member institutions including Sharia officers, legal experts and bankers attended.
The attendees actively participated in the discussion during and after the presentation and it was agreed that there was a need to have similar studies on other contracts such as Murabaha, Istisna’a and Mudaraba.
Also, there was a consensus on the importance of explanatory notes/guidelines for implementation to be issued by AAOIFI for major and most widely used standards.
Accordingly, it was then agreed that the Sharia officers committee of the Bahrain Association of Banks should discuss and agree the way forward for such suggestion.
Most participants were of the view that the role of the Central Sharia Board should be strengthened in interpreting Sharia standards and as a reference body for the judiciary in case they need Sharia-related clarification.
Khalid Hamad, executive director of banking supervision at CBB and chairman of the Waqf Fund, welcomed the participants and introduced the presenter.
In Islamic banking, Ijarah refers to a contractual agreement where one party (lessor) leases an asset to another party (lessee) for a predetermined period in exchange for periodic payments known as rent.
Unlike conventional lease agreements, Ijarah focuses on transferring the right to use or benefit from the asset, rather than ownership itself. This means the lessor retains legal ownership of the asset throughout the lease term.
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