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Jakarta, 9 Aug 2024 – The Menara Syariah & INCEIF University Symposium (MSIUS) 2024 concluded successfully after two days of insightful discussions and invaluable exchanges on bridging innovation and tradition in Islamic finance among Subject Matter Experts, Shariah scholars and industry practitioners in the region.
The symposium, themed “Bridging Innovation and Tradition in Islamic Finance for Sustainable Waqf and Climate Investments” and co-hosted by Shariah education & economic hub venue Menara Syariah and INCEIF University, focused on advancing sustainable Waqf and addressing climate investment challenges through the lens of Islamic finance.
In the closing remarks, INCEIF President & CEO Professor Emeritus Dato’ Dr Azmi Omar expressed the University’s gratitude to all who contributed to the event’s success.
In his presentation “Collaboration and Partnerships: Fostering a Sustainable Islamic Finance Ecosystem”, Dato’ Azmi drew comparisons between the Islamic finance ecosystems of Malaysia and Indonesia, emphasising the critical importance of sustainable development to ensure the needs of the current generation were met without compromising the ability of future generations to meet their own needs, all while preserving ecosystems and managing limited natural resources.
He highlighted that Islamic finance must transcends mere profit maximisation and focuses on broader stakeholder interests. “Today’s goal should be on achieving halal and tayyiban principles. The essence of a Shariah economy is about the preservation of harm and the attainment of benefit.”
He laid out several strategies essential for fostering a sustainable Islamic finance ecosystem. These include the integration of environmental, social, and governance (ESG) factors into Islamic Financial Institutions’ (IFIs) decision-making processes; the development of impact measurement metrics to assess the social and environmental consequences of Islamic finance activities; and the enhancement of transparency through mandatory sustainability performance disclosures by IFIs.
Dato’ Azmi also focused on the power of collaboration and partnerships in building a sustainable ecosystem. He stressed the importance of knowledge sharing, forming strategic partnerships with regulatory bodies, non-governmental organisations, universities, and international organisations. Such collaborations would leverage resources, share expertise, and foster a supportive ecosystem for sustainable finance initiatives. Moreover, these partnerships would facilitate the exchange of best practices and experiences among IFIs and other local and international bodies.
“The importance of resource mobilisation, such as partnerships between fintech firms, Islamic microfinance institutions, and traditional Islamic banks could expand access to a broader range of funding sources, financial services, and expertise, benefiting both the institutions involved and the communities they serve.”
Dato’ Azmi shared a case study “Project Hassan”, an initiative under the Smart Sawah Berskala Besar Asnaf (Smart SBBA) programme, managed by Lembaga Zakat Negeri Kedah (LZNK. The project in Kedah covers 201 hectares of paddy land and is designed to create diverse economic opportunities for the asnaf community in the surrounding area. The initiative aims to transform members of this community from asnaf village laborers into agricultural entrepreneurs and other roles, such as rice mill workers and food stall operators. The ‘from asnaf to asnaf’ economic model ensures that the community members themselves drive economic growth. The project plans to raise RM10 million (USD 2.7 million) through the myWakaf platform to finance a rice mill located close to the Smart SBBA site. This proximity will reduce transportation costs and time for farmers, increase their yields, and eliminate the need for middlemen, thereby enhancing the community’s economic prospects.
In conclusion, Dato’ Azmi emphasised that creating a sustainable Islamic finance ecosystem was a necessity. However, achieving this would require significant human capital and talent. Collaboration and partnership were key to overcoming the challenges and fostering a robust and sustainable Islamic finance ecosystem.
Highlights from the panel discussions of the two-day symposium:
Panel Discussion 1: Unlocking Waqf Potential in the Digital Age moderated by INCEIF Assoc Prof Maya Puspa Rahman
The panel discussed how digital platforms could enhance the creation, management, and transparency of Waqf endowments. Key topics included leveraging blockchain technology for secure record-keeping, implementing fractional ownership models for broader participation, and exploring innovative fundraising strategies for Waqf projects.
Prof Dr Amir Shaharuddin of Universiti Sains Islam Malaysia addressed the challenge of nazir competency in waqf management. He underscored the need for skilled nazir, strong governance, and supportive technology for the effective collection and distribution of cash waqf. He emphasised the necessity of advanced technology for efficient donations and disbursements and highlighted the future role of technology in sharing knowledge, reporting impacts, and measuring donation outcomes, with a focus on distribution and impact.
Imam Nur Azis, MA of iBantu.co highlighted the critical issue of transparency in waqf, which is essential for earning public trust. He noted that while cash waqf in Indonesia was currently valued at Rupiah1.7 trillion, its potential was around Rupiah180 trillion. Imam Nur demonstrated how blockchain technology could enhance transparency and reduce fraud in waqf management, citing examples Finterra Waqf Chain in Malaysia and iBantu’s impact reporting. He discussed advancements such as fractional ownership models, tokenisation of waqf, and smart contracts, while addressing regulatory, Shariah compliance, and technological challenges.
Dr. Hendri Tanjung, who was the key contributor to the Waqf Core Principles document available from Badan Wakaf Indonesia, focused on the benchmarks for effective nazir. He is currently developing Android software to implement these core principles, with completion anticipated by December 2024. Dr Hendri also previously developed a dedicated website for this initiative.
Dr Ir A Mukti Soma of Telkom University discussed the high poverty levels in Indonesia and the ongoing challenges related to education and health. Citing the low levels of Islamic financial inclusion and literacy, he highlighted the importance of integrating financial literacy into educational curricula and focusing on digital financial literacy. He also stressed on the need for educating individuals about consumer protection from digital fraud and called for enhanced commitment from the government and Badan Wakaf Indonesia to foster trust through improved reporting and market discipline.
Panel Discussion 2: Financing Sustainable Development: The Convergence of Islamic Finance and Climate Action moderated by Dr Anisa Dwi Utami of IPB University
The panel brought together experts to explore how Islamic finance could drive climate action. Discussions ranged from the evolution of Green and Blue Sukuk to the importance of sustainability-linked financing.
Panellist Assoc Prof Maya Puspa Rahman highlighted the importance of climate action and traced the evolution of green bonds and green sukuk, starting from the first Climate Awareness Bond in 2007 and the green sukuk in 2017. She acknowledged the growing global appetite for green sukuk but pointed out ongoing challenges such as the lack of standardisation, pricing issues, and mismatches between investor expectations and the actual performance of green sukuk instruments.
Dr. Iqbal Balatif, Manager for Sukuk Transaction and Development at Ministry of Finance, Indonesia, began his remarks by referencing Surah al An’am verse 141, which stressed the Islamic principle of avoiding wastage and appreciating the environment. He then shared his experience in structuring the first green sukuk in 2018, emphasising the necessity of having a clear framework and intention to ensure that financing truly supports climate action.
Gregget Kalla Buana of The United Nations Development Programme (UNDP) Indonesia focused on the importance of collaborative efforts to achieve sustainability. He discussed UNDP’s role in developing integrated financing frameworks and highlighted the successes of green sukuk and the more recent blue sukuk. He also mentioned social impact bonds that incorporate Islamic finance principles, which have been used to fund social development projects, such as building schools.
Dr Oktofa Yudha Sudrajad of Institut Teknologi Bandung emphasised the importance of strong collaboration between different stakeholders in the issuance of sustainability sukuk. He discussed various Islamic finance contracts that can be combined to structure these sukuk, demonstrating how Islamic finance can be effectively harnessed to fund climate action.
Panel Discussion 3: Digital Assets: Redefining Islamic Financial Instruments for Impact Investing
The panel delved into the transformative potential of digital assets within Islamic finance. Moderated by IPB University Lecturer Dr. Laily Dwi Arsyianti, the session featured thought-provoking insights on how Sukuk tokens and security tokens could revolutionise impact investing in the Islamic financial sector.
INCEIF Assoc Prof Dr Ziyaad Mahomed provided expert analysis on the future of digital assets in Islamic finance. Ronald Wijaya of AFSI discussed the potential of these innovations to enhance accessibility and efficiency in Islamic investing. Indonesia’s Islamic Economy Infrastructure Ecosystem at the National Committee for Islamic Economy and Finance Director Dr Sutan Emir Hidayat examined the regulatory considerations and the importance of ensuring Shariah compliance in digital asset structures.
The session concluded with a strong sense of optimism about the role of digital assets in shaping the future of Islamic finance, offering new avenues for growth and inclusion in the industry.
The news on the symposium appeared on numerous sites:
Menara Syariah and INCEIF Collaborate on Sustainable Waqf and Climate Investments