The Bahrain Institute of Banking and Finance (BIBF) is working with UK-based developer Cogneum and their Middle East and Africa partner Innosoft Solutions on a Shariah governance software platform.
The cloud-based platform is meant to allow Islamic banks and financial institutions to streamline their internal Shariah governance processes, facilitate the integration of Maqasid al Shariah and the UN SDGs in their workflow, and maintain an audit trail and track evidence for enhanced corporate governance and reporting, according to BIBF.
“We are currently in the developing phase of the product,” said Mujtaba Khalid, Head of the BIBF Islamic Finance Center. “If all goes as planned, we plan to launch this product by the fourth quarter of 2020.” The BIBF is a training institute affiliated to the Central Bank of Bahrain.
Khalid said there are many Islamic banks and financial institutions in the GCC region and Southeast Asia that want to adhere to the UN Sustainability Development Goals, or SDGs.
The software will help reduce charitable write-offs by Islamic banks due to Shariah non-compliance issues.
When asked what goes into making up Maqasid al Shariah, Khalid said that numerous studies, research and papers show that the goals of Shariah are in line with the UN SDGs. “This is what our software solution is about, if you are SDG-compliant, you are, according to vast research in Islamic finance, also in line with Maqasid. This has been shown through multiple independent research papers done in multiple jurisdictions,” according to Khalid.
The platform uses the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Standards and ensures the step-by-step application of the process flows for retail Islamic banks’ products.
Daniel Mueller, CEO of Cogneum said they have developed a workflow and automation platform that helps organisations manage their ESG and sustainability impacts and risks. He notes they have been working in the GCC over the last year and a half with public and private sector organisations.
“In our collaboration, BIBF provides the guidance in Shariah governance and Cogneum provides the workflow and the automation platform.”
The platform works with templates that define compliance processes that are linked with Shariah governance and the UN SDGs.
“The platform supports linking of evidence to transactions. The evidence can be in support of Shariah compliance, UN SDG compliance or other required compliance frameworks,” said Mueller.
He said that in an ijarah contract there are a certain number of steps, each of which have documents and contracts associated with them which the platform links. The platform also links the appropriate AAOIFI Shariah standards with each step of a transaction.
“The platform is designed for remote collaboration,” said Mueller. “Given the current environment with COVID, it is ideal for a workforce who are distributed and working from home.”
TARGETING RETAIL FIRST
The partners will initially targeted the platform for retail Islamic banks.
“We will start with retail Islamic banking products and next year we will aim to target complex trade finance as well as treasury and capital market products,” said Khalid.
“The Shariah governance framework of the software solution will be based on AAOIFI Standards but can also be customized as per the banks’ Shariah governance manual.”
The platform can also work with investment banks, said Mueller.
He added that the platform can also help organisations in the areas of green bonds, sukuk and sustainability risk reporting.
“We are looking at different markets. There is a growing need for organisations to comply with financial and sustainability frameworks.”
(Reporting by Hassan Jivraj; Editing by Emmy Abdul Alim email@example.com)
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