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Introduction: Shariah Advisory Board and Home Financing
The Shariah Advisory Board is a specific legal council that consists of several people. The purpose of this committee is to control the activities of financial organizations in accordance with Islamic religious laws. The representatives of the council are watching to ensure that the work of banks and other financial and economic entities does not contradict the laws of Shariah, and the primary rules of the Islamic order and religious canons are strictly observed. This committee often consults various representatives of the banking sector on some issues: financial audit, work with securities, insurance investments, pension, and charitable funds, etc. The significance of such authority in countries that live under the Shariah law is quite large; it controls financial institutions and ensures that their activities take place not only in accordance with the basic rules of trade but also according to the norms of the Islamic world, defined long ago.
The activities of Standard Chartered Bank are primarily regulated by this board. In particular, when it comes to working with real estate and lending in this area, the Shariah Advisory Board represents the interests of Islam and determines which of the areas of the bank’s work are legitimate. Thus, the committee allows the rental of residential premises, the acquisition of real estate for long-term or short-term use, and also considers all business agreements between stakeholders. Standard Chartered Bank, like most other similar financial institutions, operates on the basis of the Ijarah principle, which implies a lease or rental agreement (SCB Shariah Supervisory Committee, 2017). This type of control by the Shariah Advisory Board is quite typical and standard for most Islamic states.
Parsing the Fatwa
According to the rules of the Shariah Advisory Board, the Ijarah principle is one of the key ones in the work of Islamic banks. The essence of this concept means the rental of real estate, that is, the use of the third-party property for a specified fee on a contractual basis (Abdul-Rahman, 2014). With the Ijarah agreement, some Shariah rules apply. For example, the right to cancel the contract by buyers when they consider a particular proposal like the one that does not correspond to the description. Another rule implies the assessment of the quality of specific goods. Buyers have the right to cancel the transaction if a defect is found after the purchase. There is also the right of the parties to terminate the contract at any time, depending on the established deadlines or on particular events. A recall or cancellation is also one of the Ijarah rules, which is related to the possibility of terminating the contract (Iqbal, M., & Molyneux, 2016). There is one more principle that provides for compensation or replacement in case of damage to property, not through the fault of the tenant. All these laws are an indispensable condition for the activities of Islamic banks and are called upon to determine the rules for conducting financial affairs in accordance with the Shariah law, to which many countries adhere.
The contract can be concluded proceeding from the fact that the subject of the agreement is connected with specific terms or is dependent on the tasks performed. If a relevant deal is based on a temporary criterion, this period should be precisely regulated, and the time frame is entirely justified. Any contract signed by the bank ceases to be valid if a leased object stops serving its purposes. Also, some conditions must be met if the lease includes agricultural land. It is forbidden to set such conditions that can lead to losses. Moreover, lease payments depend on the rate of farm products. It means that the cost of individual services for hiring a particular object is not always fixed. As for Standard Chartered Bank, it has its per cents that the tenant must pay for the use of real estate (Standard Chartered Saadiq, 2017). At the same time, the activities of this institution continue to be subject to the Shariah law, which is followed by the Shariah Advisory Board.
Thus, the Ijarah principle that is implemented in the bank sphere of the UAE is quite typical and standard for Standard Chartered Bank. Home financing is one of the activities of this institution, and compliance with the Shariah law is one of the essential conditions for its work. A specific committee called the Shariah Advisory Board controls the implementation of Islamic laws and observes all the operations of the bank. A described fatwa is an integral part of the business policies of many Arab states. The basic principles that it represents in the field of real estate rental relate to some procedures connected with signing the relevant regulatory documents, as well as the possibilities for their dissolution or change. All the activities should be carried out in strict accordance with these laws; otherwise, the business of a financial institution may be suspended because of the non-observance of specific religious canons that are typical for most Islamic states.
Abdul-Rahman, Y. (2014). The art of RF (riba-free) Islamic banking and finance: Tools and techniques for community-based banking (2nd ed.). Hoboken, NJ: John Wiley & Sons.
Iqbal, M., & Molyneux, P. (2016). Thirty years of Islamic banking: History, performance and prospects. New York, NY: Palgrave Macmillan.
SCB Shariah Supervisory Committee (2017). Islamic home finance by Standard Chartered Bank. Web.
Standard Chartered Saadiq. (2017). Web.