Deloitte’s Shariah Appointment: Defining the Role

Last week, Deliotte announced the appointment of Mufti Hassan Kaleem, a classically-trained Islamic jurist, as its (presumably global) Shariah scholar. The appointment is a reflection of the fact that no financial institution – or advisory firm seeking to serve financial institutions – can be truly global without expertise in Islamic finance.

Reports in the press, including in the Financial Times, do not describe the scholar’s new role in detail. There is a reference to “signing off on products” and another to “different work with different exposure.” Were I defining the role, it would have three key elements:

 

1. Deepen the firm’s awareness of Shariah and Islamic finance matters

Islamic finance is growing rapidly and is here to stay. An advisory firm, as a whole, needs to understand this sector. As there are many accounting and tax implications of Shariah-compliant structuring, firms like Deloitte need to climb the learning curve fast.

In addition to leading the development of firm-wide training courses, I would ask the scholar to present at a worldwide partner’s meeting in the near future. This would raise awareness quickly and signal the topic’s importance and relevance.

(For more on how to raise Gulf awareness in a global organization, see Chapter 11 — “Bringing it Home: Fostering GCC Awareness in the Head Office” — of Dubai & Co.)

2. Integrate the Shariah perspective into the overall advisory proposition

Islamic law is a deep and rich tradition, and Shariah scholars are by necessity specialists. The Shariah perspective cannot, however, be confined to a small group of specialists and absent from the overall client service team.

Mufti Hassan Kaleem has the unique opportunity to work with clients and client services teams on adopting a more holistic perspective on what the Shariah intends: matters such as meritocracy and fairness, environmentalism, and full transparency with customers. These areas are governed more by principles than by “bright line” rules, which makes them more a matter of dialogue than decree.

3. Support “Shariah Execution Audit” activities within Islamic banks

Islamic banks customarily conduct Shariah Audits – exercises by which an audit team makes sure that the bank’s management has complied with the processes mandated by their Shariah Committees. Global firms like Deloitte can help apply best practices to the process of making sure banks live up to the promises they make to their Shariah Supervisory Boards.

One responsibility I would not suggest, however, is to “sign off that products are fully Shariah compliant.” Shariah Supervisory Boards who advise banks – especially in the Gulf – have a diversity of opinions as to what is and is not Shariah compliant. Malaysia has made the Shariah approval process for Islamic products uniform through its central bank, but the Gulf states have not done so. Requiring Deloitte’s “sign off” would have the effect of giving Deloitte’s Shariah scholar veto powers over the Shariah Supervisory Boards of all its clients. Such a measure limits Shariah diversity, dynamism, and consumer choice.

Fostering Shariah expertise within a global advisory firm is laudable and makes commercial sense. The role of the Shariah experts, however, should be more to enable than to approve.