MADISON, Wis. (7/31/13)--World Council of Credit Unions has published the Islamic Finance Manual: Operating Policies and Procedures for Credit Unions, the first known guide to establishing Shariah-compliant credit unions in the developing world.
|Helmand Islamic Investment and Finance Cooperative's (IIFC) accountant (right) receives training on end-of-month adjustments from the IIFC Group head of Helmand province in Afghanistant. World Council's nine-year program there resulted in the publication of the Islamic Finance Manual: Operating Policies and Procedures for Credit Unions, the first known guide to establishing Shariah-compliant credit unions in the developing world. (Photo provided by World Council of Credit Unions)|
The Customer Owned Banking Association, World Council's member organization in Australia, developed the manual based on the council's experience establishing Islamic investment and finance cooperatives in Afghanistan (2004-2012).
The guide details operating policies and procedures based on international standards for financial cooperatives and adapted to comply with Islamic Law. The 305-page document addresses membership, shares and savings mobilization, Shariah-compliant financing and collection, provisions and allowances for bad debts, asset and liability management, capitalization and capital adequacy, accounting, cash operations, internal controls, human resources, procurement and information technology and security.
Each chapter includes a review of procedural requirements and who should be involved, including template forms and contracts.
"The Islamic Finance Manual produced with the initiative of the Customer Owned Banking Association of Australia is a product of years of dedication and cooperation among World Council staff and local Afghan leaders to adapt World Council's traditional credit union building model to an Islamic banking environment," said Brian Branch, World Council president/CEO. "The manual now provides a cornerstone for local credit union development in countries as diverse as Libya and Pakistan to Australia and the U.S."
World Council's nine-year program in Afghanistan focused on establishing sustainable financial cooperatives and a national apex trade association. World Council consulted Islamic scholars and local religious leaders to modify its traditional credit union development methodology and establish the country's first fully Shariah-compliant financial institutions.
Today, more than 30 IIFCs and points of service in 14 provinces offer share savings and loan products that heed the Islamic prohibition on paying or receiving interest. Afghanistan's national financial cooperative association, the Islamic Investment and Finance Cooperative Group, was established in 2009 and became a World Council member in 2012. Afghan IIFCs comprise the world's youngest credit union movement and is the only one to claim full compliance with Islamic Law.
Islamic finance is a form of ethical financing, defined by the fair distribution of wealth, concern for the welfare of communities and economic stability. Islamic finance principles promote the protection of consumer rights and prevent investment in businesses that are considered "harmful," including gambling, armaments, alcohol and pornography.
The creation of economies based on physical assets is at the heart of Islamic finance--a key reason why the Islamic financial sector was largely unaffected by the recent global financial crisis. Islamic financial markets operate in 37 Muslim countries, and many non-Muslim countries in Europe offer Islamic finance options.