The Islamic Research Academy (IRA) of Al-Azhar said last week that the new law called sukuk, or Islamic bonds, still needed amendments to be compliant with the principles and provisions of Islamic Sharia. The IRA stated in its report, which was sent to President Mohamed Morsi and the Shura Council, which these days has parliamentary authority, that in order for the law to conform with Sharia, some articles should be amended while others should be written off. The IRA scholars opposed foreign ownership of sukuk. Abdallah Al-Naggar, an IRA member, said in a telephone interview with a TV talk show that the owner of sukuk should not be a foreigner because this might lead in some cases to foreign ownership of state assets. According to the IRA report, scholars had demanded the elimination of articles related to issuing sukuk on endowments. It said that sukuk must not be issued to finance Islamic endowments because it has charitable and not investment purposes. Moreover, the academy had opposed resorting to international arbitration should there be disputes, saying such a move would pose a threat to state sovereignty. The IRA criticised Article 20 of the draft law related to choosing the members of the Islamic supervision committee which has jurisdiction in identifying the types of sukuk which are in accord with Sharia. According to the law, the minister of finance chooses the committee. “This is humiliating to Al-Azhar,” said Al-Naggar, adding that Al-Azhar was the sole entity that should choose the members of the committee. Despite the reservations, Ahmed Al-Naggar, the finance minister's advisor on sukuk, was quoted as saying the ministry welcomed Al-Azhar's approval of the sukuk law. Al-Naggar told the state news agency MENA that the observations expressed by Al-Azhar were “corrective” and that most of them are stipulated in the law. However, Al-Naggar did not say whether the ministry would implement the changes demanded by Al-Azhar. Al-Naggar could not be immediately reached for comment by Al-Ahram Weekly. Meanwhile, IRA members stressed the importance of the amendments, saying that without them the law would not be Sharia compliant. Secretary-General of the Egyptian Islamic Finance Association Walid Hegazi said it was important for the Ministry of Finance to implement the changes demanded by Al-Azhar clerics, saying that these changes were good and that they were in line with the law overall. Hegazi said the changes could be made in the executive charter of the law. “This will be much easier than referring the law back to the Shura Council for changes, since the government can change the executive charter,” Hegazi told the Weekly. “In both cases, the changes would be binding.” In March, Al-Azhar protested that the law was passed by parliament, dominated by the Muslim Brotherhood's Freedom and Justice Party, without Al-Azhar being consulted. The Shura Council approved the law and sent it directly to President Morsi without Al-Azhar's approval. The hardline Salafist Nour Party, which at times is at odds with the relatively more moderate Muslim Brotherhood from which the president hails, supported Al-Azhar, saying that the Islamic institution's Senior Scholars Authority should be consulted on all issues pertaining to Sharia, as stipulated in Egypt's recently adopted constitution. According to Article 4 of the constitution, the opinion of the senior scholars at Al-Azhar must be sought on all matters related to Sharia though the article does not stipulate whether Al-Azhar's opinions are binding or simply consultative. On 31 March President Morsi referred the sukuk draft law to Al-Azhar's Senior Scholars Authority for its opinion. This is not the first time Al-Azhar, Egypt and the Muslim world's leading Islamic authority, has looked into the controversial sukuk law. In January, it rejected the draft law presented by the Ministry of Finance on the grounds that the law violated Sharia and that it posed a threat to state sovereignty. The law was referred back to the Ministry of Finance for amendments. The ministry then modified the bill and the final version was approved by the cabinet in March and was sent to the Shura Council a few days later. If passed, the sukuk law would allow the state to issue sukuk bonds for the first time. The government, which suffers from a gaping budget deficit, is hoping that sukuk could bring in between $10 to $15 billion a year.
