The Association of Alternate Financial Institutions (AAFI) recently conducted a forum on 6 September at the Organisation of Professional Associations of Sri Lanka (OPA) Auditorium for its members on the Legal Aspects on Islamic Finance with a focus on the documentation and recovery aspects of Murabaha, Diminishing Musharaka, Wakalah and other key products.
The Association of Alternate Financial Institutions (AAFI) was formed in 2015 with the intention of furthering the Alternate Finance industry in Sri Lanka through the creation of a forum to voice and discuss the issues pertaining to the alternate finance industry and promote its growth. The AAFI is a not for profit association and currently has 17 voluntary corporate members including ADL Capital, Al Falaah Takaful – LOLC General, Amana Bank PLC, Bank of Ceylon PLC, Candor Asset Management Ltd., Hatton National Bank – Al Najah, LB Finance – Al Salamah, People’s Leasing & Finance – Al Safa, Al Falaah IBU – LOLC Finance, Commercial Leasing & Finance PLC, Richard Pieris Finance Ltd. – Arij IBU, HNB General Insurance – Takaful, KPMG, Commercial Bank of Ceylon – Al Adalah, Amana Takaful PLC, MCB Bank and NDB.
The welcome address was delivered by AAFI President Ravi Abeysuriya. In his address he emphasised that the objective of the Association was to ‘provide a platform for the players in the industry facilitate the exchange of information and to promote and grow the Alternate Finance Industry’.
The forum included presentations by Himali Mudadeniya, Partner at FJ & G De Saram and Naomal Goonewardena, Partner at Nithya Partners. Mudadeniya elaborated on the documentation to be maintained when carrying out Wakalah, Diminishing Musharaka and Murabaha transactions. She further added that the essential aspects of Alternate Financial products include the avoidance of uncertainty, interest and gambling as well as ensuring that contracts are not conditional on each other and should satisfy Sri Lankan law requirements.
Goonewardena expounded on the enforcement issues faced by financial institutions when carrying out Wakalah, Diminishing Musharaka, Musawama, Ijarah and Murabah transactions.
Goonawardena in explaining the Mudarabah mentioned that this is an instance where one part of the partnership provides the capital and the other part (Mudarib) provides the entrepreneurial skills. The Mudarib is liable for breach of trust, misconduct and negligence.
The presentations were followed by a lively and informative panel discussion with eminent legal personalities from the Islamic Finance industry including, Preeni Koralege, Chief Legal Officer – Amana Bank and Vidisha Jayawardane, Senior Legal Adviser – Assistant Vice President – National Development Bank PLC in addition to the speakers. The panel discussion was moderated by Suresh R.I. Perera, Principal Tax and Regulatory at KPMG.
Rifka Ziyard, Secretary to the AAFI, made the closing remarks and mentioned that the AAFI would continue to be dedicated to organising forums and events for its members in order to facilitate a knowledge sharing platform.