Day 1

Opening Remarks

In the begining of the forum, Dr. Majid Eshghi, Chairman of the Securities and Exchange Organization (SEO), mentioned I’m delighted to join you at 13th international forum on Islamic Capital Market, going on to saythat on the behalf of the SEO I want to thank you and it’s a great pleasure to have you.
He said this program is not just to provide an opportunity to exchange ideas but also to create a platform to engage participants and our local capital market leaders. We hope this engagement be after the forum.
“This year we have some influential personalities and prominent market regulators, operators, leaders, thinkers and scholars that are associated with the world of Islam in conventional capital market. Over 90 knowledgeable, well-established lecturers from 25 different countries will be present in the forum of course it’s the result of Iranian team of the capital market’s effort.  
Last but not least I want to thank my hardworking colleagues at SEO for professional organization of this online forum.
I hope this forum can create a chance for you to deal with deeply the Islamic capital market and the issues around them. The pandemic caused the conference to be held online and I hope in the next event I meet you in person God willing” Dr. Eshghi said.

Then Dr. Bahador Bijani, Vice-chairman of SEO in International Affairs and Foreign Investment, delivered a speech. He said I hope this event contribute to Islamic capital market and help to exchange information in terms of initiatives, achievements and developments in different jurisdictions. I want to appreciate my colleagues for holding this conference. We have almost confronted for a decade with unprecedented challenges from market crash to challenges of Covid-19 in recent years.
The lecturer stated that they directly affect the economy and consequently the capital market. We can see particularly these challenges affected the capital market and crypto-assets.   
The pandemic and lockdown has affected the global economy. The effect of vaccination may make business more active in the market.
He mentioned Deutsche Bank announced the number of investors in 2020 decreased sharply. Moreover, A research conducted by the Bank of America shows that 37 percent of people in recent years invested in the stock exchange which is 170 billion dollars, so it shows that more money is going to inject to the stock market. This trend can be seen in Iran’s capital market and due to overreaction of retail investors, all markets’ index raised sharply.

He said I hope the platform like ICM can give proper and possible solutions around these new challenges. 
The potential of Islamic capital market instruments to alleviate the effect of the pandemic mustn’t be underestimated. Social responsible financing invests in Zakat, Sadaqe and Waqf in terms of crisis and many other important issues are needed to be discussed in various platforms like this.
Regarding cryptocurrencies Dr.Bijani remarked many of them faced the security issue. As they are not regulated by us there is a dark nature of creation of value and trading to move the liquidity from the regulated market to the dark market, so it is one of the most important challenges that we are facing it at the moment and the Islamic jurisprudence have not made a resolution or concrete decision about the nature of this asset and the government is not determined to face this issue.
“Participants of the dark market put pressure on regulatory bodies to regulate them for trading global assets obligatory. Nobody can deny the potential of blockchain technology in this market. 
The SEO is determined and has taken steps to facilitate the capital formation and reduce the burden on the security of this event both as equities and Sukuk while maintaining and stabilizing the market which is really a hard task” the lecturer said.

Potential of Fintech in Islamic Finance Industry and Digital Economy
Lecture by Dr. Muhammad Ashfaq, Senior lecturer and CEO of Amanah Institute of Islamic Finance and Economics

He started with Islamic economy drivers consisting of demand-side drivers and supply-side drivers.
Demand-side drivers:
1- A large, fast-growing and young Muslim population
2- Islamic values driving lifestyle practices
3- Digital connectivity
4- Growth of ethical consumption
While Supply-side drivers are as follows:
1- Government regulations
2- Intra-OIC trade growth
3- Participation of global top brands
Dr. Ashfaq said the global economy is forecast to shrink by 5.2 percent in 2020 due to Covid19, which is the worst global recession since World War two. He stressed that the Islamic economy has not been immune to the impact of the pandemic, as investment in the Islamic economy fell by 13 percent in 2019/20 to $11.8 billion from $13.6 billion in 2018/19.
He also mentioned the value of Islamic finance assets increased by 13.9 percent in 2019 from $2.52 trillion to $2.88 trillion. Governments, especially in OIC countries have been keen to bolster Islamic finance. Moreover, Islamic Fintech in OIC countries is fast-growing. Meanwhile, Iran’s fintech market size is $9.2 billion and Saudi Arabia’s fintech market size is $17.9 billion, so they are important hubs in this area.
Ashfaq went on to say that key developments of Islamic finance in 2019/20 include revenue developments, operational developments and national and trade developments.
Finally he said the outlook of Islamic fintech and finance could lead to turbulence in Islamic equity markets, safe-haven flows to gold and investment-grade sovereign Sukuk and lower investors risk appetite.

Performance of Socially Responsible Investment vs. Shari’ah Compliant Investment amid Covid-19: Lessons to Learn
Lecture by Dr. Irum Saba, Associate Professor, Institute of Business Administration (IBA)-Karachi

In the beginning of her lecture, she stated that Covid-19 crisis is an opportunity for financial intermediaries to transform themselves and improve their services and processes.
Dr. Saba mentioned Socially Responsible Investment (SRI) is an investing strategy focusing on social change and financial returns for a conscious investor.
Somewhere else she emphasized that Shariah-compliant investment is done in the light of Shariah (Islamic law).
The lecturer stressed that the total assets under management (AuM) of Islamic funds grew by 31.9 percent in 2020 despite the pandemic.
Saba pointed out to IFSB Stability report in 2021 in which Islamic indices are moving similarly to the conventional market, continued to outperform their conventional counterparts in 2020 in keeping with the past trend, but with a growing differential.
At the end the professor of Institute of Business Administration said the lessons we must learn are as follows:
1-Change in investment strategy
2-Regulatory framework
3-Investible assets
4-Investment of different stakeholders in the case of Islamic investments
5- Talent
6-Collaboration
7-SRI based on Sukuk
8- Awareness  

Islamic Finance and Market Anomaly: Case of Iran Capital Market
Lecture by Dr. Farhad Morsali, Assistant professor, Head of International Affairs in the Iranian Association of Islamic Finance

At first, he dealt with the definition of market anomaly, saying when the actual result under a given set of assumptions is different from the expected result predicted by a model. Anomalies are occurrences that deviate from the predictions of economic or financial models.
Morsali stressed that there are three types of market anomalies, including calendar anomalies (deviation in normal behaviors of stocks with respect to time periods such as turn of year, turn of week…), fundamental anomalies (prices of stocks are not fully reflecting their intrinsic values such as value vs. growth anomaly) and technical anomalies (They are based on the past prices and trends of stacks).
He said market anomaly causes behavioral constraints of investors, information asymmetry, different tax treatment and weak regulation.
Somewhere Dr. Morsali said Islamic finance forbids usury (riba), gambling, ambiguity (ghara) selling a debt against a debt and stipulates that income must be an outcome of productive economic activities based on the principles of profit and loss sharing contracts (Akl-ul-mal bil batel).
He went on to say that some Islamic solutions to anomalies regarding investors’ behavior and information asymmetry are patience and transparency respectively. In terms of different tax treatments, Muslims possessing a minimum net worth above their basic needs (Nisab) shall pay Zakah.
Regarding Iran capital market, Dr. Morsali stated that there are several reasons for its sharp rise including encouragement by the officials, enhancement of investment culture and offering higher returns in comparison with parallel markets.
“On the other hand, Iran capital market’s anomaly causes are behavioral causes (manic buying and panic selling), momentum effect (inertia of prices), speculation & pump and down scheme (misguidance, manipulation) and macro-economic & systematic factors (uncontrollable)”, he said.
Finally, Dr. Morsali pointed out to the SEO's measures to control the market such as encouraging market making, changing price limits, licensing more institutions, adding diverse instruments and so on.       

Socially Responsible Investment during Covid-19 Crisis
Lecture by Dr. Mohamed Cherft EL AMRI, Istanbul Sabhattin Zaim University

He said Socially Responsible Investment (SRI) is any kind of investment or project that takes into consideration ethical, environmental and social elements in the investment’s choice, processes, objectives, organization and management. Investment and projects in social well-being can lead to reducing poverty, enhancing healthcare services, avoiding investment in harmful industries and protecting customers and promoting responsible use of natural recourses.
Dr. Cherft stressed that SRIs products are equities, bond, properties, and commodities etc. Then he pointed out Islamic SRI principles can be traced in the source of Holy Quran and (Green) Sukuk is one of the newest financial instruments in the market. The World Bank reported that 17 green Sukuks had been issued as of July 2020. The green Sukuk issuance have been underpinned by existing global standards and aligned with a framework established by the issuer and typically had an independent second opinion.
Somewhere else he dealt with the Islamic SRIs & covid: issues and challenges, saying common issues and challenges are regulatory framework, asset size and liquidity, project selection, instruments and products and additional costs.
At the end he concluded the pandemic has been an accelerator of ESG trends and opportunities. Covid-19 has demonstrated the value of future-proofing investments by focusing on resilience in the face of long-term structural trends such as climate change, digitalization, diversity and inclusion.

Overview on the Recent Development of German Financial Supervision
Lecture by Robert Elsen from Bafin

He said BaFin supervises approximately 1500credit institutions, 700 financial services institutions, 90 branches of foreign institutions, 30 pension funds etc. In addition, BaFin promotes a transparent and fair offer of financial products in the various fields of financial sector and closely observes the market development and analyses consequences for the investors.
Elsen emphasized that the measures of BaFin prevents money laundering and enhances bank solvency.

Sukuk Innovation - How Far Have We Gone
Lecture by Dr. Syed Aun R. Rizvi, Associate professor, Labor University of Management Sciences (LUMS)
He said Islamic finance assets are estimated to be $2.0 trillion, and is expected to grow at the rate of 15% over the next few decades. Although it is an impressive record, Islamic finance only accounts for 1% of the global financial system.
The lecturer stated innovating in Sukuk, particularly social Sukuk could help support the education and health care systems amid the current slump and attract environmental, social, and governance (ESG) investors (those investing for social reasons) and / or Islamic investors (those looking for Sharia-compliant investments). Furthermore, the reason for innovating in Sukuk is to scale up the amount of funds required.
.Finally Rizvi mentioned post Covid-19 challenges could be recovery of capital markets and complexity issues with Sukuk process

 
RegTech in Capital Markets: Aspects and Opportunities
Lecture by Dr. Hamid Hassanabadi,Chief Technology Officer, SEO

He said RegTech is a subset of FinTech that uses innovative and integrated technology to facilitate the delivery of regulatory requirements more effectively and efficiently than existing capabilities, stating RegTech is often misunderstood and confused with FinTech. He mentioned FinTech refers to the use of technologies and software to provide financial services, while RegTech is the use of new technologies to address the increasingly dense data landscape required to meet regulatory compliance challenges.
Dr. Hassanabadi stated the RegTech market is projected to grow at a rate of 19.5% in terms of value, from $5.32 in 2019 to reach $21.73 by 2027. In addition, the top opportunities of RegTech are automating and simplifying processes, cutting cost, increasing agility, managing risks and so on. He mentioned RegTech main players are regulators, financial institutions, RegTech firms and professional services.
He said SEO’s recent actions on RegTech includes utilizing E-KYC solutions for customer onboarding, implementing domestic advanced surveillance systems, establishing a new sector entitled RegTech below IT department organizational chart, establishing Iran capital market sandbox, founding sandbox steering council and considering committees (shariah, cyber security, legal, technical, business).
Regarding the future of RegTech, Hassanabadi remarked it involves more automation, standardization and simplification across organizations and industries. Moreover, RegTech will continue to evolve as financial institutions develop new products and services, which in turn carry the optional for new regulations and increased compliance costs. 

 Day 2

New Model of SPVs for Sukuk Issuance in Iran Capital Market
Lecture by Dr. Mohammad Sajjad Siahkarzadeh, Board Member, Central Securities Depository of Iran, Member of IAIF

At first, he said Socially Responsible Investment (SRI) is any investment strategy seeking to consider both financial return and social/environmental good so as to bring about social change regarded as positive.
Regarding the amendment of Crowd-funding regulations in favor of Covid-19 stricken business sectors, Siahkarzadeh mentioned there are two options for donators: the first one is donating the principle and the second one is donating the proceeds.  
Then he defined Waqf as the revenue or benefit generated serves specific categories of beneficiaries. Waqf is a special kind of philanthropic deed in perpetuity.
The lecturer remarked that there are two forms of Waqf: the first one is financial assets (income producing assets called yields or Manfaat) and the second one is real assets (fixed or capital assets called principal itself or Eine), adding general types of Waqf are Waqf for religious purpose, Waqf within family and Waqf for philanthropic objectives.
Siahkarzadeh stressed that Waqf Fund’s mechanism in Iran capital market is as follows:
1- For the purpose of the benevolent intentions of individuals.
2- Fun manager, licensed by the relevant regulator, issues the fund units.
3- People willing to participate in Waqf Fund receive the units by financially contributing to the fund.
4- Fund manager uses financial resources to buy the assets eligible for the endowment from the unit holders.
At the end, the lecturer spoke about CSDI’s mutual funds platform, saying the value of mutual funds in Iran capital market is $20.420 billion.  
Islamic Moral Economy, Sukuk and Sustainable Development: The Impact of Sukuk on CE2 Emission
Lecture by Dr. Mehmet Asutay, Director, Durham Center for Islamic Economics and Finance
He remarked that Islamic moral economy essentializes justice, but encourages for equity through the expansion of ihsan; this framework should constitute the objective of Islamic finance. In addition, Islamic moral economy goes to the extent of removing barriers so that everyone can have access in an attempt to emancipate and empower individuals through the expansion of ihsan.
Regarding sukuk and socio-economic & green objectives, Astutay said sukuk market today is largely composed of sukuk issuance that comply with financial principles of Islamic law but are value-neutral form versus substance and only very small number of sukuk issuances today are marketed as responsible finance or green sukuk. Moreover, sukuk enables risk-sharing in high-risk development projects and it offers flexible structures for different phases of development projects.
The lecturer emphasized that the volume of sukuk issuance has a positive relationship with the volume of carbon emission. The result shows that financial development, measured by the volume of sukuk issuance, provides access for financing in energy consumption activities that lead to an increase in carbon emission.
He concluded that there are several strategies and policies, such as formulating energy mix to shift from oil-dependency, developing  green economy and finance by issuing green bonds and sukuk, improving energy efficiency, promoting clean energy and sustainable use of resources, and encouraging sustainability and ESG (environmental, social and governance) reporting, to name a few.

Islamic Capital Markets and Sukuk Industry Roles in Macro Financial Environment
Lecture by Dr. Sutan Emir Hidayat, Director, Islamic Economy Infrastructure Ecosystem at the National Committee for Islamic Economy and Finance

At first, he said the role of green sukuk in Maqasid Al-Shari’a is in renewable energy, sustainable management of natural resource, energy efficiency, green tourism, resilience to climate change for highly vulnerable areas/disaster risk reduction, green buildings, sustainable transport, sustainable agriculture and waste management.
Then the lecturer stressed the key pillars in risk-sharing-based financial system are:
1- Equity-based and fixed income0based finance
2- Fixed income-based finance is generated from real asset transaction. No sale of debt/credit except at par value.
3- Due to the limit of number of real assets and no sale of credit, the financial system is eventually dominated by equity-based finance.
At the end, Sutan said research findings on social impact of banking shows social impact financing significantly enhances the financial performance of FIs globally.
Problems and Challenges of Islamic Capital Market
Lecture by Md. Kamaruzzaman, Senior Vice President and Head of Islamic Banking Division, & Member Secretary to Shariah Supervisory Committee, One Bank Limited, AL Noor Islamic Banking
He said Islamic capital market refers to the market where activities are carried out in ways which do not conflict with the principles of Islam. The role of Islamic capital market is to raise funds, trading and mobilizing funds from surplus sector to deficit sector of economy to ensure balance distribution of wealth & maximize is usage in the wealth of human being.
The lecturer stated that Islamic capital market is very similar to conventional capital market but the main distinguishing factor is the operation and financial instruments offered must be Shari’ah compliant; guided by the textual injunctions of the Al-Quran and Al-Hadith.
Kamaruzzaman mentioned there are some recommendations to cope with the problems and challenges of Islamic capital market:
1- Products and services: The most important pre-requisite for a vibrant Islamic capital market is the availability of an extensive range of products and services, supported by the presence of a diverse group of intermediaries that can attract both institutional and retail investors.
2- Dissemination of knowledge: Investors are decreasing for their inadequate knowledge, high risk and uncertainty regarding Islamic capital market. Near about 80% of the investors has no proper training to invest in the capital market.
3- Regulatory framework: In promoting orderly growth of the Islamic capital market, a black and white regulatory framework is needed.
4- Creation of enough experts in this sector: There is no scarcity of official experts who have expertise of traditional financial system. There is a lack of financial experts who have knowledge of both i.e. traditional financial system and the Islamic law.
5- Corporate tax: Tax neutrality provisions are imperative to ensure that ICM instruments and structures do not attract higher tax liabilities relative to their conventional counterpart.

Shaping the Post-Pandemic Sukuk market via Blockchain Sukuk
Lecture by Dr. Aishah Muneeza, Associate Professor, International Center for Education in Islamic Finance (INCEIF)

In the beginning of her lecture, she stated that digitalization drive in Islamic capital market refers to the process of using technology to enhance the capital markets also digitalization in the capital markets vary from jurisdiction to jurisdiction.
The lecturer raised this question, what is a Blockchain sukuk? She went on to say that Blockchain sukuk is a financial instrument where Blockchain technology is used to structure and issue it via smart contract that executes transaction in a transparent and reliable manner. Blockchan sukuk is a simply a form of digitalized sukuk hat is wholly operate using the Blockchain technology.
Then Aishah said benefits of Blockchain sukuk are transparency in transaction, reduction in cost, less number of intermediaries involved and simple process, while challenges of Blochchain sukuk are lack of enabling legal infrastructure, huge investment required for technology, Shariah challenges and regulatory challenges.
Finally she concluded that digitalization of market and business has become inevitable in the light of the covid-19 crisis and the progression of the modern world and Blockchain is one of the promising fintech mechanisms that will propel digitalization. Furthermore, digitalization of sukuk would certainly bring efficiency in its processes and operations withnumorous benefits for market stakeholders. Blockchain is an enabler technology among other fintechs with unlimited potentials in capital market and financial services delivery to be deployed in sukuk digitalization.

Islamic vs. Conventional ETFs and Digital Currencies: Evidence from Portfolio Diversification
Lecture by Dr. Dchieche Amina, Assistant Professor, Rabat Business School

He said exchange-traded funds (ETFs) are the most common examples of a type of financial instrument known as a portfolio-in-a-single-share.  
Regarding digital currencies, Amina remarked that because of their decentralized nature, they may exist independently of governments and central authority. In terms of Shariah, he explained that Bitcoin is considered like any other currency. It has to be used under the same conditions of exchanging currencies.
At the end, the lecturer said our findings indicate that the worse choice to be avoided by all investors to combine Islamic and conventional ETFs, moreover Shariah investors should not for sure indulge with conventional ETFs as our empirical results show that the conventional ETFs may not be a good hedging instrument in protecting Islamic funds. 

Closing Remarks

Dr. Bahador Bijani, Vice-chairman of SEO in International Affairs and Foreign Investment, said I would like to identify and discuss three themes: the first one is growing the importance of Islamic Finance & Islamic Capital market.
The second one is looking at the current capital markets’ priorities and challenges around them 
and the last one is looking into how best we can address such challenges.
Then he stated that Islamic financial services industry has grown increasingly. Despite the pandemic in 2020, Islamic financial services industry (Islamic banking, Islamic capital market and Islamic insurance sector of Takaful) increased $2.71 trillion and it is expected that Islamic assets to rise $3 trillion in a couple of years from now.    
He stressed that Islamic finance is no longer something which can be taken out of concentarion and neglected, going on to say that the capital market regulators’ priorities are crypto-assets, learning machine, artificial intelligence, sustainable finance, cyber and digitalization. On the other hand, the challenges of the capital market is Shariah compliance. In Islamic capital market, Islamic products are compliant with strict shariah.
Finally he remarked that those challenges can be addressed with cooperation and healthy engagement with capital market practitioners, regulators, exchange operators, asset managers and policy makers.