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Global Accounting Research encourages innovation and good governance

Article - May 6, 2014
Islamic finance faces similar daily issues as the conventional finance sector. Challenged by corruption, fraud and a limited number of products available, Islamic finance must be constantly innovative in order to achieve its full potential.
DR NORMAH OMAR, DIRECTOR ACCOUNTING RESEARCH INSTITUTE (ARI)
However, for decades there have been various stumbling blocks ranging from inaccessibility to finance for small business owners; a clear understanding of how to create good Islamic corporate governance for both companies and non- for-profit organisations; and of course how to tackle crime in Islamic financial institutions. As a global Islamic finance hub, Malaysia has seen significant socio-economic development from the sector since the early eighties; but these challenges were yet to be addressed appropriately until the establishment of the Higher Institutions’ Centre of Excellence Accounting Research Institute (ARI) in 2009.  
 
Initially after becoming a Higher Institutions’ Centre of Excellence (HICoE), the institute was asked to focus on Islamic finance. However, having for years been active in the research of financial criminology and forensic accounting Dr Normah Omar, the institute’s Director recognised the potential for a fresh angle – Islamic Financial Criminology. “We have found a way of taking advantage of this niche and are working together with the ministry of education towards Islamic financial excellence, in fact if you type Islamic Financial Criminology into any search engine the ARI will come up,” she said. 
 
An unrivalled expert in her field, Dr Normah Omar has been fundamental in the establishment and the development of the ARI. Having returned from the UK with a PhD in her pocket in 1993, Dr Omar was one of Universiti Teknologi MARA’s (the umbrella university of the institute) initial faculty members having seen the transformation from a technical institute type entity to a 200,000 student strong educational entity which offers undergraduate, graduate, professional and PhD programmes. She has written over 100 academic articles, and several books about the research institute’s findings. ARI also relies on a pool of talented experts in the sector, such as Dr. Rashidah Abdul Rahman, Research Fellow and Professor of Corporate Governance and Islamic Finance; Dr. Zuraidah Mohd Sanusi, Associate Professor and Deputy Director (Postgraduate and Innovation); and Dr. Jamaliah Said, Associate Professor and Deputy Director (Research and Networking). ARI is supported, indeed, by twenty-strong research fellows who themselves are experts in the areas of ICT, Governance, Financial Reporting, Shariah Law, Audit, and Public Sector Management.  
 
Nonetheless, it is not only a matter of minimising financial crime. ARI is home to eight research centres, each focused on a different topic. Perhaps the most innovative is the centre of Islamic Microfinance (IMF) – a concept which becomes year on year ever more popular around the globe.   In fact, the number of Sharia compliant microfinance providers has nearly doubled in recent years, and yet the reach remains relatively small – providing solutions for just over 1 million of the world’s 650 million Muslims living on less than two dollars a day. Coupling ARI’s help in business/portfolio management and assistance in access to Micro Takaful means that small business people in Malaysia have an opportunity rarely seen. “Prior to the work of ARI, people were not able to get takaful insurance for microfinance and this means if something happens to the person who took the loan they are unable to pay it back. We help the poor manage their cash flow system and how to do stock management. Microfinance is not just about getting people into industry but also helping them to manage their business. Micro financiers do not have a complete database for recipients and how they are screened, so we are here to help with that too,” says Professor Dr Rashidah Abdul Rahman Research Fellow at ARI.
She even goes as far as to describe why other case studies and modus operandi may not be successful. “Islamic Microfinance should not be given to the hard core poor as they will be unable to pay back the loan, which is one of the biggest failures of microfinance in Bangladesh, Algeria, and Nigeria. The money is used for personal consumption, rather than business development; it is Zakat that is for the consumption of the very poor. Microfinance is only for businesses. So far in Malaysia, we have 95% returns on loans.” 
 
Another key research area of ARI concerns anti-money laundering and counter-terrorism financing. In order to develop a concerted effort in mitigating money laundering and terrorist-linked financial activities, ARI relies on international partnerships such as the one with the UK Charity Commission. Moreover, ARI strives to instill integrity in the Malaysian corporate culture through the Malaysian Institute of Integrity (IIM). Dr Normah Omar led the effort that resulted in the development of the Corporate Integrity System Assessment Questionnaire, an essential instrument that corporations utilise to assess and evaluate their level of integrity practices. It is clear that ARI plays a pivotal role in supporting the economic transformation, thereby contributing to the Economic Transformation Programme’s (ETP) Entry Point Project (EPP) 10: Becoming the Indisputable Global Hub for Islamic Finance. As Dr Normah Omar puts it: “We are working together with the Ministry of Education towards Islamic financial excellence by streamlining bureaucracy, increasing transparency, and strengthening good governance.”
 
Evidently, the work in tackling hard hitting issues like the funding of terrorism through NGOs and the developing of Sharia-compliant products is a job that not everyone would be ready to take on, and yet Malaysia’s Accounting Research Institute maintains its position as the global authority, and the obvious partner for global accounting research. “If you want to be active in Islamic finance this is the best place to come, we are ready to work with British institutions to create new products because the UK harbours innovation, but we are here to clarify the foundations of Islamic Finance and accounting, and work in unison to develop the sector,” said Dr Normah Omar, Director of ARI.

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