Issue 08 2014 / Islamic Banker ASIA / 33

CHAT WITH MM
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Muath
Mubarak
Chat with .....
Suresh Perera
MM: As a Principal of KPMG Sri
Lanka, what are your aspirations
and expectations for Islamic Finance
local industry in 2014 as it is the
amalgamation year for the banking &
fnancial institutions?
Suresh: Well I would like to see
more participants entering the feld
this year as well as new products being
introduced in to the market. But the
focus of the most of the fnancial
institutions this year is complying with
the scheme of consolidation introduced
by the Central Bank. In addition most
of the fnancial institutions are also
trying to get a grip on FATCA. In this
back drop I hope the growth of the
industry and the focus to address the
barriers for development would not
take a back stage. I would like to see the
Tax Ofce taking efective steps to issue
detailed guidelines for Islamic fnancial
instruments pursuant to the legislative
amendments few years back. It would
be a bonus if the budget proposals this
year would also contain proposals to
address the growth of the industry.
MM: Could you brief us on the
important and relevant fndings of frst
ever country report of KPMG research
report issued in 2011?
Suresh: Te survey pointed out
SURESH RAJENDRA IVAN PERERA, is the Principal of
KPMG Sri Lanka. He is a multidisciplinary professional
qualifed in both law and accountancy. He obtained a
Degree in Bachelor of Laws (LLB) from the Faculty of Law
and is a Attorney-at-Law of the Supreme Court of Sri Lanka.
Suresh is an Associate Member of the Chartered Institute
of Management Accountants, UK (ACMA, CGMA). He is
also an Executive Member of the Sri Lankan Branch of the
International Fiscal Association. He served as the Chairman
of the Tax Committee of the Bar Association of Sri Lanka in
2008 and 2009.
Islamic
Finance
education &
research is one
of the pillars
on which the
industry would
rest upon and
would depend
upon for
growth.
Islamic Banker Asia
CHAT WITH MM I SURESH PERERA
Issue 08 2014 / Islamic Banker ASIA / 35 34 / Islamic Banker ASIA / Issue 08 2014
COVER STORY
to the degree of usage of some of the
Islamic Financial Instruments (IFI) such
as Murabaha & Ijarah . It also provided
information pertaining industry players.
MM: In your view, what are the
challenges of Islamic Finance research
& education sector and what are
the initiatives require in meeting the
market requirements locally?
Suresh: Islamic Finance education
& research is one of the pillars
on which the industry would rest
upon and would depend upon for
growth. Human capital with requisite
knowledge on Islamic fnance is need
of the hour in Sri Lanka. Te education
should address two categories.
Inculcating knowledge in established
professionals who are driving fnancial
services sector in the private sector and
the Regulators. Tis is a challenging
task. Structured educational courses
should be conducted at times that
are convenient for these professionals
to follow whilst engaged in their
professional roles. Te content of
the courses should weigh heavily on
practical and application aspects of
Islamic fnance. Te second category is
the young students. Te course design
for this category should be extended
to In-depth academic aspects whilst
keeping a tab on the course fee. Its high
time in Sri Lanka that institutions such
as law college, faculty of law and other
universities include Islamic fnance in
their curriculum.
MM: As a prominent personality
of the Islamic fnance conferences
and government lobbying, could
you explain to us the Sharia, Legal,
Accounting & Taxation framework for
the local players?
Suresh: Sri Lanka does not have a
government appointed central Sharia
Scholar Board as in Malaysias Bank
Nagara equivalent. Each institution has
its own board of Sharia Scholars.
Sri Lanka has a Fascinating web of
laws. Roman Dutch common law is the
residuary law of the land there are many
personal laws such as Kandyan law,
Muslim law and territorial Tesawalami
law in operation in addition to statutes
passed by parliament and provincial
councils. English common law governs
commercial transactions in the country.
It is in this backdrop that Islamic
fnancial instruments function in the
country. Banking Act and fnance
business Act were amended to permit
banks to engage in Murabaha and
Mudaraba and fnance companies to
engage in Islamic fnancial transactions
respectively. Institution of Chartered
Accountants of Sri Lanka (ICASL) is yet
to issue Islamic Financial Instruments
specifc accounting standard. Hence all
instruments are accounted using local
accounting standards. Sri Lanka has
adopted IFRS in the local standards.
Few years back 4 tax statutes were
amended to empower commissioner
general of Inland Revenue to publish
detailed guidelines to ensure there
would be a level playing feld between
conventional instruments and Islamic
fnancial instruments. Tat is same tax
treatment applicable to conventional
instruments would also be applicable
to Islamic fnancial instruments
notwithstanding the form of the
transaction. But unfortunately to
date these guidelines have not been
issued. But at the same time I must
mention that the local tax ofce
has not challenged the institutions
extending the tax treatment applicable
to conventional instruments to Islamic
counter parts.
MM: How do you see the progress
Demystifying
Islamic fnance
concepts among
regulators
still remains a
challenge. But
it is essential
that this hurdle
be overcome
to ensure
regulatory
amendments.
Islamic Banker Asia
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Issue 08 2014 / Islamic Banker ASIA / 35 34 / Islamic Banker ASIA / Issue 08 2014
of Islamic banking & fnance in Sri
Lanka? What are the pressing issues
and challenges faced by the industry
and how can they be resolved?
Suresh: From the time Amana
Investments was established as the
frst Islamic fnance establishment in
Sri Lanka, the industry has witnessed
many changes taking place and many
other fnancial giants entering the feld.
Whilst Amana progressed to obtain the
frst banking license to operate as the
frst fully fedged bank , the industry
has witnessed the State owned Bank of
Ceylon , the biggest bank in Sri Lanka,
many other institutions including
the two largest private sector banks,
fnance companies and funds entering
the industry. With frequent seminars,
conferences, awards ceremonies,
the industry is quite live. Tere is
enthusiasm among professionals and
students to acquire knowledge and there
are few institutions imparting Islamic
fnance knowledge. So one could
observe the industry is progressing
well. But having said that I must say
that there is lot of room for further
development. Amendments to the
Banking Act to permit banks to engage
in other types of Islamic fnancial
instruments in addition to Murabahah
and Mudarabah , modifcation of
exchange control regulations to facilitate
foreign investments in IFIs, addressing
dual stamp duty issues applicable on
IFIs including Ijarah Sukuk, creation
of a secondary market for Sukuk by
facilitating listing in Colombo Stock
Exchange (CSE) are few issues that
should be addressed from the regulatory
front. Demystifying Islamic fnance
concepts among regulators still remains
a challenge. But it is essential that this
hurdle be overcome to ensure regulatory
amendments. Development of Islamic
fnance professionals and Islamic
fnance scholars is another aspect vital
for progression of the industry.
MM: You have authored many
articles, presented research papers
and offering budget proposals
regarding the Islamic fnance industry.
How do you see the receptiveness
of the regulatory bodies and the
relationship with its stakeholders?
Suresh: I must say all the
regulators that I have dealt with after
understanding the value of Islamic
fnance to the Sri Lankan economy
have always been receptive to further
the development of the industry in the
country. It is the bureaucracy and the
speed at which things happen that is
creating the barrier.

MM: How do you see the Islamic
fnance as an alternative fnance
system for the governments to fulfll
their national objectives especially
for the poverty reduction, bridging the
budget defcit, doing mega economic
infrastructure projects and attracting
funds to do government projects via
Sukuk?
Suresh: To date the relevant
policy makers in Sri Lanka have not
comprehended the role Islamic fnance
could play in developing Sri Lanka.
Te government is for development
and is for creating major infrastructure
project for the betterment of the
populace. Islamic fnancial instruments
such as Sukuks could play a major role
in funding the major infrastructure
development drives. Roads, railways,
waterways, creation or expansion of
ports and airports, hospitals, power
projects etc however unfortunately
the policy makers who are the drivers
of these infrastructure projects are
not familiar with the ability to fund
these projects with Islamic fnancial
instruments. Tis knowledge gap
Sukuks could
play a major
role in funding
the major
infrastructure
development
drives. Roads,
railways,
creation or
expansion
of ports and
airports,
hospitals,
power projects
etc however
unfortunately
the policy
makers who
are the drivers
of these
infrastructure
projects are
not familiar
with the ability
to fund these
projects with
Islamic fnancial
instruments.
Islamic Banker Asia
CHAT WITH MM I SURESH PERERA
Issue 07 2014 / Islamic Banker ASIA / 37 36 / Islamic Banker ASIA / Issue 08 2014

Figure 3: Challenges of Regulatory Clarity
FACT BOX
Full Name: Suresh Rajindra Ivan
Perera
Nationality: Sri Lankan
Qualifcations: LLB , Attorney at
Law, ACMA UK, ACMA , Notary Public,
Company Secretary, Commissioner
for Oaths.
Professional Goal: To serve country
with the professional knowledge
Favorite Shariah Scholar: Mufti
Ismail Menk Inspiring Islamic Finance
Book: An introduction to Islamic
fnance by Shaykh Mufti Taqi Usmani
One line advice: Be positive ;
Clinching victory from jaws of defeat
is an art.
What one would describe you?
Intellectual working towards justice
for all.
What are you most passionate
about you? Sports, wild life,
numerology & astrology.
What is your greatest achievement
in your life? Establishing myself as a
tax consultant .
What is your favourite journey?
Journey to Lisbon & Fatima
What is your motto in life? Do
your best & let God do the rest.
should be bridged for the betterment of
the country. Te government is focusing
on SME sector and many tax incentives
have been granted to the sector . Islamic
micro fnance could play a vital role in
this arena.
MM: In your view, what are the major
differences between conventional and
Islamic banking system?
Suresh: Islamic fnance is based on
risk sharing, partnerships & earning
fees for labour whilst avoiding RIBA or
interest which makes money on money.
IFI also avoids aspects that could be
harmful to the society or relationships
such as uncertainty gambling and
investment in harmful products. Islamic
banking based on this products would
have a diferent risk portfolio compared
to conventional banks. Conventional
banks engage in interest based products
such as loans deposits derivatives
etc which creates a debtor creditor
relationship as opposed to partnership
and risk sharing model.
MM: As an Islamic fnance advisor
and prominent personality of the
industry, could you share the most
memorable experience of your
journey? What are your valuable
advices for the stakeholders of this
industry?
Suresh: Tere are many incidences
that come into my mind but I would
like to mention two of them. Te
frst is the presentation I made to all
the CEOs and CFOs of the banks &
fnancial institutions to explain the
Islamic fnance & the associated tax
issues. It is at this presentation that
we formed Islamic Finance Focus
Groups the platform for the industry
players to meet & discuss the issues &
barriers faced by the industry for the
development of IFB in Sri Lanka. Te
second incidence is the presentation
I made to the Presidential Taxation
Commission, pointing out the value
IFB could add to Sri Lankan economy
and the need to create level playing
feld for Islamic fnancial instruments
by amending the tax legislation in the
country. Pursuant to this a budget
proposal pertaining to IFB was included
in the annual budget of the government
leading to amendment of four tax
statutes in Sri Lanka. My advice to the
stake holders is to use every opportunity
to enlighten the authorities as to the
benefts Islamic Finance could add to
our economy and what is happening
in other countries such as UK, France
Singapore, Hong Kong, South Africa,
Tailand etc IBA
I must say all
the regulators
that I have
dealt with after
understanding
the value of
Islamic fnance
to the Sri Lankan
economy have
always been
receptive to
further the
development of
the industry in
the country.
Islamic Banker Asia