Experts Call To Set Up Islamic Finance Regulatory Framework

That is the view of BBK investment banking arm Capinnova Investment Bank chief executive officer Jamal  Hijres. “An important effort towards achieving international consistency was the creation of two multilateral institutions, the Accounting and Auditing Organisation for Islamic Financial Institutions and the Islamic Financial Services Board.

Experts Call To Set Up Islamic Finance Regulatory Framework

Experts Call To Set Up Islamic Finance Regulatory Framework

“The growth of such institutions will definitely improve and propel the industry at a faster pace. “The Islamic banking industry is a fast growing sector that offers an array of opportunities yet to be exploited,” he said.

“Although the Middle East still represents the biggest share of the total Islamic banking sector, Western  countries are gearing towards this new trend that presents a unique opportunity to diversify.

“With a growing market share and a considerable growth rate recorded over the past decade, it is essential for a unified global Islamic banking authority to be established.

“This authority can be entrusted with standardising Islamic banking operations and facilitating communication between the different entities, leading to the full exploitation of the sector’s potential.

“One of the most important challenges faced by the Islamic banking sector is the unavailability of  experts in both banking and Islamic issues.

“An Islamic banker must possess a profound knowledge of Sharia rules and principles, in addition to finance.

“The shortage in experienced and qualified scholars is forcing them to field positions on multiple Sharia
boards, which in turn increases the risk of a conflict of interest.””Even though the financial crisis did not affect the Islamic banking industry in particular, the drop in Gulf real estate and oil prices had repercussions on the industry,” he said.

“However, now with oil prices back in the normal range it has definitely brought confidence back to the industry.”While Islamic finance is one of the big success stories in finance today, it is worth looking at the  current credit crunch in conventional finance to see how easily one problem can spiral out of control.

“This is something that Islamic finance practitioners need to take on board and make sure they are  prepared to expect the unexpected. “Rigid corporate governance programmes, transparency on compliance, learning from conventional banking  successes and failures and achieving greater market penetration are all goals that will help sustain this area of Islamic finance.”

AAOIFI standards 'vital for Islamic finance'

The standards set up by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) have become the core of the re-engineering process of Islamic finance.

They provide the basis for innovation within the framework of Islamic teachings, Housing Minister and AAOIFI chairman Shaikh Ibrahim bin Khalifa Al Khalifa told delegates at a conference yesterday.

“Ultimately this will hopefully enhance users confidence in Islamic practices and encourage growth of demand,” he said.

AAOIFI standards 'vital for Islamic finance'

AAOIFI standards 'vital for Islamic finance'

“The confidence in the AAOIFI stands behind its worldwide application.

“The standards are now being followed, either as part of a regulatory requirement or as internal guidelines, by all leading Islamic financial institutions across the world including the Middle East, Asia Pacific, South Asia, Central Asia, Europe and Africa,” he said.

“In order to facilitate the adoption and technical application of the standards, AAOIFI has, over the past few years, made significant progress on the implementation of the certified Sharia adviser and auditor development programmes,” he added.

He said AAOIFI had now 86 standards in total in the areas of accounting, auditing, ethics, governance and Sharia. In the past year alone, AAOIFI successfully issued a number of new standards and revised another good number of existing ones.

A total of 400 delegates from more than 30 countries took part in the conference at the Crowne Plaza yesterday.

“This is an event where scholars and practitioners can hold very democratic discussions and express ideas,” said AAOIFI secretary-general Dr Mohamad Nedal Alchaar.

“It allows people to criticise each others ideas. There are different schools of thought in a number of areas. Through standardisation we can see more harmonisation. That is essential.

“The principle is simple. We are one religion and we want one set of standards,” he said.

“This is an expanding industry and we all have to work together on standardisation to move forward,” he said. “In the current climate Islamic finance sets standards that are now seen as a positive choice not just for Muslims but also for non-Muslims because we have shown that our financial system is viable in turbulent times,” he said.