The Islamic finance industry in the Gulf is moving towards a centralized Sharia board as scholars from leading countries join a common United Arab Emirates entity, a leading Islamic scholar said.
The United Sharia Board, which began drawing scholars from local Islamic institutions two years ago, now has two members from Saudi Arabia and one scholar each from Kuwait and Qatar, Scholar Hussein Hamid Hassan said at the launch of a policy briefing on corporate governance in Islamic finance.
“We have almost one united sharia board for the Gulf,” he said. “I think within five to 10 years we will have one sharia board for everyone.”
Sharia scholars serving the United Sharia Board also represent individual bank Sharia boards, thereby transferring the Islamic rulings, or fatwas, issued by the centralized board to their individual institutions across borders.
While progress has been made, there are still differences in interpretations of Islamic law that is preventing a quicker adoption of a centralized Gulf board.
A unified Gulf-wide entity would boost corporate governance within the growing industry, said Nassar Saidi, executive director of Hawkamah, which issued 55 recommendations to Islamic financial institutions in its policy paper.
Mr. Saidi added that creating a centralized board is a first step but would need support from regulators to give enforce its fatwas.
The policy report, which was based on a survey of 22 Islamic institutions across the Middle East and North Africa, also determined that more should be done to limit the number of the same Sharia scholars serving on multiple boards.
“You shouldn’t have multiplicity which can create a conflict of interest,” he told reporters. “If you have well recognized scholars on one central board, that would help.”