DUBAI – Hawkamah, the Institute for Corporate Governance, is expected to issue a ‘standardised template’ for restructuring Islamic bonds this year, executive director Dr Nasser Saidi said.
Hawkamah was created for the region, by the region, and of the region to bridge the governance gap by assisting the region’s countries and businesses in developing and implementing sound, well integrated corporate governance frameworks.
The Islamic finance industry seeks more uniformity and the new template for Sukuk Ijarah will ease the cost of issuing the debt and also strengthen the Islamic finance business, Dr Saidi said.
“The market needs for standardised instruments,” said Dr Saidi, who is also chief economist at the Dubai International Financial Centre, or DIFC. “If you have a standardised document, it will encourage more issuers to start issuing sukuk,” he told reporters at a news conference on Wednesday. It will also lower the cost of issuance, he added.
The Dubai-based institute, which is working with the Bahrain-based International Islamic Financial Market, or IIFM, is planning more Islamic bond templates after that, he said.
Earlier at the news conference Hawkamah issued policy brief on corporate governance for Islamic banks and financial institutions.
The policy brief highlights the improvements required in the corporate governance frameworks and practices of Islamic Banks and Financial Institutions in MENA taking into consideration international practices and standards developed by various Islamic finance standard setting bodies and in the light of the Global Financial Crisis and its lessons for the banking and financial industry.
Dr Saidi said: “The Global Financial Crisis and its aftershocks has taught us that strong corporate governance is essential for the development of a vibrant and sound Islamic banking industry. Effective corporate governance practices are essential to achieving and maintaining public trust and confidence in the banking system, which are critical to the proper functioning of the banking sector and economy as a whole.”
This policy brief identifies the corporate governance implementation gaps in the Islamic Financial Institutions industry in region and lays out specific recommendations to bridge this gap. These include defining clearly the role and responsibility of the Shariah Supervisory Board (SSB) members to include being responsible for the Shari’a compliance of the product or transaction from the product development stage, through to its implementation, carrying out a SSB evaluation, arranging for a continuous professional development program for Shariah Scholars, putting in place a succession plan for the SSB members and enhancement of the disclosure rights of the Investment Account Holders, to name a few.
“We acknowledge the support of the Accounting and Auditing Organisation of Islamic Financial Institutions who are one of the drivers for standardisation in the Islamic Finance Industry,” he said.
“The regulation of Islamic Finance needs to be aligned with the regulation of conventional finance to the maximum extent while remaining consistent and compliant with Shari’a requirements. Research suggests that the global Islamic finance is in excess of $1.1 trillion, which is a growing portion of global financial markets. Islamic finance should be used in developmental and infrastructure projects as well and become an integral part of public finance instruments. This way, the Islamic communities can participate to their full advantage in mainstream international finance and capital markets,” he added.