Archive for October 29th, 2010
Sukuk Roadblocks May Rise With National Shariah Boards: Islamic Finance
Points of Essence:
- The AAOFI-led National Shariah Board plan to oversee Sukuk sales may face resistance from the Islamic finance practitioners even before its inception saying that would create another layer of bureaucracy as there has been sufficient regulation to monitor Sukuk. This will according to them stifle the growth of Sukuk and hamper its evolution speed
- AAOFI insisted that the Board will play a pivotal role in synchronizing and standardizing the sukuk regulations with the international standards which in turn may help clarify standards and bolster investors’ confidence in the Sukuk industry.
The plan to create national Shariah boards to oversee sukuk sales is drawing criticism from bankers and lawyers who say the groups would increase bureaucracy in the $1 trillion Islamic finance industry.
The Accounting & Auditing Organization for Islamic Financial Institutions, a leading global regulator, is in the final stages of a plan recommending governments appoint panels of scholars and experts at the national level to rule whether products comply with the religion’s tenets, Mohamad Nedal Alchaar, secretary-general of the Manama, Bahrain-based body, said in an interview in Kuala Lumpur on Oct. 26. The proposal will be submitted early next year, he said.
The regulator says such a system will help clarify standards and bolster investor confidence in an industry whose assets are forecast by the Kuala Lumpur-based Islamic Financial Services Board to almost triple to $2.8 trillion by 2015. The changes risk adding bureaucratic hurdles and slowing approvals at a time when sales are down 19 percent this year, according to CIMB-Principal Islamic Asset Management Sdn. and Atlanta-based law firm King & Spalding LLP.
Further regulation may just add another “layer of bureaucracy,” Jawad A. Ali, global deputy head of the Islamic finance practice at King & Spalding, said in an interview in Kuala Lumpur on Oct. 26. “I believe it would slow down the development of Islamic finance and render it uncompetitive.”
