Islamic Finance News Portal – Bringing you the latest updates in global Shariah finance

Watch out for news alert!

Islamic finance ‘needs tighter regulation’

leave a comment »

Points of Essence:

  • Dubai Financial Supervisory Authority insisted that tighter regulation for Islamic finance is a must to avoid problems plaguing conventional global financial markets such as the sub-prime crisis. It added that some quarters were confident that it will never fail due to the resilience of Islamic finance since it forbids speculative transactions and requires all deals to be based on underlying assets.
  • DFSA however believed that standards may slide if the industry is caught up in the euphoria of growth and that in fast -growing industry segment,human capital and the infrastructure are sufficient to ensure that the activities are conducted prudently.

by Liau Y-Sing on Monday, 11 August 2008

More regulation is needed in the rapidly growing industry, says Dubai Financial Services Authority. (Photo for illustrative purposes only - Getty Images) ISLAMIC FINANCE: More regulation is needed in the rapidly growing industry, says Dubai Financial Services Authority. (Photo for illustrative purposes only – Getty Images)

The booming Islamic finance industry needs tighter regulation to avoid the problems plaguing conventional global financial markets such as the sub-prime crisis, the Dubai Financial Services Authority said on Monday.

The $900 billion global Islamic finance industry has been touted as a safe haven as conventional markets falter, since it forbids speculative transactions and requires all deals to be based on underlying assets.

“When you’re caught up in the euphoria of growth, sometimes standards slide,” said Michael Zamorski, the Dubai authority’s managing director for supervision told Reuters on the sidelines of an Islamic finance forum.

“Whenever you have a fast-growing industry segment, they need to make sure that their human capital and the infrastructure are sufficient to ensure that the activities are conducted prudently.”

Islamic finance is based on the sharia which forbids investments involving interest payments, contractual uncertainty, gambling and weapons.

Demand for sharia-compliant assets has soared as record energy prices fuel a boom in Middle East petro-dollars and the September 11 attacks create a suspicion among some Muslims towards the West.

Islamic assets are growing at an annual pace of around 20 percent and are set to hit $2 trillion in 2010 from $900 billion now, Ernst & Young forecast in February.

Zamorski said the industry’s main challenges were the lack of sharia scholars and a global uniformity in sharia standards.

“The more harmonisation there is, the better the liquidity of products,” he said, referring to the need to synchronise the differing sharia standards. (Reuters)

Source: Arabian Banking & Finance.

Advertisements

Written by Suapi Shaffaii

August 12, 2008 at 7:33 am

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: