Gulf states may have single Shariah council by 2013

Gulf Arab states may have a single Shariah board for the region’s Islamic financial institutions by 2013 to standardise the industry and increase services available to Muslims, a Shariah scholar said, reports Bloomberg (June 13, 2010).

A region-wide Shariah council is "not a far-fetched reality" since there is a pool of experts in the United Arab Emirates, said Hussain Hamed Hassan, head of Dubai Islamic Bank PJSC’s Shariah committee and chairman of the Shariah Coordination Committee of the Islamic Financial Institutions in the UAE. "It will happen, but it’s a question of time," he was quoted by the newswire.

The report added that regulators around the world, including Bahrain and Malaysia, are looking for ways to better evaluate risks of the Islamic banking industry and make products suitable for investors globally. Malaysia’s central bank is preparing a system that would enable cross-border transactions among Islamic financial institutions, Governor Zeti Akhtar Aziz said in May.

Islamic law, or Shariah, restricts investors to transactions based on the exchange of assets rather than money alone because interest payments are banned. Islamic products are reviewed and approved by a board of scholars and, without globally accepted standards, financial institutions and bond issuers rely on rulings by these scholars to offer services to devout Muslims.

"How can an industry progress when a bank in Sharjah cannot buy the sukuk issued by a bank in Dubai? The industry needs to have some stability in order for it to grow," said Hassan, who also serves on the Shariah board of the Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions, the report added.

Demand for Shariah-compliant products is increasing as the wealth of Muslims rises, spurred by export-led Asian economic growth and crude oil income in the Persian Gulf. Created in the 1970s, the Islamic finance industry’s assets may quadruple to US$2.8 trillion (RM9.2 trillion) by 2015 from about US$700 billion (RM2.3 trillion) in 2005, according to the Kuala Lumpurbased Islamic Financial Services Board.