Sunday, March 10, 2013

Call for IFSB to make standard mandatory


Making Malaysian-based Islamic Financial Services Board (IFSB) standard mandatory is essential to grow Islamic finance to the next level, said Bahrain central bank executive director Khalid Hamad Abdul Rahman Hamad.

“The articles of association of IFSB is voluntary and does not require the member countries to adopt. This has to change and IFSB should change its mandate with the acceptance of all the members.

“Once members agree that the standard has to be mandatory, it will help to avoid situations or regulatory arbitrage and then it will take Islamic finance to the next level which is internationalisation,” he told The Malaysian Reserve in a recent interview.

The Kuala Lumpur-based IFSB has been in operation since 2003. It serves as an international standard-setting body of regulatory and supervisory agencies that ensure the soundness and stability of the Islamic financial services industry.

Khalid Hamad noted that growth for a certain industry would require proper regulations, good standards in accounting, practice, prudential and skilled resources.

Though some countries are not ready for Islamic finance, he noted it was developing slowly and in the right way in some jurisdictions.

“There are not enough Shariah- compliant financial instruments world wide,” said Khalid Hamad adding that Islamic finance must invest in Shariah-compliant instruments that create value for the society.

Asked what would be Bahrain’s competitive edge over other Arab countries in the race to be an Islamic finance hub, he said: “I don’t see competition here as each country would promote its speciality. As long there are proper rules and regulations, I see all these initiatives complementing each other. This creates business opportunities for key players to do business across borders.”

He said opportunities in Muslim majority North Africa is massive while Egypt is developing new laws to enable it to issue sukuk.

Commenting on South-East Asia, Kamal Hamad said the growth potential is huge especially for Indonesia.

“They are taking steps to develop Islamic finance and if they do it right, you will see a huge growth,” he said.

The work of the IFSB complements that of the Basel Committee on Banking Supervision, International Organisation of Securities Commissions and the International Association of Insurance Supervisors.

As at December 2012, the 184 members of the IFSB comprise 55 regulatory and supervisory authorities, eight international inter-governmental organisations and 121 market players, professional firms and industry associations operating in 41 jurisdictions.