BY
AZLI JAMIL
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.
