The summit concluded that there is an opportunity to nurture greater prominence and acceptance for Islamic finance during this period of uncertainty in the conventional financial market. To achieve this, three areas needs to be focused on; ensuring that the Islamic finance industry remains robust, continuous product innovation and development of the regulatory aspects.
The participants agreed that working to achieve these objectives is not without challenges. There is still a lack of standardisation in how the major organisations such as IFSB and IDB interpret the mechanics of Islamic finance. Adoption of the standards issued by IFSB and AAOIFI are purely voluntary and are not legally enforceable. It was highlighted that at the summit, participants were discussing issues which have not even been implemented in their own jurisdictions. The development of a uniform set of regulations could very well lead to a struggle for domination by a particular school of thought. Averting this will be the greatest challenge.
Also highlighted in the summit was the absence of a global Shariah compliant liquidity mechanism or inter-bank system for short term liquidity as well as for central banks to invest their reserves.
According to IFSB chairman Muhammad Sulaiman Al-Jasser, the global financial crisis has exposed the failure of self-regulation. IFSB secretary-general Rifaat Ahmed Abdel Karim said that as the global financial architecture undergoes structural reforms as a result of the financial crisis, the Islamic financial services industry would have to follow suit. The IDB and IFSB have formed a high-level task force on Islamic finance and global financial stability that will also study how the sector can dovetail with the revamp exercise for the international financial architecture, especially with regard to regulations and crisis management.
[IFN, Volume 6 Issue 19]
The participants agreed that working to achieve these objectives is not without challenges. There is still a lack of standardisation in how the major organisations such as IFSB and IDB interpret the mechanics of Islamic finance. Adoption of the standards issued by IFSB and AAOIFI are purely voluntary and are not legally enforceable. It was highlighted that at the summit, participants were discussing issues which have not even been implemented in their own jurisdictions. The development of a uniform set of regulations could very well lead to a struggle for domination by a particular school of thought. Averting this will be the greatest challenge.
Also highlighted in the summit was the absence of a global Shariah compliant liquidity mechanism or inter-bank system for short term liquidity as well as for central banks to invest their reserves.
According to IFSB chairman Muhammad Sulaiman Al-Jasser, the global financial crisis has exposed the failure of self-regulation. IFSB secretary-general Rifaat Ahmed Abdel Karim said that as the global financial architecture undergoes structural reforms as a result of the financial crisis, the Islamic financial services industry would have to follow suit. The IDB and IFSB have formed a high-level task force on Islamic finance and global financial stability that will also study how the sector can dovetail with the revamp exercise for the international financial architecture, especially with regard to regulations and crisis management.
[IFN, Volume 6 Issue 19]
No comments:
Post a Comment