Islamic finance could also face a systemic failure and reputation risk unless there is a unified and dynamic regulatory framework applied not only domestically but also globally, warned an economist and former International Monetary Fund (IMF) executive director Dr Abbas Mirakhor.
He added that the industry may have more regulatory standards but there is no implementation of the standards in a unified manner and there is no organisation that supervises the instruments. Therefore, Mirakhor said that to ensure a decent chance of growth and development, one has to make sure the regulations are unified and accepted by all jurisdictions.
“We need to create a uniformed standardisation for Shariah products and at the same time you need a uniformed, comprehensive and universal regulatory system in place, which can have the authority of early warning when it comes to weak instruments," he said.
However, the question is whether it should be done via an association of Islamic banks or central banks that have Islamic Finance operating in its jurisdiction. Such arrangements are not difficult but it depends very much on the "will" of the participants, said Mirakhor. (Bernama)
In my previous posting, I made a feeble attempt at article review in which one of the points raised was the difficulty in finding a unified opinion due to the differing mazhabs followed by the different scholars. It was also raised that perhaps a product should be approved with a “warning” label as to which mazhab the approval was arrived at.
Speaking about “will”, a lot of jurisdictions leave the Shariah compliance and monitoring role to the individual banks, the question is, are the banks willing to let go of this “power” to approve products?
Given this major obstacle in reaching a unified stand, how then do we proceed with a global, central authority to supervise and regulate the industry? I feel the IFSB, AAOIFI, Fiqh Academy are global institutions which can (and should) play the regulators role, if allowed.
I agree with Mirakhor when he said a regulatory authority “needs to have enough mandate to supervise/regulate the policy”. Getting the mandate however, might not be so easy.
He added that the industry may have more regulatory standards but there is no implementation of the standards in a unified manner and there is no organisation that supervises the instruments. Therefore, Mirakhor said that to ensure a decent chance of growth and development, one has to make sure the regulations are unified and accepted by all jurisdictions.
“We need to create a uniformed standardisation for Shariah products and at the same time you need a uniformed, comprehensive and universal regulatory system in place, which can have the authority of early warning when it comes to weak instruments," he said.
However, the question is whether it should be done via an association of Islamic banks or central banks that have Islamic Finance operating in its jurisdiction. Such arrangements are not difficult but it depends very much on the "will" of the participants, said Mirakhor. (Bernama)
In my previous posting, I made a feeble attempt at article review in which one of the points raised was the difficulty in finding a unified opinion due to the differing mazhabs followed by the different scholars. It was also raised that perhaps a product should be approved with a “warning” label as to which mazhab the approval was arrived at.
Speaking about “will”, a lot of jurisdictions leave the Shariah compliance and monitoring role to the individual banks, the question is, are the banks willing to let go of this “power” to approve products?
Given this major obstacle in reaching a unified stand, how then do we proceed with a global, central authority to supervise and regulate the industry? I feel the IFSB, AAOIFI, Fiqh Academy are global institutions which can (and should) play the regulators role, if allowed.
I agree with Mirakhor when he said a regulatory authority “needs to have enough mandate to supervise/regulate the policy”. Getting the mandate however, might not be so easy.
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