Islamic Finance Must Harmonize Practices to Grow
By Suleiman al-Khalidi
Available at: http://abcnews.go.com/Business/wireStory?id=10001501
SWEIMEH, Jordan, March 3 (Reuter) – Islamic banking must speed standardization to grow while monetary authorities should enact laws that allow expansion into new Sharia-based products in domestic markets, industry experts said on Wednesday.
The industry needs to surmount divergent views and practices, due to different readings of the sharia, and adhere to benchmarks as it looks for new ways to grow, industry experts said on the sidelines of an Islamic finance forum at the Dead Sea.
The fast-growing $1 trillion industry is now governed by a patchwork of national regulators, standard-setting industry bodies and Islamic scholars ruling on products and contracts. Jordan’s oldest Islamic bank, Jordan Islamic Bank , also urged monetary authorities in countries where Sharia-compliant banks operate to cater for their special needs.
“There is a need for legislation that does not set Islamic banks apart from other banks but rather grants them the opportunity to invest in goods and other areas of investment, ” said Musa Abdelaziz Shihadeh, chief executive of the bank, whose main shareholder is the Bahrain-based Al-Baraka Banking Group. Islamic finance, derived from sharia, or Islamic law, forbids charging interest and favors profit-sharing arrangements or structures that resemble rental agreements.
Islamic financing is usually underpinned by physical assets.
Mohamad Nedal Alchaar, secretary general of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which helps set standards for the industry, said the priority was to establish common practices.
“I think harmony is a prerequisite to success. … So the issue of unified practices is extremely important at this juncture especially now that Islamic banking is present across the world,” Alchaar told Reuters. Differences of opinion among scholars have seen some financial products deemed un-Islamic in certain centers but permissible in others, creating uncertainty in the industry.
Sheikh Mohammed Taqi Usmani views that there has been nearly consensus amongst the Shari’ah scholars on Shari’ah related issues in Islamic banking and finance and only about 10 per cent disputed-opinions which are still need to be resolved. According to the GCIBFI sampled about 6000 fatwas, it is found that 90 per cent were consistent across the IFIs