The Islamic Development Bank (IDB), a Jeddah-based multilateral institution, has called for the creation of a global sharia advisory board that can offer greater uniformity for the Islamic finance industry, its president said on Thursday.

A centralised format to the supervision of sharia-compliant banking products is gaining favour across the globe, as regulators seek to standardise industry practices and improve consumer perceptions.

Regulators, scholars and simple economics are pressing Islamic banks in the Gulf to diversify their money market transactions, a trend which could spur growth of the region's financial markets.

Islamic money market assets have expanded rapidly in the last few years along with the rise of sharia-compliant banking.

The GCC’s banking industry saw single digit growth in both revenue and profit last year as it continued to vastly outperform its international peers.

A study by Boston Consulting Group (BCG) showed revenue at Middle East banks grew by 6.9 per cent on 2011 while profits increased by 8.1 per cent, largely due to an increase from extraordinary income sources.

Capitalising on the modern business mantra of Islamic Banking, more and more banks are coming up with their Islamic windows, according to the Central Bank of Oman (CBO).

However, the number of full-fledged Islamic banking bodies will be confined to just two key players, as is said by Hamood Sangour al Zadjali, Executive President of the CBO.

Banks in the Gulf region are set to see a gradual improvement in profitability on rising fee income and lower impairment charges, Fitch Ratings has said in a new report.

The rating agency said the outlook for most banks in the GCC/Middle East region was stable, largely driven by the probability of sovereign support.

The Omani banking law is notable in many ways, but the most discussed way is that it prohibits--with very few exceptions--the use of commodity murabaha (tawarruq) (CMT).  The exceptions are narrow: an Islamic bank is permitted to use CMT if its "survival is genuinely threatened, or in case of a conventional bank's conversion into Islamic where no other alternative mechanism exists to convert part or all of its portfolio, as determined by the bank's SSB".  Any use of the CMT requires Central Bank approval, which should be effective in limiting the times it is used.  In any case, it cannot be rolled over and so it can only be used for three months.

Responding to increased interest in developing Islamic finance, the International Monetary Fund (IMF), Central Bank of Tunisia (CBT), ) and the Islamic Development Bank (IsDB), organized a three-day regional conference in Tunis on December 17 to exchange knowledge and share experience in building technical capacity in Islamic Banking and Sukuk Markets.

The draft law for Islamic insurance or takaful firms and amendments in Capital Market Law for accommodating Sharia compliant debt instrument or sukuk have been finalised. This will be enacted after it completes the routine regulatory approvals from different government entities, said Abdullah bin Salem bin Abdullah Al Salmi, Executive President of the Capital Market Authority (CMA).

The upcoming launch of sharia-compliant financial products and services in the Sultanate augurs well for the growth of sukuk – the Islamic equivalent of bonds, says a leading expert on Islamic Banking.
Khalid Yousaf, Director — Islamic Finance Advisory Services, KPMG Oman, envisions significant demand for sukuk in the financing of, among other things, infrastructure projects, housing schemes, real estate ventures, tourism resorts, and other development projects. Additionally, sukuk will open the way for new fund-raising opportunities via the Capital Market and provide a new investment vehicle for investors in the Sultanate. 

Global takaful contributions are forecast to reach $12 billion by the end of 2012, after expanding by an annual average growth rate of 19 percent in the past two years.

Takaful is an Islamic insurance concept, which is grounded in Islamic muamalat (Islamic banking), observing the rules and regulations of Islamic law, otherwise known as Shari’ah.
There are an estimated 230 takaful companies and another takaful re-insurer with an estimated $11 billion in volume.