Islamic products are reviewed and approved by a board of scholars. Without globally accepted standards, financial institutions and bond issuers rely on rulings by these scholars to be able to offer services to devout Muslims.
“We have seen different approaches,” to standardize the structure of Islamic products, Rifaat Ahmed Abdel Karim, secretary general of the Islamic Financial Services Board, said last month in Kuala Lumpur. “It may explain part of the dilemma we face. In the long-run, I believe we should have a mechanism that should harmonize this.”
Demand for Shariah-compliant products is increasing as the wealth of Muslims rises, spurred by export-led Asian economic growth and crude oil income in the Persian Gulf. Created in the 1970s, the Islamic finance industry’s assets may quadruple to $2.8 trillion by 2015 from about $700 billion in 2005, according to the Kuala Lumpur-based IFSB.
The IFSB was established in 2002 and sets guidelines including reserves for Islamic banks and insurance companies. Islamic law, or Shariah, bans the payment of interest and stipulates agreements be based on the transfer of goods or services.
“The limited number of quality people inherently creates challenges, which are particularly sensitive around product structuring, Shariah compliance and customer service,” Shaikh said last week. The Islamic Finance Council, which counts the Birmingham-based Islamic Bank of Britain Plc as a member, provides training for scholars, education and research, according to its Web site.
source : Bloomberg