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Regulating Islamic Financial Transactions - ASHARQ AL-AWSAT English Archive
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Riyadh, Asharq Al-Awsat- For over 30 years, Islamic banking has been operating in the Arab world without being recognized by the Shariaa [regulatory] or supervisory bodies. What is meant by recognition here is operating under legislation, rules, and regulations that are commensurate with the nature of the Islamic banking industry. The Islamic banking industry’s chances of competing fairly [with conventional banks] are small, as it operates under the umbrella of conventional banking laws, and due to the completely disparate nature of the two industries. Therefore, Islamic banking has tried to adapt to this odd state of affairs by duplicating conventional banking products and services in line with the requirements of Islamic Shariaa law. Those in charge of the Islamic banking industry are not aware of the damage that this odd state of affairs has done to this industry’s growth and potential for innovation which is based on the [Islamic] principles that this industry is built upon. These officials have worked tirelessly to get the Islamic Shariaa supervisory and regulatory bodies in the Arab world to change this situation by enacting laws and legislation that is commensurate with the Islamic banking industry, and today one can hardly find a conference, seminar, article, or report on Islamic banking that does not mention the importance of the Shariaa supervisory bodies implementing rules and regulations to govern the Islamic banking industry.

Shariaa regulatory institutes have taken the initiative in calling for laws and regulations to be enacted, particularly the Islamic Fiqh Academy that has issued a number of resolutions recommending that Sharaa supervisory and regulatory bodies in Muslim countries enact appropriate rules and legislation. An example of this is the Islamic Fiqh Academy’s Resolution 76/7/8 that was issued by the Islamic Fiqh Academy on the occasion of its eighth session, and which deals with problems being faced by the Islamic banking industry. This decree recommended that;

First: Islamic Banks should continue their dialogue with the Central Banks in the Islamic States to enable the Islamic banks to fulfill their tasks in investing their client funds, in conformity with the Shariaa principles which govern banking activities and in harmony with their specific nature. Central banks need to be mindful of the requisites for the Islamic banks to succeed in playing their active role in the national development which control rules and in a manner that is appropriate for Islamic banking’s distinct nature. The Organization of the Islamic Conference and the Islamic Development bank are invited to resume the meetings of the Islamic States’ Central Banks, which would make possible the implementation of the present recommendations requirements.

Second: Islamic Banks should see to it that their leaders and staff are given proper professional training that is cognizant of the nature of Islamic banking and provide adequate training programs in collaboration with the Islamic Research and Training Institute (IRTI) and other relevant parties concerned with training in Islamic banking.

Whilst during the 19th session of the Islamic Fiqh Academy, resolution 177 was put forward with regards to the role of Shariaa supervisory bodies in regulating Islamic banking transactions, recommending that each country should adopt laws and regulations to govern the Shariaa supervisory and regulatory bodies, and take action to transform these [supervisory] bodies into independent bodies. Whilst the Fiqh Academy’s resolution 178 on Islamic Tawarruq bonds called on a proper legal framework to be implemented to govern the sukuk issuance process. This would be through adopting legal legislation that specializes in different aspects of sukuk issuance, and achieving economic proficiency and Shariaa credibility in a practical manner.

The above is with regards to the Islamic Fiqh Academy, as for the Shariaa [regulatory] bodies for banks, ongoing dialogue is taking place with the supervisory bodies in the countries in which these banks operate, and they are being urged to enact laws and legislations that are commensurate with the principles of Islamic banking. The situation has moved past the stage of dialogue to concerned authorities calling on these supervisory bodies to enact the required laws in public seminars, meetings and newspaper articles. This is an issue that I have often raised in brief, however now that I have elaborated extensively on this; can any fair-minded individual accept the accusations being levied against Shariaa bodies, that they are standing in the way of the regulation of Islamic banking transactions?

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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