DIFC Favours Single Sharia Board For All Institutions

Dubai: The DIFC is considering creating a single centralised Sharia board for the DIFC , in order to widen the acceptability of any one Islamic institution’s offerings and overcome the problems created by every institution having its own Sharia board and, therefore, limiting the liquidity of the market.

“In my view and that of the DFSA it would serve the markets better is we had one centralised DIFC Sharia board that would service all Sharia products in the DIFC . It is a problem in the global Islamic finance markets at present that different institutions have their own Sharia boards and is such an environment there is a danger of regulatory arbitrage, which we have seen in the local markets here,” Eisa Kazim, Governor of DIFC , told Gulf News.

“One typical product may be approved its own institution’s Sharia board, but then may not be approved by another institution’s board. This problem would be solved by all institutions working under one central board.

“Centralisation is very important and we hope to have it. Even worldwide, there is not one global standard and every country has its own requirements which is not helping the development of Islamic finance,” Kazim said.

Kazim contrasted this difficult situation in the Islamic markets with what happens when a conventional debt instrument like a bond is issued. “That bond is open to the global market and whoever wants to participate in it has no obstacle. But if you issue a sukuk, people first check that sukuk’s board which approved the sukuk and the conditions under which it was issued to see if they can participate. That means you will only have a limited number of people participating,” said Kazim, adding that “Islamic finance is only 1.5 per cent of total global assets, so the potential is very big to expand”.