Call for unification of Sharia banking standards

The UAE is in fourth place in a global table of 92 countries rated by Islamic financial progress, based on five criteria.

A top Dubai businessman has urged unification of Sharia banking standards in the UAE to fully realise the country’s potential as a global hub for the Islamic financial industry.

Hamad Buamim, president and chief executive of the Dubai Chamber of Commerce and Industry, told the World Islamic Economic Forum (WIEF) in Dubai: “One problem is that different banks have different Sharia boards. We strongly believe that the Sharia boards should move towards one direction, and we have recommended that.

“We have got to unify them in the country, and even beyond the country in other banks in the region. I believe we are lagging behind in this. I recognise of course we are a federal country and this will have to be taken into account,” Mr Buamin said.

He was speaking after the release of the authoritative Islamic Finance Development Report, which annually ranks countries according to their development in the Islamic financial industry.

The report, compiled by information group Thomson Reuters (TR) and the Islamic Development Bank, showed the UAE in fourth place in a global table of 92 countries rated by Islamic financial progress, based on five criteria.

Malaysia was ranked top, with Bahrain in second place followed by Oman. “The UAE is always hovering mid-table. Its weakest link is governance,” the report said.

According to the governance criteria, the UAE came in ninth place, behind competitors such as Pakistan (third), Kuwait (fourth) and Oman (seventh).

Mr Buamim said the result of the TR/IDB report was “an interesting outcome”.

He added: “One of the things those other countries have that we in the UAE do not have is a unified Sharia board.”

A TR executive said that the report was not designed to be a “league table” of Islamic financial performance. “The UAE has performed well and is in the top 10 in all categories and is clearly a global leader. But Oman has organised a lot of conferences and introduced new Sharia regulations just recently,” the executive said.

The report said that Oman, which began to develop its Islamic financial industry about two years ago, had made a “stunning debut”.

The country was rated top in corporate social responsibility and awareness criteria, although it fell short of the global average for “quantitative development”, basically a rating of the size of the financial industry.

Malaysia was the biggest in this category, followed by Saudi Arabia and the UAE.

Mr Buamim said the Dubai Chamber would implement and encourage other measures to further the emirate’s aim to be “capital of the Islamic economy” in two years’ time, as decreed by Sheikh Mohamed bin Rashid, Vice President of the UAE and Ruler of Dubai.

Mr Buamim said that issues needed to be addressed in three areas: standardisation; regulation; and innovation. “New information and research is being collected to help address these issues,” he said.

One Islamic financial expert, who did not want to be identified, said there were two obstacles to unification of Sharia boards in the country’s financial structure – the need to win approval for any new structure from federal regulators, and the existence of a large body of Islamic financial scholars who depended on the current system of issuing “fatwas”, or rulings on the Sharia-compliance of Islamic financial interments.

“Unifying standards is a problem because of the vested interests that exist in the Islamic industry,” he said.

Mr Buamim, who was instrumental in winning Dubai the opportunity to stage the 10th WIEF, said that the forum had a record attendance level, with some 3,300 participants from 104 countries.

Next year, Dubai will stage the Global Islamic Economic Summit in November, he added.

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