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Sunday, 1 July 2012

NIB backs AAOIFI’s efforts to reform Islamic finance industry

NIB is backing what could be Islamic finance’s biggest shake up in years, lending its support to the announcement of seven new standards from the Middle East’s leading Islamic finance regulator, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

The new standards govern key areas of Islamic finance, including financial rights and their management; liquidity management; bankruptcy; capital and investment protection; agency investment; calculation of profits transaction and options of trust.
AAOIFI will introduce the new standards to the region’s Islamic financial community at a ceremony, to be held at Dubai’s Grand Hyatt hotel, on 23 May, of which Noor Islamic Bank is a sponsor. Islamic finance industry leaders will have the opportunity to debate the proposed changes before a final draft of the reforms is prepared by the end of this year.
Hussain AlQemzi, GCEO of Noor Investment Group and CEO of Noor Islamic Bank said, “We welcome AAOIFI’s initiative to reform the guidelines that direct the work of the Shari’a boards which act as advisors to our industry. The announcement of these new standards will be an opportunity for the Islamic finance industry to engage in meaningful and insightful debate about the future direction of our industry.
“This review of standards is timely. Islamic finance is growing rapidly, hitting $1.3 trillion last year. This speed of growth will inevitably expose systemic flaws in how the industry is regulated, which could impact Islamic finance institutions and stall growth unless they are addressed. That is why we are supporting AAOIFI’s efforts to bring about much needed change.”
AAOIFI, a Bahrain-based organisation, had previously said it wished to develop standards that can benefit the industry and help drive future growth. Among the basic components of Islamic finance to be reviewed this year will be the Murabaha, Mudaraba and Ijara structures, which are designed to permit investment while obeying religious bans on paying interest and pure monetary speculation.
AlQemiz has been an outspoken critic of the lack of clear global consensus on what products and services are Shari’ah compliant. According to AlQemzi, this disconnect between different regions of the world, such as the GCC and S.E Asia, makes it harder for Islamic finance players to construct the type of cross border deals required to challenge the conventional banks dominance.
He has also criticised the Islamic finance industry for its failure to challenge the pre-eminent position of the regulators in driving the sector forward. Speaking at a recent Islamic finance conference in Dubai, Al Qemzi called on his counterparts in the industry to challenge the regulators with new and innovative products and to take responsibility for the sector’s future growth.

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