Islamic Financial Market Exchange in Dubai
"Prospects of Islamic finance in Dubai Financial Market", Gulf News special report by Rushdi Siddqui, Global Director of Dow Jones Islamic Indexes, December 30, 2006
This special piece in Gulf News by the Director of Dow Jones Islamic Indexes (DJII), Rushdi Siddiqui raises some issues associated with establishing an Islamic stock exchange, but neglects to even mention many. The primary focus of the article is on how to decide what is Shari'ah-compliant, but even this focuses on the current standards created by DJII and adopted by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). However, Mr. Siddiqui avoids the possibility that Shari'ah-compliant products may be offered that that violate the substance and intent (maqasid) of the Shari'ah. Dr. Mahmoud El-Gamal, a prominent scholar on Islamic finance, has repeatedly warned that the current system of using Special Purpose Entities and ancient contract forms will eventually lead to the approval of products that follow the form and violate the substance of the Shari'ah.
While this is a significant problem for the Islamic financial industry to address, the greater problem, I believe, is overlooking the actions of firms in assessing their Shari'ah-compliance. There are screens in place focusing on weeding out companies who derive substantial income from haram business like alcohol, tobacco, weapons and gambling, but there are not screens in place to screen out companies with unethical business practices. These include companies found to be engaged in corruption, those who violate labor, human rights and environmental regulations and global norms. There are also no positive screens to reward companies that not only avoid haram business, but adhere to the highest ethical business practices. This would encourage companies to engage in behavior that promotes the development of the Islamic (and non-Islamic) ummah. An Islamic Financial Exchange focused on the substance of the Shari'ah, not merely the form, will provide a jumpstart to expanding the Islamic financial industry, especially if it brings in practices worked through by the socially-responsible financial industry.