The Islamic Financial Services Board has named Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia as its Chairwoman in 2007. Her deputy will be Dr. Shamsad Akhtar, Governor of the State Bank of Pakistan who became the first female governor of the bank in 2006 0following a career working for the World Bank and Asian Development Bank.
KFH, Bank Muamalat & RHB Islamic Bank
Kuwait Finance House, a large Kuwaiti Islamic financial institution has been trying to enter the Malaysian market and is believed to be trying to purchase a 70% stake in the country's second-largest Islamic bank, Bank Muamalat as well as a 32.8% stake in Rashid Hussain Bhd (RHB), the parent company of RHB Islamic bank.
Testing the limits of financial engineering
An article in the Norwalk (Connecticut) Advocate describes the development of products needed to create an Islamic hedge fund by Connecticut-based Shariah Capital (which provides an article on sukuk from U.S. News & World Report a week ago). The article describes how the "firm received fatwas, or religious blessings, on Shariah-compliant investment vehicles that provide an alternative to short-selling and options trading." The key to this description is that the fatawa create Shari'ah-compliant versions of conventional products and their success criteria, therefore, is how closely they match conventional products, while remaining compliant with the Shari'ah. This is described even more succinctly on Shariah Capital's website:
"Shariah Capital is committed to becoming a leader in modern Islamic finance by developing the solutions behind competitive Shariah compliant alternatives to conventional Western financial instruments and investment products. [...] In collaboration with prominent Shariah scholars and Western financial and legal experts, Shariah Capital has developed risk management tools that replicate the economics of conventional short sales, options trading and leverage with Shariah compliant equivalents."
While Shariah Capital pursues more controversial products than many Islamic financial institutions, the way of thinking is common with most other Islamic financial institutions: Let's find a way to have conventional produts re-engineered to become Shari'ah-compliant. This is one way to open a new niche market with a customer base that will pay extra cost to have products that are backed by a fatwa certifying that it conforms to the scholars' interpretation of Islamic law & jurisprudence, but it is not innovative in a way that will expand its market outside of it's niche. Innovation should be directed more towards incorporating the lessons learned from Socially Responsible investing (SRI) into Islamic finance and tailoring SRI to the ethical priorities of Islam. This will create products with appeal to a larger segment of the Muslim community and also, particularly given some of the shared roots between Christianity, Judaism & Islam, could make Islamic finance appealing to non-Muslims as well, which would allow the industry to make an even larger impact.