Friday, October 01, 2010

GCC sukuk markets may grow in Q4, Shari'ah scholars and standards, women in Islamic finance

One of the many themes I have tried to articulate on this blog is the areas where Islamic finance can differentiate itself from conventional finance.  An article in Maktoob Business points to one area that may be difficult  for Islamic finance, but should not be impossible given the low bar set by conventional finance.  This is the role of women in Islamic finance.  Currently, there are few women in top roles in Islamic finance although there are several exceptions in Malaysia (with the head of one Islamic bank, the central bank and one Shari'ah scholar being women).  As I mentioned, there is a relatively low bar set by conventional finance: the industry is one of the more male-dominated industries across the world.  As the article mentions, Islamic finance has not yet seen as much participation by women in top roles, but there is no inherent reason why this cannot be the case.  Should Islamic finance be successful n becoming more balanced in terms of gender participation, it would set an example for conventional finance, but also counter popular misconceptions about women and Islam more generally.

The move by Dubai Islamic Bank to up its stake in Tamweel to 57.33% has led to rumors that Emaar, the largest shareholder of Amlak Finance, will sell its stake in the other Islamic mortgage company in Dubai, which was expected to be merged with Tamweel.

Qatar Islamic Bank has reportedly priced its five-year, $750 million sukuk at 262.5 basis points over midswaps.  There has been little corporate sukuk issuance in the GCC outside of regular Bahraini Central Bank short-term issues and Saudi corporate issues.  The resolution of the Dubai World debt agreement for $25 billion of debt has led to a revived pipeline that at $5.5 billion which now surpasses the pipeline in Asia of $2.1 billion.  Particularly since the Dubai debt crisis, Asian issuers have been much more active in the primary market for sukuk as investors have viewed the GCC as being significantly more risky, even though most of the problems were contained to Dubai (and to a few Kuwaiti investment banks).  However, the Dubai World situation is not resolved entirely and remains dynamic, which could quickly increase the risk aversion of investors towards the GCC.

The issue of ensuring proper governance with respect to Shari'ah scholars has become a widely discussed issue since ISRA proposed a global certification, which Reuters describes as having 'overwhelmed' the industry.  The ISRA proposal and the issue of coordination of Shari'ah standards in general has received a cool reception from Megat Hiziani Hassan, a lawyer at Malaysian firm Zaid Ibrahim.  In an opinion article in Maktoob Business, Dr. Rusni Hassan, a Shari'ah advisor to HSBC Amanah Malaysia, reminds the Islamic finance industry that Shari'ah scholars are best suited as 'guides', not 'police'.  I agree in general--Shari'ah scholars should have a 'teaching' role to ensure that practitioners understand the rules around Shari'ah-compliance and the reasons for them.  However, there is a role for Shari'ah scholars as 'police' as well that will prevent or at least mitigate the Shari'ah risk associated with future reversals in approval of controversial products' Shari'ah-compliance.  In many ways, Shari'ah scholars are 'regulators' of the Islamic finance industry and without their setting firm boundaries, financial engineering can be taken too far in creating products that meet the letter but not the spirit of the rules governing the industry.


islamic finance certification said...

There is no shortage of scholars, each with Islamic Sharia finance board, which monitors and ad-hoc panels are often set up individual deals.The The main difference between the first and the next generation of researchers and institutions are in place now so come the experts can focus more on applied knowledge of the techniques of Sharia financial and institutional building.

santia said...

I like Dinar.and its revaluation of currency.