Innovation in Islamic banking products

Debate on Islamic finance focuses on innovation

The debate on the evolution of Islamic finance products should not be framed in terms of innovation versus imitation.

That was the broad consensus among the panellists addressing the issue of the drive towards innovation in such products yesterday at the DIFC week.

“As long as imitation does not compromise our [Islamic] ethos, there should be no objection to Islamic finance products being replicas of conventional products, said Mohammad Abdul Haq, managing director and global head of Amanah Private Banking, HSBC Private Bank UK.

Though largely replicas of conventional products, appreciation of Islamic finance is growing and new products are also being made available.

Shaikh Yousuf Talal DeLorenzo, chief Shariah officer and board member of US-based Shariah Capital, believes that though there are a few elements of the conventional side, sukuk is uniquely Islamic.

While emphasising the need for more innovation rather than imitation, Hassan Motala, senior executive officer at Crescent Capital (DIFC) Limited, said: “What we have to offer from the Islamic side and Islamic product point of view is that there are so many good principles out there that not only benefit Muslim investors but it can be as good for non-Muslim investors.”

In recent months, he pointed out, there are structured products that are increasingly acceptable, both as a structure and in substance supporting the Sharia principle.

However, there were some differences of opinion on how to go forward and how to actually design products that will be accepted globally.


There has to be some form of standardisation with core principles, particularly about newer products that are being issued and there has to be consensus among them, Motala said.

“For example, products that have been issued in Malaysia must be acceptable to investors in the Middle East. As an asset manager, we are managing global products.

“You want to have that ease and peace of mind to know that if you are placing your money in a certain product, whether it be in the west of the world or east of the world, it is acceptable to investors globally.”

Abdul Haq said that though having a standardised set of principles may be convenient for bankers, he was not sure whether it is practical or even conceivable to have one opinion about every product.

“In our religion, we have the pleasure of choosing between more than one school of thought and so why not use this advantage in our business as well,” said Farhan Bahman Al Bastaki, CEO of Waqf Trust Services.

“At the end of the day, it’s the market that will benefit the most. Though I have to go through the hassle myself, my client will enjoy the benefit of big variety to choose from.”

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