Financial institutions must comply with Islamic laws: Sheikh Abdul Sattar Abu Ghudda
Systems and standards of Islamic financial institutions and the mechanisms imposed faced heated debate in the first session of the Eighth International Forum of Islamic Finance Institutions, especially as opinions varied in recent years over the compliance of some tools with Islamic Sharia (law). Head of the jurisprudence panel at Albaraka Banking Group, Dr Abdulsattar Abu Ghudda, said all tools used in Islamic finance had to observe one important aspect, and that was to avoid anything forbidden by Islam through juristic reasoning by analogy. He noted the need for commitment on the part of the financial institutions to complying with Islamic laws, while maintaining the quality of services provided to clients. On his part, Dr Esam Al-Enizi of Kuwait University’s Sharia College, noted the need for further developing tools that assisted in the Islamic finance sector, and explained that standards imposed in this sector helped minimize violations.
Meanwhile, jurisprudence supervisor at Ernest and Young, Abdulnasser Al-Mahmoud, said there were certain criteria that guaranteed quality of services, including clear advisories. According to international reports published recently, Kuwait is leading the world in the number of Islamic financial institutions and the volume of assets these bodies manage, stressed Minister of Commerce and Industry Falah Al-Hajri Sunday. The minister, inaugurating the eighth international forum of Islamic finance institutions said Kuwait is among the states quick to support the Islamic financing industry through both legislation and creation of friendly operating atmosphere.
Al-Hajri further remarked leading international banks are now seeking to offer Islamic banking products and services, which is testimony to the growth and importance of the field. In figures, over 300 Islamic finance bodies are operating in 75 states, managing some $500 billion amid expectation the figure would go all the way up to over a trillion by 2015. On issues to be discussed, Al-Hajri mentioned quality control and Shariah (Islamic Jurisprudence) compliance, which is the main concern, due to the very nature of these bodies as providers of Shariah-compliant services. There is also the issue of sovereign rating, as this rating determines these institutions’ competitive edge as they seek international expansion, Al-Hajri noted. Intellectual property rights would also come up in terms of how it applies to financial products and services.
The two-day conference is a most important venue for Kuwait, as the Islamic finance sector is the state’s most developed and fastest growing sector. Addressing the forum, participant Ahmad Al-Yaseen said the growth seen in the sector is due to the reliability and quality of the services and products and the full and careful implementation of Shariaah guidelines. He said Islamic financing offers satisfactory solutions and alternatives to interest rate on transactions. Kuwait Finance House General Manager Mohammed Sulaiman Al-Omar on his part said, on behalf of the sponsors, that the industry is now before a historical opportunity amid the current developments which create favorable conditions for further growth and development in Islamic financing. He said that as local opportunities are limited, Islamic financing bodies are seeking international and regional expansion to seize opportunities beyond the local market. This is the lone option the way things are, he stressed.
Representing participants, representative for National Bank of Kuwait Abdullah Al-Tuwaijri said Islamic banking and financing in the Arabian Gulf region benefited from the economic boom in the region and the increase in oil prices. He pointed out products and services saw marked growth, as sukuk, for instance, went up to $27 billion by September 2007 and it is expected the figure would reach $50 billion in 2008. On the industry in Kuwait, he said the sector is more advanced than in most states, and growth saw the number of companies go from 14 companies three years ago to a current 37 companies. These bodies are managing sums over KD 6 billion which is over 40 percent of the overall sums managed by investment companies in Kuwait.
Traditional finance and banking operators are starting to offer Islamic products and services, such as the National Bank of Kuwait, which currently runs more than one Islamic fund. In another development, Minister of Commerce and Industry Falah Al-Hajeri expressed hope on Sunday that the National Assembly will approve a bill for the establishment of authority of the stock market soon in line with the policy of transforming the country into a regional financial hub. Al-Hajeri, speaking to journalists on sidelines of the eighth conference of Islamic financial establishments, said the ministry has spared no efforts in backing Islamic financial institutions and removing all obstacles in their face.
The official pledged to support any local or foreign investor as long as he (or she) works under umbrella of the state legislations laws. On Islamic sukuks, the minister said concerned authorities started, nearly three months ago, implementing special regulations for this form of financial transactions. He praised the holding of the conference in Kuwait, noting that it constitutes “some of the vehicles to restore Kuwait’s distinguished economic role,” under leadership of HH the Amir. A special parliamentary panel is holding meetings to ponder proposals and draft regulations for establishment of the aspired authority.