A GLOBAL authority may be set up to oversee Islamic finance syariah advisers, a religious scholar said, amid calls to address the fragmented regulation which threatens to slow the industry’s growth.
The role of syariah scholars has been a growing point of debate as the US$1 trillion (RM3.1 trillion) industry’s rapid rise raises issues such as the shortage of advisers, conflicts of interest and a lack of transparency in their rulings.
Syariah scholars shape the direction of the Islamic finance industry by issuing fatwas on financial instruments and banking practices.
The International Syariah Research Academy for Islamic Finance (Isra), which is backed by Bank Negara Malaysia, has initiated plans for a global regulatory body for syariah advisers, and a group of religious scholars are studying the plan.
Isra’s executive director Mohamad Akram Laldin said the proposed authority would be similar to other professional groups such as legal or medical industry bodies but its precise remit has yet to be finalised.
Potential issues that could be dealt with include licensing syariah advisers and ensuring a continued supply of these scholars, he said.
“We have a number of scholars who are there but what about the second, third generation?,” Akram said by telephone.
“We need to plan in order to ensure that there will be no interruption in the industry. We hope that the different jurisdictions will recognise this as the platform to license syariah advisers.” He said the recently established committee comprising Malaysian and Middle Eastern scholars hoped to have a clear plan by next year.
Malaysia, Pakistan and Sudan have national level syariah advisory councils but most other countries do not exercise similar regulation over syariah advisers.
Bahrain-based industry body AAOIFI recently announced plans to overhaul rules dealing with scholars’ shareholdings and their conduct on banks’ syariah boards but compliance with its guidelines are voluntary.
There are over 200 scholars but a small group sit on multiple boards and some also run their own syariah advisory services, raising concerns about conflicts of interest.
The top 6 of 221 scholars including Sheikh Nizam Yaquby, Sheikh Abdul Sattar Abu Ghuddah and Mohamed Ali Elgari sit on almost a third of the entire universe of almost 1054 board positions, according to a Funds@Work report in April this year.
But differing jurisdictions, regulators and legal frameworks could complicate the task of establishing a single syariah adviser platform.
“It’s very difficult to set up an international body which actually has power to effect these changes,” said Muneer Khan, Islamic finance head at Dubai-based lawyers Simmons & Simmons.
“It all depends on voluntary cooperation. A lot of work would have to take place behind the scenes to get regulators to sign up.”
source : bttimes