Harmonisation and Regulatory Consolidation of Islamic Finance

Recent efforts aimed at regulatory consolidations and setting standards have given due recognition to the economic constraints and legal uncertainties arising from the imposition of Islamic jurisprudence.

They have also addressed the relative lack of uniformity in market practices. In view of these developments, it is possible that market inefficiencies arising from different interpretations of Shariah compliance will diminish in the near future.

The leading regulatory bodies in Islamic finance such as the Accounting and Auditing Organization of Islamic Finance Institutions (AAOIFI), the General Council for Islamic Banking and Finance Institutions (GCIBFI), the Islamic International Rating Agency (IIRA), the Islamic Financial Services Board (IFSB) and the Figh Academy in Jeddah have all been working towards aligning Shariah principles towards a consistent basis.

A fine balance needs to be drawn between regulatory revisions and collective initiatives to ensure that standardisation does not stifle financial innovation. Responding to efforts by professional organisations seeking greater uniformity, an IFSB task force is due to publish recommendations for standard sukuk structures later this year.

source : islam online

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