The emergence of Islamic finance as a major component of the global financial system has contributed to the economic development of many countries, says Dr. Habib Al Mulla, Chairman, Dubai Financial Services Authority.
Addressing delegates at the 3rd Islamic Financial Services Board (IFSB) Summit in Beirut today, Dr. Habib called for standardisation and innovation of products and services in the Islamic financial services industry.
He said: “The Islamic financial services industry should seek to be as innovative as possible in terms of products and services that they offer. The industry would greatly benefit from standardisation of Islamic services and products, and this would promote greater consistency across the industry.
“Islamic firms would benefit by being able to respond more quickly to the needs of clients, and not be delayed by the legal and Shari’a approval process. Innovation within the pre-defined concept of Islamic finance should be encouraged through flexible yet well defined laws and regulations.”
Dr. Habib outlined the master plan put in place for Islamic finance at the DIFC. The plan includes the establishment of an appropriate legal and regulatory infrastructure, and vehicles for risk management, and enforcement.
Dr. Habib said: “Islamic finance has grown from a niche market to become part of the global finance system, and the legal and regulatory framework must reflect this through the introduction of an appropriate international framework. At the national level, we must implement international standards such as IOSCO, Basel, and IAIS for the entire financial services industry.
“To have different standards for Islamic institutions for the sake of differentiation could result in Islamic firms being put at a competitive disadvantage. Our role is to encourage the growth of the industry and not create hurdles.”
Dr. Habib stressed that disclosure and transparency in financial markets were an invaluable source of confidence to customers and market participants. He said that balanced transparency in capital markets was important for making the right quality and quantity of information available to the market, and helping the customer make an informed decision.
Dr. Habib elaborated on the DFSA’s master plan for Islamic financial services. He said that the DFSA considered many jurisdictions when devising its regime for the DIFC as a whole and specifically Islamic finance. With respect to Shari’a, the DFSA chose to act as a Shari’a Systems Regulator rather than a Shari’a Regulator.
Dr. Habib added: ‘For the future, the DIFC has established the Islamic Finance Advisory Council under the auspices of HH Sheikh Mohammed, and its responsibility is to begin work with the industry to identify the gaps and issues in the market, and then set realistic timetables with a view to improving the operating environment for Islamic finance. This is just a start. As a regulator, we recognise that we along with the market have to continue to evolve.”
He said that the DFSA has applied a risk based regulatory framework across both Islamic and conventional firms. The DFSA draws upon international standards, integrating wherever possible and differentiating when required.
The IFSB summit is organised by the Islamic Financial Services Board, and runs from May 17-18 at the Phoenicia Intercontinental hotel in Beirut.
The Islamic Financial Services Board is actively involved in the discussion of issues that are relevant to have an impact on the regulation and supervision of the Islamic financial services industry. It runs conferences, seminars, and forums in many countries.
The Dubai Financial Services Authority (DFSA) is an independent, integrated regulatory authority responsible for the regulation of all financial and ancillary services conducted in or from the Centre, including asset management, banking, securities trading, Islamic finance, re-insurance, and an international financial exchange. The DFSA has been created using principle-based primary legislation modelled closely on that used in London and New York, and the DFSA regulatory regime operates to standards that meet or exceed those applying in the world's major financial centres.
The Dubai Financial Services Authority (DFSA) is a central component of the Dubai International Financial Centre (DIFC), a new financial centre established to position Dubai as a recognised hub for institutional finance, and the regional gateway for capital and investment to the Middle East.
