(For other news from the Reuters Islamic Banking Summit, click here)
By Martin de Sa’Pinto
GENEVA, April 15 (Reuters) - The development of a harmonised global set of sharia-compliant products is being hampered by the lack of a recognised body to oversee the Islamic finance industry, a bank chief executive said on Wednesday.
Faisal Private Bank’s Chief Executive, Marco Rochat, said the absence of a global set of harmonised rules on sharia compliance created an unlevel playing field.
Some investments permitted to some investors but not to others, he told Reuters.
“We need a body to oversee the market and ensure trading compliance, like you have in traditional banking, or in accountancy. A regulated environment would help a lot of investors,” Rochat said.”
He said the market for sharia-compliant products was still unregulated. That meant there were, at times, large differences between accepted products in the Middle East, North Africa and Malaysia.
“We need to see this period as the beginning of an evolution in this area,” Rochat said. Without a broader and more coherent oversight, different markets will continue to treat products in an ambivalent manner, he said.
“In the case of money-market funds, some (boards of sharia scholars, whose role is to approve or reject products on the basis of sharia compliance) see the returns as interest, others sanction it,” Rochat said.
“Also, capital protected products are widely used, but scholars could object to them because in theory there is no risk to your capital.”
Rochat — whose bank advises on almost $500 million, which is invested entirely in sharia-compliant products — said the lack of harmonised rules meant a lot of inappropriate products were sold to sharia investors.
The main problem, he said, was that there was only a handful of scholars with the experience and reputation to judge the suitability of such a wide range of products.
Yet broad and consensual oversight is a necessary step if Islamic finance is to fulfil its potential to cater for up to a billion Islamic customers, and perhaps gain ground among a non-Islamic base as well. (Editing by Andrew Macdonald)