The
International Islamic Financial Market (IIFM), a Bahrain-based regulator,
issued global guidelines yesterday to unify and govern syariah-compliant
contracts used between an agent and a service provider.
The
Wakalah agreements will seek to broaden the range of liquidity-management
products for lenders, Ijlal Ahmed Alvi, the institution’s chief executive
officer, says in a statement issued in Singapore, where the World Islamic
Banking Conference is taking place.
They
will cut reliance on commodity-backed contracts amid limited supply of products
that conform to Koranic principles.
Islamic
law prohibits the payment of interest and bans investment in industries such as
gambling and alcohol deemed as unethical.
Under
a Wakalah agreement, a lender acts as an agent between say an importer and
exporter by issuing a letter of credit and is paid fees and commissions in the
place of interest.
IIFM
was established in 2002 by the monetary authorities of Bahrain, Malaysia,
Brunei, Indonesia and Sudan, as well as the Islamic Development Bank based in
Jeddah, Saudi Arabia, to focus on global syariah-compliant capital and money
markets, according to its website. The body’s primary objective is the
standardisation of Islamic financial products and documentation.
The
Islamic Financial Services Board, another global standards-setting body in
Kuala Lumpur, estimates the syariah-compliant financial-services industry grew
20 per cent in 2012 to US$1.6 trillion in assets, according to a 2013 stability
report. Banking assets amounted to US$1.27 trillion, with US$229 billion of
sukuk outstanding, the article said.
Global
sales of sukuk, which pay returns on assets to comply with the interest ban,
climbed four percent to US$18.2 billion in 2013 from a year earlier, according
to data compiled by Bloomberg. The bonds returned 0.5 per cent this year, the
HSBC/Nasdaq Dubai US Dollar Sukuk Index shows, while debt in developing markets
lost 3.4 per cent, according to JPMorgan Chase & Co’s EMBI Global
Diversified Index.
(Borneo Post Online / 04 Jun 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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