World Bank MD Urges Islamic Finance Standardisation

KUALA LUMPUR, April 30 (Bernama) -- Lack of standardisation and cohesion in Islamic finance, especially in sukuk products, hinders the growth potential of the industry and deprives the market of an organised structure to facilitate secondary trading and liquidity. World Bank managing director Dr Mahmoud Mohieldin said promoting standardisation is among the challenges in the Islamic finance landscape and the industry would benefit from more widely accepted benchmarks and indices. "Innovation and knowledge sharing between various market players are essential to facilitate the standardisation and unification of global markets for Islamic financial products," he said in his public lecture on "Taking Islamic Finance to the Next Level: Key Challenges and Opportunities". The global sukuk market is expected to set a new record this year, with Malaysia to remain the dominant market along with increasing interest in the Gulf Cooperation Council countries. Malaysia, known for its well-regulated framework, overall enabling tax, economic environment and Malaysian sukuks' overall rating, will continue to drive,the nation as an attractive sukuk issuance platform. He said although investors seem keen to invest in sukuk that give creditors control of the underlying assets in the event of a default, the market is underdeveloped. This is partly because sukuk transactions withour guarantees tend to be lenghthier, costlier and more complex, therefore this area needs innovative solutions based on sharing knowledge of what can work on the ground, Mohieldin said. He said among other challenges the industry needs to address in order to realise the full potential of Islamic finance are improving regulatory oversight, rebalancing tax treatment, strengthening insolvency frameworks, ensuring adequate liquidity and establishing sound risk-management practices. He said knowledge sharing can play an important role in underpinning initiatives in the challenging areas. The World Bank and the Global University of Islamic Finance (INCEIF) signed an agreement on Monday to develop education and executive programmes in Islamic finance. The collaboration, to foster the development and expansion of sustainable and equitable Islamic finance around the world, is focused on four strategic areas -- sharing of research, strengthening capacity, and sharing of case studies as well as knowledge. -- BERNAMA