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IFS needs uniform standards

DUBAI — Islamic Financing Services (IFS) industry, currently recording a vibrant growth rate worldwide, particularly in the Arab region, needs to have clear regulatory procedures in place while seeking to be more proactive to access untapped funds, experts say.

Leading Islamic financing executives in the UAE feel that while Islamic banks must develop ability to respond more efficiently to increasingly sophisticated client demands and to compete more effectively with their conventional counterparts, the sector needs to fill gaps in regulation by setting up a central Sharia board and supervisory guidelines.

They feel that with mergers becoming a trend among the Islamic banks, the emergence of stronger Islamic players is in the offing. Mergers, they opine, would bring forth mega Islamic banks that can cast their shadow domestically, regionally and internationally.

Worldwide, it is clear that the Islamic Arabic speaking community is under the climate of change with the economic upswing. As they still hold traditions and religion close to their hearts across all segments, they all want to bank the Halal way given a choice. Although, a growing number of educated and affluent Muslims may also be banking with non-Islamic banks, given an option they would like to do things the Islamic way.

In the UAE, Islamic banks hold about 11 per cent of the total assets of all banks in the country. Asset growth of Islamic banks has surpassed asset growth of the whole banking industry during the last three years. Islamic banks share in total deposits reached 18 per cent, their share in equity 9 per cent and in profits 11 per cent. Those shares have been rising over the last three years and are expected to continue their upward trend.'' They feel that while almost all Islamic banks are regulated by the central banks in their respective countries, there was an absence of commonly accepted regulatory and supervisory guidelines and best practices that cater for Islamic banks. While mergers may be potential upbeat phenomena, the industry needs speed in the adoption of common standard and rules.