The World Bank plans to support standard-setting bodies of the Islamic finance industry in turning their voluntary standards into binding banking regulations, a bank official said.
The fledgling Islamic finance industry is governed by a patchwork of national banking regulators, its own standard-setting bodies and rulings of scholars interpreting Shariah, or Islamic law.
Bodies such as AAOIFI - the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions - are providing standards to Islamic banks but they have been adopted by only few national regulators.
James Adams, World Bank vice president for East Asia and Pacific, told Reuters on the sidelines of an Islamic finance conference that the World Bank was in talks with several standard-setting bodies on how to help them turn their rules into national regulations.
“Clearly, in today’s world standardisation would be an asset both in terms of the ability to regulate with consistent standards, but also for the businesses it’s an enormous asset if they’re able to rely on consistent standards and not be subjected to different standards, “he said on Monday.
“What we can provide is access to the governments ... particularly through the central banks and ministries of finance, so I think our role is very much to work with the standardisation organisations to facilitate a dialogue (with governments),” Adams said.
Bankers have said that the lack of universal standards in Shariah interpretation and product regulation is a key obstacle for the industry to realise its growth potential.
Acceptance of products can differ substantially between its main regions, the Gulf Arab region, South East Asia and Europe.