Islamic insurance growth hampered: Expert

BY Michael Bradford

LONDON—Financial centers across the world should coordinate their efforts to promote innovation in financial products that comply with Islamic law, the head of one center in the Middle East says.

Nasser Al Shaali, the chief executive officer of the Dubai International Financial Centre, said during the London Sukuk Summit 2008 that the spread of Islamic financial services is held back by weaknesses in legal and institutional frameworks that are hampering product innovation.

“There are still many countries where the legal and institutional framework is not explicit and transparent about Islamic finance, and the framework developed for conventional finance is being applied to Islamic institutions,” said Mr. Al Shaali.

“Significant weaknesses in the legal, governance and systemic liquidity infrastructure are impeding the spread of product innovations in Islamic finance and preventing supervision and risk management,” he said.

Mr. Al Shaali also called for greater standardization in Islamic finance, which he said would help reduce costs and speed issuance of Sharia-compliant products. “One way to promote this is through standardization of, or agreement on, a set of fatwas issued by Sharia scholars,” he said. “Some jurisdictions are helping industry practitioners by collating fatwas issued in their markets to serve as a useful aid to those structuring Islamic financial transactions.”