DIFC Event Discusses Sukuk Oversight

By ExpatBriefing.com Editorial 23 April, 2014

International standard setter the International Islamic Financial Market (IIFM) recently organized an industry consultative meeting on the standardization of Shari'ah-compliant financial certificates, known as Sukuk.

The meeting was hosted by the Dubai International Financial Centre (DIFC). The objective of the consultation was to discuss the need for standards in the Sukuk industry given the rapid growth in their use, in order to maintain a high level of confidence, transparency, and global Islamic market unification. Sukuk are a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure that complies with Islamic law principles. Although there is an obvious appeal to the Muslim community, Sukuk can be bought by anyone.

In the past few years, the Islamic financial market has witnessed enormous growth in Sukuk issuances from sovereigns, supranational institutions, financial institutions, and corporations covering many jurisdictions, the DIFC said. As Sukuk issuances grew so did the number of Sukuk structures, resulting in a complex market.

For the Sukuk industry to continue its growth, it needs to take steps to bring about clearer understanding of documentation and product standards, guidelines, best business practices and transparency, while strengthening and streamlining the Shari'ah approval processes, attendees were told.

The meeting was attended by a diverse group of experts, including a number of regulators, renowned Shari'ah scholars, senior representatives from Islamic financial institutions, local and international law firms, accounting firms, consultants, rating agencies, multilateral development institutions (International Monetary Fund, Islamic Development Bank Group etc) and other representatives from the industry.

Chirag Shah, Chief Strategy and Business Development Officer at DIFC Authority, commented: "There has been a clear shift towards Shari'ah compliant offerings over the last year, in line with His Highness Sheikh Mohammed bin Rashid Al Maktoum's initiative towards establishing Dubai as a leading Islamic Economy. At DIFC, we continue to support the growth of the Islamic Finance pipeline by creating a business environment conducive for these activities and collaborating on events, such as the IIFM consultative meeting, to encourage discourse from industry experts on the topic."

Ijlal Ahmed Alvi, Chief Executive Officer of IIFM, said that the purpose of the consultative seminar was to seek the views and recommendations of experts on key issues highlighted in the concept paper presented by IIFM concerning various Sukuk structures, particularly Ijarah, Mudarabah, Wakalah, Musharakah, and on Convertible/Exchangeable Sukuk.

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