Hawkamah, the Institute for Corporate Governance, plans to standardize Islamic bonds. The Islamic finance industry seeks more uniformity and the new template for Sukuk Ijarah to ease the cost of issuing the debt and also strengthen the Islamic finance business.
The Dubai-based institute is working with the Bahrain-based International Islamic Financial Market (IIFM) for more Islamic bond templates.
The standardization seeks to improve the corporate governance frameworks and practices of Islamic banks and financial institutions. The process will be in line with the international practices and standards and in the light of global financial crisis and lessons learnt from the crisis.
Dr Nasser Saidi, executive director of the institute, said that the global crisis and its aftershocks have forced the finance industry to rethink the corporate governance practices that are critical for proper functioning of the banking system and economy as a whole.
The policy is to bridge the gaps in corporate governance and lay down specific recommendations for the bonds. The instrument will be clearly Shari?a compliant and will be inspected by Shariah Supervisory Board (SSB) members.
There will be continuous monitoring and professional development programs for Shariah Scholars about the product. There is also a plan to have a proper succession plan for the SSB members and enhancement of the disclosure rights of the Investment Account Holders.
The global Islamic finance is in excess of $1.1 trillion and continues to grow in international financial markets. Dr Saidi said that the Islamic finance should be used in developmental and infrastructure projects and also become an integral part of all public finance instruments.
This way, it is hoped that people who prefer such investing mode can participate in mainstream international finance and capital markets.