12th Roundtable Discussion – Waqf Fund (Discussion Summary and Recommendations)
A select group of people were invited to the Roundtable, including regulators, academics, practitioners and Shari'ah scholars. Nearly half of these travelled from outside Bahrain (Malaysia, Sudan, Oman, KSA, US and UAE). The attendees included the following:
The topic selected has been chosen due to the importance of benchmark in Islamic finance transactions. A common criticism that has been leveled at the Islamic finance industry since its inception in 1970s is that it uses the same interest rate benchmark that the conventional industry uses. Although from a strictly fiqhi (jurisprudential) perspective its permissibility has been established by Shari'ah scholars, there is no doubt that it is a less than ideal situation. Particularly from a reputational risk perspective it is difficult to convince a lay person that Islamic banking is different from conventional banking when the same interest rate benchmark is used by both.
After the global financial crisis several malpractices and market abuses in the conventional world have come to surface. The setting of LIBOR is one of those. The methodology of LIBOR setting is being questioned and is up for serious review. It provides an opportunity to the Islamic banking industry to reflect on its own use of the conventional benchmark and deliberate over whether it is possible to have a separate Islamic benchmark(s) and how.
“Creating an Islamic Profit Rate Benchmark – Why and How?”.
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