With the rapid growth of global Islamic finance, which is estimated to grow to $3.8 trillion by 2023 from $2.4 trillion in 2017, there is a growing need to subject all Islamic banking transactions under the standards of independent Shariah supervisory boards worldwide, a leading Islamic finance expert has said.
According to Nafith Fayez Ahmad Alhersh, a well-known Islamic finance researcher who conducted a study on the internal and external constraints of Islamic banks globally, Shariah supervisory boards should exercise their competence impartially and freely to ensure integrity in the Islamic finance sector. The study, which was published by Qatar-based Bait Al-Mashura Journal in its latest report, highlighted that the absence or absence of standards for Shariah supervision threatens Islamic banks, which are in the midst of their rapid growth and expansion worldwide.
In Qatar, the country’s central bank has recently announced its plans to establish a centralised Shariah regulatory framework for Qatar’s Islamic banking sector, which will be in line with the best global practice. The Qatar Central Bank (QCB) has previously said that the establishment of a centralised Shariah supervisory board will help achieve greater market-wide consistency and credibility in Shariah governance.
Islamic finance, which is now considered to be one of the most dynamic sectors of the global financial system, is known for being less prone to financial shocks and more flexible in risk management. To date, there are around 250,000 workers employed by Islamic financial institutions, and more than half of them are in the Middle East.
Islamic banks have over 100 million customers, and the Mena region dominates the global Islamic finance activities. However, Islamic banking is also expanding to new markets, and has grown rapidly in Africa, United States, and other markets in Europe such as Germany and Russia, Alhersh added.
He also pointed out that the most important challenges for the Islamic finance sector are the lack of innovative financial products, legal constraints, weak human resources, and traditional banking work in addition to other external challenges; such as globalisation and weak cooperation between banks and technological requirements.