Dubai: The UAE on Wednesday launched a new initiative to create a unified global legal and legislative framework for the Islamic finance sector.
Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, Minister of Finance and Governor of the Islamic Development Bank for the United Arab Emirates, announced the launch of the new initiative that will be developed through a strategic partnership between the Ministry of Finance, the Islamic Development Bank (IDB) and the Dubai Islamic Economy Development Centre (DIEDC).
The Islamic finance sector will benefit greatly from a unified international legal and legislative framework. After its formulation and subsequent approval by internationally accredited relevant authorities, it will be formally established as a legal and legislative framework that serves as the basis for a new international treaty.
The new global legislative framework is set to enable the Islamic economy to expand its reach and responds to calls for greater standardisation within the sector.
A memorandum of understanding (MoU) has been signed between DIEDC and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), enabling DIEDC to use AAOIFI’s standards as a reference in building the international legal framework with the guidance of the Ministry of Finance and IDB.
Norton Rose Fulbright has been recently appointed to provide legal advice in drafting the code for the global framework.
“The Islamic finance sector will benefit greatly from a unified international legal and legislative framework. After its formulation and subsequent approval by internationally accredited relevant authorities, it will be formally established as a legal and legislative framework that serves as the basis for a new international treaty,” said Sheikh Hamdan bin Rashid Al Maktoum.
Stimulating the Sector
The legislative framework for Islamic economy will lead to a vertical and horizontal expansion of the sector globally due to the number of member countries in the Islamic Development Bank. This will serve as a crucial factor in triggering the steady and rapid growth of Islamic finance.
“In line with the strategic framework of the Dubai: Capital of Islamic Economy initiative, DIEDC has worked relentlessly over the past several years to highlight the importance of global legislation in stimulating the Islamic finance sector,” said Sultan bin Saeed Al Mansouri, Minister of Economy and Chairman of DIEDC.
“There is today an urgent need in the Islamic finance sector to accelerate growth and reduce discrepancies in practices across the globe. As part of this priority, the development of a general framework that standardises rules and regulations will be a major achievement for Islamic finance and for the Islamic economy in general.”
IDB is a strategic partner in this landmark project and will offer technical assistance.
“This project to build a legal framework for Islamic finance transactions, with the support of the UAE Ministry of Finance, which is a founding member of the Islamic Development Bank and a key stakeholder in the Islamic economy, is a long-awaited step. It comes in response to the growing demand from Islamic financial institutions and dispute settlement centres, including courts and arbitration centres,” said Dr. Bandar M H Hajjar, President of the IDB.