MANAMA: A new standard developed by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) this year will help the industry to avoid hidden traps in Sharia decision making, it has emerged.
Discussions during the 14th edition of the AAOIFI-World Bank Conference that began in Bahrain yesterday centred around how Sharia decision-making is a cumulative and consultative exercise conducted by Islamic finance professionals in order to find a compliant and economically viable solution for an existing problem in the organisation or an approval of a product or service proposal.
The AAOIFI Governance and Ethics Board (AGEB) in February 2019 felt a need for a standard in this area with regard to methodology/process of obtaining fatwa and other decisions.
Also discussed were recent developments in fintech, including cryptocurrencies, blockchain technology, smart contracts, crowd-funding and artificial intelligence, which are set to introduce new risks to the whole industry.
While the benefits of cost saving and efficiency appeal to many market players and new entrants alike, these technologies require effective mechanisms to govern their applications, was the expert opinion.
While the Islamic finance industry is keen to keep pace with the recent developments, additional layers of challenges and obstacles exist in terms of Sharia and governance.
The question that panellists during the conference sought to answer is how can the players take the industry to the next level of development and growth without risking its stability in this dynamic age?
Capitalising on the potential efficiencies, cost-savings, and new market opportunities created by low-margin disruptive technologies has become a new normal in today’s dynamic financial industry.
As technology matures and gains a larger audience and market share, it threatens the status quo, finding a right combination of these will not only lift the Islamic finance industry to greater heights, but also will reinforce its position with the unique propositions it has to offer to the global financial industry.
A right mix of technology, aided by prudent regulatory support in a challenging macroeconomic environment will hold the key to sustainable success, was the expert view.
The global financial industry has witnessed fluctuations and changes post the financial crisis which hit the world economies over a decade ago.
The stability and growth of the industry has been affected by various factors and many practitioners are of the view that there is a dire need for more effective regulations, prudential rules, and stricter polices to safeguard the industry from another turmoil.
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