DUBAI: A Saudi Arabian Islamic finance body aims to set up a committee of senior Islamic scholars in the kingdom by 2010 to help standardise Islamic banking edicts in the Gulf oil producer, an official said yesterday.
The Islamic International Foundation for Economics & Finance is in the early talks with Sharia scholars and hoped to “institutionalise” Islamic rulings within a year, said Yousef Abdullah al-Zamil, the foundation’s assitant secretary general.
“The problem is that in Saudi Arabia there is not a system in place for banks, the banks have different views and there is not even a division for Islamic finance at the central bank,” he said.
Saudi Arabia, the largest Arab economy, is home to Al-Rajhi Bank, the Gulf region’s biggest bank complying with Islamic law, or Shariah.
Islamic law bans usury, usually understood to cover all forms of lending at fixed interest, and imposes restrictions on various other forms of lending.
A select group of Islamic scholars oversee the fast-growing niche market, but a lack of standardisation on what financial contracts are acceptable is one of the biggest complaints among bankers in the $1tn industry.
Islamic law is open to diverse interpretations, resulting in some financing structures that are gaining widespread approval. For instance, Islamic bonds, the industry’s hottest product, came under the spotlight last year after a top standards body said almost all do not comply with Islamic law.