Two of the Gulf’s top Islamic finance scholars spoke out against efforts to reduce the number of boards they and their peers are allowed to sit on, challenging industry attempts to improve corporate governance. Bankers in the emerging $1 trillion Islamic finance industry say the concentration of hundreds of board positions in the hands of a few sharia scholars leads to conflicts of interest and hampers appropriate supervision. (Photo: Islamic bank ATM machines in Dubai, January 28, 2008/Jumana El Heloueh)
Bahrain-based industry body AAOIFI is drafting rules to regulate scholars’ shareholdings and the number of sharia supervisory boards a single scholar can sit on. “There is no need to limit the number of boards,” Sheikh Nizam Yaquby, one of the most revered Islamic finance scholars in the Gulf Arab region, told a conference in Manama. He sits on several dozen sharia supervisory boards.
He said there was no similar criticism of other groups such as lawyers or accounting firms working for several banks: “Why should (sharia scholars) not be treated like other professionals in the field?”
Bankers say reforms launched by AAOIFI will likely fall short of expectations as scholars governing themselves are unlikely to cut into their own source of income, unless central banks force them to do so.