Bankers in Islamic finance are increasingly outsourcing sharia supervision due to a lack of scholars in the industry, but critics say this is making the sector even less transparent and slowing its development.
The $1 trillion industry rode a five-year oil boom until the 2008 property crash in the Gulf Arab region raised complaints that many of its investment instruments can be seen as mere copy-cats of conventional banking products, threatening the sector’s future growth. (Photo: Dealers at the Amman Stock Exchange on October 11, 2010/Ali Jarekji)
Critics say growth and product innovation is being further stifled by the limited number of top scholars available to join the sharia boards of Islamic banks, some sitting on up to 80 boards.
“In banking you can lose a deal in one day,” said John Sandwick, a Geneva-based Islamic wealth and asset manager. “If the scholars are not responsive, and we know it is literally impossible for one man to provide so much work, then everyone suffers,” he said. (Photo: An Islamic bank in Amman July 8, 2010/Ali Jarekji)
Instead of maintaining their own costly sharia boards with prominent scholars, bankers are increasingly using consultancy firms that directly deal with the scholars.