Standardization a must for universal acceptance; Sukuk – a Shariah perspective
By: El Waleed M. Ahmed is a Legal Consultant and Head of Foreign Affair Department, Kuwaiti Lawyer Firm (Yaqoub Al-Munayae and Aisha Al-Shaiji Law Firm), Al-Jabriya — Kuwait. LL.M Degree “Master of Laws” From
Shariah law is open to interpretation and religious boards frequently hold different views on key Shariah issues. Furthermore, Islamic jurisdiction is not bound by precedent and legal opinions may deviate from previous decisions made by other Shariah scholars. Thus, a Shariah board has considerable discretion in the interpretation of Islamic law and may choose any school of thought to inform its decision-making process. Shariah boards in the
Complex Sukuk structures involve challenging procedures and require extensive and costly advice — both legal and religious — in addition to diverse sets of skill and resources to make them work. Therefore, corporations and banks often shy away from such structures due the legal risks and the potential costs of pioneering such instruments. Notwithstanding this, Shariah is dynamic and, like all jurisprudence, open to various interpretations. The Achilles’ heel in the global acceptance and growth of Islamic finance is the level of standardization of Shariah boards’ rulings. There is yet to emerge a consistent ruling of Islamic law on the religious compliance of certain assets and transaction structures in terms of Shariah law. Shariah boards from different Islamic financial institutions may have different interpretations and advise differently because, in Islam, there is no generally accepted codification of the jurisprudence. In a conventional sense, that can lead to uncertainty and confusion. In this article I will highlighted, the necessity for a unified Shariah board at a national and international level, and mention the recommendations regarding the role of the Shariah board in the harmonization and configuration of various Shariah board rulings across the globe to develop new Islamic finance instruments.
The effects of non-standardized Shariah rulings:
Uncertainty and confusion
There is also the important factor of mutual recognition of financial standards and products across jurisdictions. The progressive harmonization of Shariah, in this respect, needs to be viewed as an attribute towards greater international financial integration. Moreover, supervision and regulation at the national and regional levels are necessary safeguards against potential improper practices. Such improper practices can cast a doubt on the credibility of all participants. Shariah scholars from around the world should contribute towards greater understanding and international convergence. Such convergence and harmonization can only happen with greater engagement among the regulators, practitioners and scholars in Islamic finance in the international community.