International Shariah Research Academy for Islamic Finance proposes regulatory recommendations (By IFN)

International Shariah Research Academy for Islamic Finance proposes regulatory recommendations

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GLOBAL: The 3rd annual ISRA-IRTI-Durham University strategic roundtable – a collaboration between International Shariah Research Academy for Islamic Finance (ISRA), Islamic Research and Training Institute (IRTI) and Durham University – saw discussions on risk management and risk sharing; resulting in regulatory, product and institutional recommendations for the industry. On the regulatory front, the roundtable – comprising of Shariah scholars, academicians and industry practitioners – discussed the promotion of equity-based financing; calling for adjustments in current global legal, tax and regulatory frameworks to create a level playing field for equity in relation to debt. The participants suggested an all-encompassing approach towards evaluating the impact of debt in society, as well as stricter monitoring by regulators on the extent and use of debt in Islamic financial products. There was also a call for the management of risk in equity-based financing on the asset side, including the sharing of liabilities. The paper said: “The returns given on the liabilities side should commensurate with the risk-return profile of the portfolio on the asset side.” Islamic banks were also encouraged to introduce special funds and restricted investment accounts in equity-based financing to mitigate the need for higher capital, as well as the enhancement of their risk management infrastructure; including risk governance and risk management processes. The declaration was endorsed and agreed upon by all participants at the roundtable, including Professor Dr Azmi Omar, director general at IRTI, Associate Professor Dr Mohamad Akram Laldin, executive director at ISRA and Associate Professor Dr Asyraf Wajdi Dusuki, head of research affairs at ISRA.