IFSB holds its first council meeting, admits new member

Veeramalla Anjaiah The Jakarta Post Kuala Lumpur

The newly established Islamic Financial Services Board (IFSB) held its first council meeting and general assembly on Sunday night and accepted Qatar as a new member.

The board also elected Rifaat Ahmed Abdul Karim of Sudan as its secretary-general.

While addressing an international press conference, Rifaat, who is presently the secretary-general of the Accounting and Auditing Organization for the Islamic Financial Institutions (AAOIF), said on Monday the IFSB's regulations and standards would be complimentary to the existing Islamic auditing and accounting bodies, adding that they were voluntary.

"Our role is to set the standards and it's up to member countries whether to follow the IFSB's standards or not," he said.

However, several delegates of the IFSB were pessimistic about its success.

"IFSB should at least make it mandatory for member countries to follow the standards and procedures," said Mohd. Daud Bakar, deputy rector of the International Islamic University of Malaysia, Kuala Lumpur.

The two-day-old IFSB will start functioning next year.

"I am going to leave my present position in the AAOIF and take up my new job at the end of February," said Rifaat.

He also clarified that United Arab Emirates was not a member of the IFSB as earlier reported in the media.

The IFSB comprising Bahrain, Indonesia, Iran, Kuwait, Malaysia, Pakistan, Saudi Arabia and Kuwait agreed on Sunday to admit Qatar, subject to "legal formalities," the board said in a statement.

The first meeting was chaired by Bank Indonesia Governor Syahril Sabirin because IFSB's first chairman, Shaikh Ahmed Mohammed Al-Khalifa, who is also the governor of the Bahrain Monetary Agency, did not attend the meeting.

While revealing the details of IFSB's first council meeting decisions to the media, including the Jakarta Post, Syahril said all the member countries were optimistic that the new body would succeed in its mission.

The council has also appointed the members, chairman and deputy chairman of the Technical Committee and also approved the bylaws of the IFSB, which are the rules and procedures governing the board.

"We also approved the annual subscription of US$30,000 for full membership, $20,000 for associate membership and $10,000 for observers," said Syahril, who will take the chairmanship of the IFSB at its next general assembly.

The IFSB -- an association of central banks, monetary authorities and other institutions responsible for supervising and regulating Islamic banking -- was inaugurated by Malaysian President Mahathir Mohamad on Sunday in Kuala Lumpur.

The two-day meeting, which was attended by more than 1,500 participants from 32 countries, ended on Monday.

The launch of the panel has been hailed as a significant step for the global Islamic financial market, which is estimated to be worth US$200 billion with an annual growth rate of 15 percent.

The board is expected to help develop a uniform application of Islamic Shariah law to financial practices and regulation.

Among others, the Islamic financial system forbids payment of any fixed rate of returns, which effectively prohibits charging interest.

Under risk-sharing principles, Islamic banks instead share the losses or profits incurred by their borrowers, so they must judiciously scrutinize the honesty and ethics of their clients.