Islamic banks work for acceptance

Islamic banks work for acceptance

Rendi A. Witular, The Jakarta Post, Jakarta

An international conference on Islamic banks ended on Thursday
with participants agreeing on the need for universal operating
standards for an Islamic banking system.

Director of Islamic Research of the Islamic Development Bank
Mabid Ali Al-Jarhi said during the conference, industry players
and regulators agreed to convene again to establish what will be
termed the "international sharia council" tasked with developing
standards, products and facilities.

Al-Jarhi explained that today, every country applied different
operational standards for its Islamic banks, thus making it
difficult for an Islamic bank of a certain country to expand
business in other countries.

The three-day conference featured senior officials from the
Islamic Development Bank, the International Monetary Fund, the
World Bank, the Accounting and Auditing Organization for Islamic
Financial Institutions, the International Islamic Financial
Market and the International Islamic Rating Agency.

Central bankers of some countries, which have been using the
sharia (Islamic law) banking system also participated in the
conference.

Al Jarhi said that the agreements reached during the
conference would be proposed to the international Basel
(Switzerland) banking committee for review.

The conference hopes that the Basel committee can help create
standard operational procedures for Islamic banks that are
acceptable worldwide, said Al-Jarhi.

The Basel committee is an international task force assigned to
outline the standard supervision and capital requirements for
banks. The committee's standard procedures, known as the Basel
Accord I, are currently used by nearly all banks in the world,
since its inception in 1998.

The committee, headquartered in Basel, Switzerland, was formed
by the Group of Ten, which includes Belgium, Canada, France,
Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the
United Kingdom and the United States.

Currently, the committee is drafting a new accord to replace
the older one based on input from financial institutions around
the world.

Globally, some 140 Islamic banks and financial institutions in
75 countries manage a total of US$230 billion in funds. They
offer a wide range of products and services starting from simple
retail products to financing for major infrastructure projects.

The Islamic banking system works in line with the principles
of Islamic sharia law. While conventional banks gets interest
from borrowers, Islamic banks take a part of the profits made by
borrowers for a profit sharing arrangement.