The Dubai Islamic Economy Development Centre (DIEDC) is readying the code for a global legislative framework for Islamic finance by the second quarter of next year.
In an exclusive interview with Salaam Gateway, DIEDC said the framework aims to bridge the gap between different industry offerings across jurisdictions.
“We aim to complete the code by the second quarter of 2021,” said DIEDC. “During the process, we shall engage with the technical experts whose input shall be included in developing the code. The initiative has received strong support from industry stakeholders from around the world.”
The code is projected to also manage the Shariah risks and provide transparency in Islamic financial transactions. It will help boost the trust of industry practitioners, sukuk issuers and investors.
In May, the DIEDC announced it was partnering with the United Arab Emirates Ministry of Finance and the Islamic Development Bank to develop a unified global legal and legislative framework for the Islamic finance sector. DIEDC also said it signed a memorandum of understanding with industry body the Accounting and Auditing Organization for Islamic Financial Institutions to enable it to use AAOIFI’s standards as a reference to build the framework. Norton Rose Fulbright is providing legal advice in drafting the code.
“We propose to roll it out through an international treaty that OIC and non-OIC countries will sign in order to adopt the code,” said the DIEDC referring to the 57-member country Organisation of Islamic Cooperation.
The code will also serve as a tool for dispute resolution in the industry through Islamic finance tribunals and open up a new professional opportunity for young lawyers, according to the DIEDC.
“Our starting point shall be the AAOIFI Shariah standards,” it added. “The project that we are working on shall codify the Islamic finance parameters for contracts in order to provide the users the protection under the uniform global legal framework.”
“We believe the next generation growth in Islamic finance shall be contributed by the non-traditional domains and in order to achieve that it will be paramount to develop a robust legal framework which is equally acceptable to all parts of the globe.”
The DIEDC said that in many non-OIC countries, Muslims have no option but to use non-Shariah compliant financial services or be financially excluded. This framework aims to also help such people through establishment of new Islamic banks in such countries under the law.
“We are reaching out to prominent stakeholders and Islamic finance experts from across the globe to join a Codification Program Advisory Board (CPAB), through which they can review the code and provide feedback,” said the DIEDC.
It said it is also discussing the Environmental, Social, and Governance (ESG) factors of the initiative.
“Islamic finance is very similar to socially responsible investing (SRI) as it shares many of the principles that are embedded within such initiatives.”