The International Islamic Financial Market (IIFM), the Bahrain-based organisation seeking to set standards for Islamic securities, may issue new global guidelines to facilitate the sale of Shariahcompliant bonds.
“There is no one, crossborder, common benchmark for sukuk,” IIFM’s chief executive officer Ijlal Ahmed Alvi said in March. “When there is a problem or a restructuring possibility, there is no precedent.”
Regulators around the world, including Bahrain and Malaysia, are looking for ways to better evaluate risks of Islamic banks, bonds and make products suitable for investors globally. Malaysia’s central bank has said that it plans to issue standardised principles for Shariah-compliant contracts such as those used in realestate and project financing to improve oversight.
Sales of Islamic bonds, or sukuk, are reviewed and approved by a board of Shariah law scholars at banks and companies. Without globally accepted standards, issuers rely on their rulings.
“We need to move towards cross-jurisdictional standardisation in order to facilitate growth in the industry,” according to Yavar Moini, senior advisor, global capital markets at Morgan Stanley. “We all know how sukuk holders should be treated theoretically, but it needs to be worked out and demonstrated so that it’s not just in a legal document.”