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Rahul Preeth
Doha
The planned introduction of a centralised Shariah supervisory body will strengthen Qatar’s Islamic finance sector, which accounts for more than a third of the country’s total financial system assets, a report has said.
According to the Qatar Financial Centre’s (QFC) Islamic Finance Hub report 2019, the Islamic finance industry’s total assets grew by a CAGR (compound annual growth rate) of 8 percent since 2015 to reach $129 billion in the first half of 2019.
This constitutes 33 percent of Qatar’s total financial system assets, it added.
A centralised Shariah body will create a more consistent Shariah governance framework that aligns Shariah compliance across the industry and reduce Shariah risk of the Islamic banks’ products and services.
“It will also facilitate arbitration and the settlement of disputes between Islamic banks and other stakeholders,” the report said.
Currently, a decentralised Shariah governance structure is in place, in which individual Shariah board’s rule on the acceptability of Shariah-compliant financial products and services is left to internal Shariah boards.
Besides a centralised Shariah board, the report said QFC’s collaboration with Malaysia and Turkey to establish Islamic finance hubs in their respective regions by using common technology and other such efforts will further strengthen the sector.
“Qatar has been rapidly developing its Islamic finance industry and is poised to become a leading hub for the sector,” the report said.
Islamic banking in Qatar, amounting to $107 billion in assets in H1 2019, is also being transformed in terms of its institutions, the report said.
“Qatar’s first bank merger, between International Bank of Qatar and Shariah-compliant Barwa Bank, resulted in the newly reconstituted Barwa Bank.”
Qatar’s $1 billion takaful sector outperformed conventional insurance in terms of growth over the past two years, mainly driven by Islamic subsidiaries of Qatari insurance operators, the report said.
Its nonbanking financial institutions (NBFIs), consisting of financing and investment companies, reached a combined asset value of just over $1 billion, it added.
“With all these developments, Qatar has the necessary foundation to take its Islamic finance industry to the next level while benefiting from the experience of other Islamic finance markets.”
Qatar’s Islamic capital market consisted of $20 billion in sukuk outstanding and $399 million in Islamic assets under management in H1 2019, the report said, adding that the government remains the most active player in the sukuk market.
“Qatar is well-positioned to seize on its potential of becoming a leading interconnected Islamic finance hub,” QFC CEO Youful Mohamed al Jaida said.
“Globally, Islamic finance has blossomed in size over recent years to reach an estimated value of $2.4 trillion and holds significant future promise.
QFC has identified the segment as key to realizing the institution’s Strategic Vision and has given priority for the sector’s development on its
platform.”
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18/12/2019
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