UAE takes lead to set up unified legislative framework in Islamic finance
The UAE has launched an initiative to create a unified global legal and legislative framework for the Islamic finance sector that will enable the Islamic economy to expand its reach and implement greater standardisation within the sector.
The global legislative framework was launched by the UAE ministry of finance in partnership with the Islamic Development Bank (IDB) and the Dubai Islamic Economy Development Centre (DIEDC).
The Deputy Ruler of Dubai, Sheikh Hamdan bin Rashid Al Maktoum, said: “The Islamic finance sector will benefit greatly from a unified international legal and legislative framework. After its formulation and subsequent approval by internationally accredited relevant authorities, it will be formally established as a legal and legislative framework that serves as the basis for a new international treaty.”
A memorandum of understanding (MoU) has already been signed between DIEDC and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), enabling DIEDC to use AAOIFI’s standards as a reference in building the international legal framework with the guidance of the Ministry of Finance and IDB.
“There is today an urgent need in the Islamic finance sector to accelerate growth and reduce discrepancies in practices across the globe. As part of this priority, the development of a general framework that standardises rules and regulations will be a major achievement for Islamic finance and for the Islamic economy in general,” Sultan bin Saeed Al Mansouri, Minister of Economy and Chairman of DIEDC, said.
The decision to form the unified legislative framework came in response to the growing demand from Islamic financial institutions and dispute settlement centres, including courts and arbitration centres.
“New courts are expected to be established worldwide to settle Islamic financial disputes according to the new unified legislative framework,” Al Mansouri said.
International law firm Norton Rose Fulbright has been appointed to provide legal advice in drafting the code for the global framework.