Greater standardisation of Islamic banking regulations under way in Qatar

In 2019 the Qatar Central Bank (QCB) announced its plans to introduce standardised criteria for sharia compliance. The bank revealed that it was working with a consultancy firm to “prepare principles and standards that govern the various Islamic banking products and transactions, and the legal supervision thereof”. Qatar’s four local Islamic banks currently employ their own sharia supervisory boards, which ensure that their financial transactions conform to Islamic principles. However, the central bank hopes that the creation of standardised regulations will help the sector conform to best international practices and achieve consistency and credibility across the market. The new criteria should also help Islamic banks grow by introducing greater clarity in the legal standing of transactions. The QCB’s announcement follows similar moves by other major Islamic finance jurisdictions, such as Malaysia, in an effort to find common ground between the scholars on sharia-compliance boards of individual institutions.

Second Strategic Plan

The steps being taken by the QCB are in line with the core objectives of its Second Strategic Plan (SSP) covering the period 2017-22, which is a policy framework designed to help the financial services sector adapt to meet the aims of Qatar Vision 2030. The SSP works to benchmark financial regulations to international standards, thus it supports the implementation of a central sharia committee to enforce consistency in Islamic finance. The plan also aims to broaden financial markets by developing policies to support the growth of Islamic finance, and diversification and innovation in financial services products.

Individual Boards

In practice, finding consensus among the sharia boards of Qatar’s four Islamic banks may prove to be relatively straightforward. The sharia boards of Qatar Islamic Bank (QIB), Masraf Al Rayan, Qatar International Islamic Bank (QIIB) and Barwa Bank have the same chair: Walid bin Hadi. He previously served as a judge on Qatar’s Sharia Court and also sits on the advisory board of the Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI). Two Islamic scholars are members of the boards of QIB, Masraf Al Rayan and QIIB: Abdul Sattar Abu Ghuddah, who has taught at universities in Saudi Arabia and Kuwait, and is also a member of the AAOIFI sharia board; and Mohammed Ameen, who has published several research papers about Islamic finance.

Barwa Bank’s sharia board has two other members: Essam Khalaf Al Enizi, a sharia board member of several other GCC banks and an AAOIFI board member; and Osama Qais Al Deraie, who has taught at universities in Malaysia and Qatar, and is the CEO of Bait Al Mashura, a specialised financial consultancy.

Harmonised Approach

Although the five Islamic scholars have significant shared experience in advising and guiding Qatar’s Islamic banks, a harmonised approach to sharia supervision could help present a united front under the umbrella of the QCB when dealing with financial institutions from other jurisdictions, or when responding to new innovations in the market such as financial technology.

A paper published in 2019 on Borsa Istanbul Review, an academic platform for financial studies, outlined the ramifications of different banking regulations on the performance of Islamic banks in the GCC and South and South-east Asia (SSA) region, including Malaysia, Indonesia, Bangladesh and Pakistan. The research found greater variation in interpretation of sharia regulations in the SSA region than among GCC states, a factor which could be significant as Qatari banks increasingly operate beyond the Gulf region. The paper also concluded that delegating supervisory authority to a centralised sharia board could be beneficial for the performance of Islamic banks, while also helping them expand their operations and retain customers.