1. Towards Standardization of Islamic Banking Products Nairobi - March 29, 2011 بسم الله الرحمن الرحيم Muddassir Siddiqui Partner SNR Denton, Dubai

2. Benefits Predictability Cost reduction Consistency, harmony Risk mitigation Single bench mark for performance Dealing with multiple Shari’ah Boards – Syndicated financing - Restructuring

3. Challenges Standardization is the by-product Standardization requires – Shari’ah standards and views AAOIFI, Fiqh Academies – Multi legal jurisdiction – Accounting treatment – Enforcement Self regulated V. Regulatory authority – Transparency

4. Consensus of Shari’ah Views ولو شاء ربك لجعل الناس أمة واحدة ولا يزالون مختلفين إلا من رحم ربك -هود Many schools of Islamic laws – biggest challenge History – Muwatta, Fatawa Alamgiri, Usmani Majallah, OIC International Islamic Fiqh Academy, Al-Azhar University, AAOIFI, IIFM etc. – Shari’ah position not consistent – example tawarruq – Disagreements within a single SSB Example - tawarruq

5. Consensus of Shari’ah Views, cont. Use of fictitious contracts Islamic finance is still at and embryonic stage – Work in progress – AAOIFI Standards are new – first edition Need revisions in the light of practice and experience Sukuk example – Premature to standardize while the Standards are new – Needs review in light of lessons learned

6. Multi Legal Jurisdictions Most central banks regulate the industry but refrain from regulating the products Few Central Banks with central Shari’ah control Malaysia, Pakistan, Sudan – standardization v. innovation – both are needed – balanced approach Individual SSB operate independently IFI desire confidentiality

7. Accounting Inconsistent treatment between AAOIFI and International accounting standards – Leases – Substance over form

8. Enforcement Shari’ah risks – TID v. Blom Various courts have various approach – contract invalid – Board of Grievances – Re-characterize the contract - Dubai – Some terms invalid – early payment discount – Use of fictitious contracts makes enforcement unpredictable – Commercial reality v. form

9. Suggestions Central Shari’ah Board Qualified members of Shari’ah Board – Multiple discipline – law – finance - accounting Transparency – Fatwa should mention the basis Separate entity for external audit Products based on: – Objectives of the Shari’ah, rationality, reality of the relationship between the parties

10. Thank you شكرا و السلام عليكم و رحمة الله و بركاته