QCB To Harmonise Shariah Regulatory Framework In Qatar

The Qatar Central Bank (the "QCB") stated in its recent Financial Stability Review for 2018* that efforts were in place to harmonise the Shariah regulatory framework for the Islamic banking sector in Qatar. We take a closer look at some of these initiatives and what they mean for the Islamic finance market.

Such efforts by the QCB illustrate a maturing Islamic finance industry in Qatar Centralised supervision

The recently announced initiatives include establishing a centralised Shariah supervisory body and preparing Shariah standards to govern various Islamic banking products and transactions. Such efforts by the QCB illustrate a maturing Islamic finance industry in Qatar. They are also in line with various steps taken in other countries such as Malaysia and Indonesia and elsewhere in the GCC to harmonise Shariah products and practices and to ensure a higher level of supervision. Centralised supervision is of increasing importance in the region given past controversies surrounding non-standard structures adopted by certain Sukuk issuers.

As the market awaits further details on how the centralised Shariah supervisory body will operate, lessons from other jurisdictions will be relevant. For example, clarifying how the rulings of such a body would sit with the judicial apparatus in Qatar would be essential given the experiences in Malaysia. This would be important where the rights and remedies of parties would differ depending on whether a transaction was governed by secular law or subject to rulings from a Shariah supervisory authority. The Federal Court of Malaysia however confirmed in a recent case1 that rulings of Bank Negara Malaysia's Shariah Advisory Council were binding on the Civil Courts of Malaysia.

Shariah standards and the Qatar Financial Centre

The Islamic finance market in Qatar is generally aligned with the Shariah standards published by AAOIFI2. It would therefore be important that any Shariah standards...