legal guide09.indd - Islamic Finance News

Global Legal Islamic Finance Industry: Present State and Prospects (continued..)
One report stated: “In the last few decades
implementing Shariah law has become a point of
focus and discussion in many parts of the world.
Acknowledging the role of Shariah was addressed by
both terror groups such as the Taliban and by civilized
countries such as the UK, where the Archbishop of
Canterbury backed the introduction of Shariah laws.
In the US there is an ongoing war between groups
and organizations that support Shariah compliant
finance and those who are against it.”
An uncomfortable situation is seen to be emerging
that — if the propaganda is successful — could stymie
the expansion of Islamic finance. Nevertheless,
it is a fertile greenfield for Islamic finance legal practitioners
on how to either evade or overcome these
minefields.
On the other hand, governments of other developed
countries are warmly welcoming the introduction
of Islamic finance. Australian assistant treasurer
Nick Sherry said: “Our minds should be open to the
potential for Islamic finance to operate in Australia
alongside what we have come to regard as more
conventional financial products.” He spoke of opportunities
for innovative Australian financial sector
companies, while acknowledging that Islamic
banking and finance products have different structures
from conventional products, which may cause
some regulatory and taxation questions. To Sherry, a
key question is whether existing principles or rules,
perhaps appropriately refined, can address these issues
without the need for specific rules for Islamic
finance. The inference: more work opportunities for
Islamic finance legal practitioners.
There are also fresh fields to conquer for Islamic
finance practitioners — besides emerging markets,
territories that were once battlegrounds are
developing financial architectures as they attempt
to make a go of becoming nations. For instance,
there are now significant opportunities in the
financial services sector in Iraq and the government
is reportedly seeking to attract new investors to help
develop the available services.
“A competitive, modern banking system is now
considered to be essential for the development of
the economy, and now that the country is more
determined to establish a liberal, market economy,
all kinds of financial services will be increasingly in
demand,” says a report. Corporate financial services
at present are very limited.
Furthermore, very few Iraqis take out insurance or
invest in private pension schemes. Sophisticated
financial services for business, such as factoring and
leasing, are still rare as Iraq reportedly experiences a
surging demand for trade finance. In a couple of years
or so, Afghanistan could be in a similar situation. And
there are countries in Africa that can also become
amenable to Islamic finance.
Even ongoing activities within established Islamic
finance jurisdictions are offering a continuous stream
of opportunities for legal practitioners. Among them
are mergers and acquisitions, to consolidate smaller
banks and of conventional institutions acquiring
Islamic banks. The need for better corporate
governance and improved financial performance
indicators calls for legal documentation, as do sales
of non-core assets of Islamic banks.
The creation of trust laws that are specifically tailored
for Islamic finance is becoming a fad. Then, of course,
there is the Herculean task of standardization of
Islamic finance products, of creating a platform
to enable various regulatory and similar Islamic
finance authorities to hum in tune, and getting the
rival Islamic finance hubs in the various regions to
collaborate even as they compete with each other.
Malaysia has set the pace by offering incentives
to major legal firms to use it as a base to conduct
international Islamic finance activities. Prospects
are there for large international firms specializing in
Islamic finance to have large stakes in an expanding
pie. With research activities becoming an integral
component of these firms, the legal community has
a real potential of spearheading the global growth of
Islamic finance.
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