Interview: Adnan Ahmed Yousif
What more can be done to coordinate regulations for sharia-compliant products?
ADNAN AHMED YOUSIF: The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has been publishing standards and norms for Islamic financial institutions since 1993 and thus plays an essential role in harmonising financial and accounting standards applied by Islamic banks, especially because the standards issued by the organisation are mandatory for Islamic financial institutions in many Islamic countries.
Individual countries also have their own sharia regulatory authorities. There is a need to find a unified Islamic reference, which can combine these efforts or to better adapt existing institutions, such as AAOIFI, to play this role.
It is also worth mentioning the importance of Fiqh (Islamic jurisprudence) and Islamic forums such as Al Baraka Forum for Islamic Economy – held every year for the last 37 years – in issuing fatwa (Islamic rulings) with regard to transactions as well as for discussion of problems faced by Islamic banks when applying different modes of Islamic finance and exchanging views with a number of different scholars to solve them.
To what extent do sukuk (Islamic bonds) deepen capital markets in the MENA region?
YOUSIF: Recent innovations in Islamic finance have definitely changed the dynamics of that industry, especially in the area of securitisation, known as sukuk. Over the last 10 years sukuk have become increasingly popular, both as a means of raising government finance through sovereign issues and as a method for companies to obtain funding through offering corporate sukuk.
Beginning modestly in the year 2000 with three sukuk worth $336m and reaching a total issuance of $145bn in 2015, the primary market for sukuk grew between 2001 and 2014 at a compound annual growth rate of 57%, reaching 14.3% of total global Islamic finance assets. It has developed as one of the most significant mechanisms for raising finance in the international capital markets through sharia-compliant structures.
Today, local and multinational corporations, sovereign bodies, governments and financial institutions are issuing sukuk as an alternative to syndicated financing, making sukuk an essential subset of the international financial system. Well-developed sukuk markets would enhance access to financial services, deepen capital markets and create a sharia-compliant alternative for small and/or risk-averse investors.
What sort of potential do you see for the expansion of Islamic financial products in the corporate segment in North Africa?
YOUSIF: When you take into consideration, on the one hand, that Islamic banking is relatively new in this region and, on the other hand, the size of its markets – which include Algeria, Egypt, Libya, Morocco, Sudan, Tunisia and Western Sahara – it is easy to imagine the huge potential for Islamic banking. The total population of this area reached 200m with total GDP exceeding $1.2trn and per capita income averaging $7000.
The economies of Algeria, Libya and Sudan were transformed by the discovery of oil and natural gas reserves in the deserts. Morocco’s major exports are phosphates and agricultural produce and, as in Egypt and Tunisia, the tourist industry is essential to the economy. Egypt has the most varied industrial base, importing technology to develop electronics and engineering industries. A climate such as this creates substantial potential for the corporate segment to be in a good position to promote and benefit from Islamic products and services.
