The different Sharia systems followed by Islamic banks in the Emirates have left many customers confused.
Sharia banking should be standardised, FNC says
ABU DHABI // The different Sharia systems followed by Islamic banks in the Emirates have left many customers confused.
And with nearly a fifth of the population doing business at the country's eight Islamic banks - and with services that one bank allows being forbidden at another - some members of the FNC are pressing for a committee to be created to bring standards to the sector.
To their surprise, the members discovered that their idea was not new. The FNC member Ali Al Nuaimi from Ajman found that in 1985, a law was passed, by Cabinet and presidential decree, for such a committee to act as a monitor.
Twenty-seven years later, the law is still waiting to be enacted.
"This has left the end user confused over which standard should be followed and which bank follows Sharia," Mr Al Nuaimi said. "They all do - but there are different services in all of them."
The 1985 law stated that it was the responsibility of the Ministry of Islamic affairs to oversee the committee's work - but shortly after the law's passage, the law foundered as the ministry was turned into the General Authority of Islamic Affairs.
That change, Mr Al Nuaimi said, left the execution and responsibility of the law lost at the federal level, prompting him to start with the Ministry of Finance and ask them who will take the responsibility of the new committee.
The Minister of State for Financial Affairs, Obaid Al Tayer, passed the question to the Ministry of Justice.
The Ministry of Justice referred the question to Cabinet, which referred it to the Central Bank, which referred it back to the Ministry of Justice, which referred it back to Cabinet, which verbally told the FNC to pass the question back to Mr Al Tayer.
He, as well as the governor of the Central Bank, Sultan Bin Nasser Al Suwaidi, both attended last week's FNC session.
While Mr Al Tayer continued to state that the new committee was not his ministry's responsibility, Mr Al Suwaidi stressed that the committee was needed.
"We agree, and we see importance for the execution of this law," Mr Al Suwaidi said. "[Especially] in the light of the difference in practice of the banks, and the difference in their customer relations."
He said the Central Bank does not have to monitor bank operations, and another entity is needed to take on this role.
Mr Al Nuaimi cited the constitution to defend his argument that the Central Bank was the one that should be in charge of the new committee.
Dr Anwar Gargash, Minister of State for Foreign Affairs and FNC Affairs, then said responsibility will be distributed between more than one entity.
"We want this to be established soon," Mr Al Nuaimi stressed again.
Mr Al Tayer said the ministry has formed a committee, headed by the minister of finance, to look over all laws passed in the 1980s and not yet executed. He said that in light of the economic crisis, many laws required follow-up.
Mohamed Al Murr, a Dubai member who is the speaker of the FNC, told Mr Al Tayer that he hoped the ministry would follow through on these laws as "they are important to Emiratis and the financial sector".
But as the debate ended there, the problem was left unresolved.
Mr Al Nuaimi said that at the FNC's next session, on April 17, he will ask the council to vote on raising a recommendation to Cabinet that the Central Bank take ownership and execute the law - "especially since the governor is in support of this committee".
The consequence of a lack of regulation is that many consumers are reluctant to employ Sharia banking.
Bassma Mohamed, a 25-year-old Muslim in Abu Dhabi, has refused to open an account with an Islamic bank.
"I studied banking at UAE University, and the system followed by the Islamic bank is not much different than other commercial banks," she said. "I don't trust that they are Sharia-compliant, seeing that they are all different."