UAE- Call for federal Shariah board 

(MENAFN - Khaleej Times) A senior official of the Central Bank of the UAE has called for the establishment of a Federal Shariah Board, a move which will allow the issuance of sukuks at federal level.

A higher shariah authority would enable the country to issue sukuk in the future. "At the moment there is no Federal Shariah Board but there are Shariah boards at the banks level," Saif HadefAl Shamsi, assistant governor for monetary policy and financial stability, told reporters on the sidelines of a two-day conference on 'Strengthening the debt capital market in the Arab world.'

Al Shamsi said the UAE has made huge strides in developing the financial system and in the issuing of sukuk. However, a lot more needs to be done, he said.

He asked for a unified authority that would render Islamic capital services as in Malaysia. According to law the UAE cannot issue sukuk, on a federal level without the approval of a higher Shariah board at the federal level, but that has yet to be created, Al Shamsi said. "Law 685 provides for having a federal sharia board, all we are doing is calling for its establishment" so that the government has the option of issuing Islamic bonds, he said. The sukuk issuance more than doubled to 3.66 billion this year compared with 1.47 billion in the year-earlier period.

"In the UAE, issuance has been restricted to some local governments, as there has been no market for federal government bonds in dirhams," Al Shamsi said.

"The result is that there is no yield curve that helps set interest rates on corporate bonds." He said that the central bank has also asked to review the mortgage rules so that a mortgagee in a sukuk could handle the situation in any default. Dr Jassim Al Mannai director-general of Arab Monetary Fund said that the value of corporate bonds issued in local currency doesn't exceed three per cent in the Arab world, as the debt markets lack the depth and liquidity. "The secondary markets are either weak or absent due to primary markets underdevelopment," he said.

Speaking on the occasion, Udaibir S. Das, assistant director Monetary and Capital Markets Department IMF, said as the MENA region confronts a much tougher external environment.

"Financing conditions are tighter and several parts of capital markets, some market intermediaries central to the bond market and the investor base have been fundamentally disrupted," he said.

Dr Janamitra Devan, VP for Financial and Private Sector Development for the World Bank, said in a major shift Norway's sovereign wealth fund has made larger investments in the emerging markets, which could be a 'game-changer' for MENA region that directly needs capital and economic uplift.