Qatar’s Islamic finance sector to get central regulation

The Islamic finance sector in Qatar is moving towards a higher level: Efforts are underway to standardise and centralise the regulations for entire Islamic banking and finance industry in order to align the sector with the best global practices. This is the core of the recent initiative of the Qatar Central Bank (QCB) to adopt […]

The Islamic finance sector in Qatar is moving towards a higher level: Efforts are underway to standardise and centralise the regulations for entire Islamic banking and finance industry in order to align the sector with the best global practices.

This is the core of the recent initiative of the Qatar Central Bank (QCB) to adopt central supervision for the sector, following the examples of countries such as Malaysia and Indonesia and others in the Gulf Co-operation Council in order to harmonise Shariah-compliant banking products and financial services.

The QCB — according to its Financial Stability Review for 2018 — said that measures were in place to establish a centralised Shariah supervisory body and create Shariah standards to govern Islamic banking products and transactions. This would end the practice of Qatari Islamic banks of self-governing by individual Shariah boards and also help overcome controversies over some non-standard financial product structures.

Further details are still to be announced, especially the date of the launch of such a centralised supervisory body, and how it will operate. This is of importance particularly for international financial institutions seeking to do Shariah-compliant business with Qatari banks and financial institutions.

The move by the QCB comes at a time when newest figures on the Islamic banking and finance industry have been released by the Malaysia-based Islamic Financial Services Board (IFSB), an international organisation promoting the Islamic banking and financial services industry.

As part of the first dissemination of country-level data on detailed financials of the Islamic banking systems of 24 countries for 2017 and 2018, the IFSB has also looked into the financial data of the Islamic banking and finance sector in Qatar.

“This should help to enhance greater comparability of the sector with data of other countries, in line with our objective to improve stability and soundness of the financial systems of our member countries,” said IFSB’s secretary-general Bello Lawal Danbatta.

The structural data for the sector shows that Qatar’s currently four Islamic banks — Qatar Islamic Bank, Al Rayan Bank, Barwa Bank and Qatar International Islamic Bank — at the end of last year employed 2,256 people across a total of 75 branches nationwide. Total assets of the four banks as of the fourth quarter of 2018 were $96.14bn, slightly down from the assets held in the fourth quarter of 2017 of $96.73bn, while total Shariah-compliant financing, excluding interbank financing, stood at $64.89bn and combined sukuk holdings at $16.67bn as of end of last year. The sector was profitable with earnings before taxes and zakat of $1.8bn at revenue of $9.51bn in the fourth quarter of 2018, translating into return-on-equity of a sound 18.9% in the period.