Dubai Islamic Bank, the world’s first Islamic bank, today, signed a "founding member's" agreement with Hawkamah Institute, an autonomous association of corporate governance practitioners, regulators and institutions. Dubai Islamic Bank (DIB) was established in 1975 and is a leader in its field, setting standards as the trend towards Islamic banking gathers momentum in the Arab world and internationally.
The new partnership shows DIB’s commitment towards continuing to strengthen DIB's corporate governance standards, ensuring that they are clear, consistent and fully in line with international best practice. DIB’s sponsorship of Hawkamah demonstrates its commitment to promoting these practices in the Middle East and North Africa (MENA) region and in Shari’a compliant financial institutions.
Dr. Nasser Saidi, Executive Director of Hawkamah, said: "Corporate governance plays a critical role in the development of modern businesses as it enhances investor confidence and helps in developing the capital markets of the region. Islamic Finance has experienced unprecedented growth so far, but the enactment and implementation of well-defined corporate governance structures is essential if trust and confidence is to be maintained. Therefore, Islamic Financial Institutions must be resolute and embrace a proactive, rather than reactive, strategy towards corporate governance if long-term sustainability is to be assured. We welcome DIB as a founding member of Hawkamah.”
His Excellency Mohammed Ibrahim Al Shaibani, Chairman, DIB, said: “Maintaining customers' confidence in Islamic Finance Institution (IFI) Shari'a compliance is of vital importance. IFIs, by its very nature, have a responsibility to enact precautionary and prudential measures that are specific to its unique structure. It is corporate governance aimed at ensuring the rights and addressing the risk exposure of investment account holders that requires immediate attention. Ensuring the highest levels of corporate governance and transparency will prove key to DIBs continuing growth and future expansion.”
Conventional governance standards seek to address the separation of ownership and management by ensuring that actions of the management are kept in line with the interests of shareholders and stakeholders. The conventional governance standards can therefore be paired with Shari'a requirements essential to IFIs to create a corporate governance structure that is suited to the Islamic Finance Industry.
Questions over the Shariah compliance of the sukuk (Islamic bonds), which are traded in IFIs, meant that the sukuk market, which in 2007 was the leading traded instrument in Islamic finance, witnessed declines exceeding 50% in 2008. Moody’s in its recent report on Islamic finance cited that questions over the Shariah compliance meant investors instead opted for investments in other financial instruments.
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