Could you provide a brief journey of how you arrived where you are today?
After a wide-ranging career in the British civil service, I settled in insurance regulation, and moved to the Financial Services Authority when it was created. From there I moved to the DFSA, and found that I needed to understand and engage with Takaful. I became involved with the work of the Islamic Financial Services Board (IFSB) on Takaful, and then with other aspects of Islamic finance. When Paul Koster joined the DFSA as chief executive, he decided that we needed a clearer focus for our work in Islamic finance, and asked me to provide it.
What does your role involve?
It involves developing and implementing a strategy for Islamic finance, and ensuring that we are equipped to deliver it. Many people in the DFSA need to engage with Islamic finance as part of their day-to-day work, so we need to train them, and also ensure that we have some people with a deeper knowledge who can act as subject matter experts for their colleagues and represent us externally. I do some of this external representation, at conferences and in international working groups developing standards. I monitor industry and standards developments to advice on any changes that may be needed in our regulatory regime.
What is your greatest achievement to date?
Within DFSA, the restructuring of our Islamic finance rules to make them more accessible, and the creation of online tailored handbooks for Islamic finance. Externally, my work in the IFSB Working Group to create a solvency standard for Takaful.
Which of your products/services deliver the best results?
As a regulator, we do not have products and services in quite the same way as a normal company. In terms of successes, however, from a standing start in 2004 we have been able to acquire some momentum as a center for Islamic finance. We are currently revising our funds regime in the light of recommendations from the industry, including making some changes to the Shariah governance of Islamic funds, and I see scope for strong growth in that area in the future. There are also some promising developments in re-Takaful.
What are the strengths of your business?
The strengths of the DFSA lie in its core values of integrity, transparency and efficiency. We have adopted a modern style of regulation, to the highest international standards, and with an international staff of highly experienced regulators. This has also made us more accessible to the businesses we regulate.
What are the factors contributing to the success of your company?
Besides the ones I’ve already mentioned, there is the legal system within which the DIFC operates. The rulers of the UAE allowed us to create a new set of laws, with a separate court to apply them, in a common law system based on that of England and Wales. We have also had Dubai’s more general advantages as an international hub, for example its excellent communications, and its attractions as a city in which people of many nations can live and work.
What are the obstacles faced in running your business today?
The financial services industry is obviously going through very hard times, and firms which a few years ago were in an expansionist mode are now under pressure, less inclined to start new ventures and sometimes running short of capital in their existing ventures. As still a young financial center, we also have less room for regulatory mishaps that more established centers can take in their stride; a major money laundering incident, for example, would have a much worse impact on the Centre than a similar incident in London or New York.
Where do you see the Islamic finance industry in, say, the next five years or so?
The industry will continue to grow rapidly, and the world’s current disenchantment with many aspects of conventional finance will give Islamic finance the room to put forward a coherent alternative. But at the same time it will need to adjust to a world of stronger international regulation and standards-setting. It will have to either fit within those new standards — which will inevitably be made with conventional finance in mind — or articulate its own, and have them accepted internationally. In this way, as in others, Islamic finance is at a critical point in its development, which will determine whether it becomes a real alternative to the conventional system or simply an adjunct to it, offering the same products and services with different legal forms and higher costs.
Name one thing you would like to see change in the world of Islamic finance.
I should like to see a reduction in the costs of Shariah compliance. Part of this can come from increased standardization of products and processes, but part needs to come from the development of the Shariah advisory profession itself. This needs to move from a model based on a relatively few prominent individuals to one which can sustain a much larger industry. This will probably involve a coherent training and professional development structure and perhaps, as in law or accountancy, more emphasis on the advisory firm rather than the individuals within it.