The success of sukuk issuances by financial institutions underlinine the tremendous potential of Islamic finance industry, which has shown healthy growth despite the global financial crisis and the lull after it, said an expert.

"The present and future of Islamic finance and banking industry are very promising,” Ernst & Young Bahrain senior director Imtiaz Ibrahim told a session of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAAOIFI) conference at the Diplomat Radisson Blu Hotel in Bahrain, according to a report in our sister publication, the Gulf Daily News.

"Islamic financial institutions are offering various deposit products on the basis of Wakala and Mudaraba, which are reliable sources of Sharia-compliant income for depositors and provides continuous liquidity stream to such institutions," he said.

"The sukuk market is also flourishing and, recently, the market has seen complex and sophisticated sukuk structures being introduced by several financial institutions across the GCC.

"AAOIFI is fully cognisant of this transformation and has been taking measures to update or introduce new accounting standards.

"AAOIFI is currently developing sukuk standards and revising investment accounts and takaful standards, which will result in the harmonisation of accounting and financial reporting between international financial reporting standards and AAOIFI standards," he said.

"The risk of losing trust of the general public in the Sharia compliance of Islamic banks could potentially pose a major threat to the industry and should not be ignored by stakeholders," added Ernst & Young executive manager Sohaib Umer.

"Regulators need to monitor the composition and working of Sharia supervisory boards more actively and adopt leading global practices in this regard.

"Also, Sharia scholars themselves should come up with a voluntary code of conduct to address issues like eligibility criteria, remuneration, conflict of interest and related topics." – TradeArabia News Service