��������������������������
“ Islamic financial institutions should appreciate that they are Islamic . They have a different set of rules to conventional banks . But if Islamic financial institutions can sit together and join hands to issue sukuks that are equity based , I expect that the rate of return will be much higher . This will draw the interest of conventional instituti� ons� ” ( Euromoney , 2008 , para . 18 )
The Kuala Lumpur based IFSB was created in 2002 and is reflective of the growing market in South East Asia . It holds the position of an “ international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry , which is defined broadly to include banking , capital market and insurance ” ( Islamic Financial Service Board , 2012 , para . 1 ). For Karim and Archer ( 2007 ) the IFSB has made real the idea of a consensus and in doing so has strengthened the sector .
Both the AAOFI and the IFSB are influential in establishing standards , but questions remain regarding how this is being achieved and what the consensual direction actually is ? ( Knowledge @ Wharton , 2010 ).
Nevertheless , while the interlocking of SSBs has helped promote this standardization of Islamic practice in coordination with the international bodies , regulation is very much orientated towards institutional survival and therefore adoption of policies stemming from the West ( Bassens , Derudder , & Witlox , 2011 ). What seems apparent therefore is a general adherence towards conventional neo-liberal standards , understandable given its overwhelming strength and size . Relevant to the debate in ������� we can suggest two reasons for this . Firstly , there has been no development in Islamic jurisprudence to attend to matters concerning corporations and therefore financial law . Reiterating Hefner ’ s comment once again , ‘ this is to say that the broader legal framework on which Islamic banking depends actually owes more to Western civil law than it does to classical Islamic precedents ’ ( Hefner , 2006 , p . 18 ). Secondly , as acknowledged by Warde , the pervasiveness of Western education upon Islamic scholars has led to a deeper convergence between the principles of Islamic economics and the Washington Consensus ( Warde 2005 , p . 47 ). Neo-liberal norms are therefore justified within the sector by applying Islamic terminology rather than the seeking of a new consensus , a process that once again is said to challenge the Islamic ethos and the practice of ������� .
What this means in practical terms is that the adoption of standardizations used in conventional finance has become a common feature of Islamic financing . As previously suggested , the AAOIFI is heavily influenced by international regulatory bodies such as the Bank for International Settlements ( BIS ), the Basel Committee on Banking Supervision ( BCBS ) and even advisories like the International Financial Reporting Standards Foundation ( IFRS Foundation ). The IFSB itself was created with support from the AAOIFI , Islamic Development Bank ( IDB ) and International Monetary Fund ( IMF ) ( Alexakis & Tsikouras 2009 , p . 92 ) and the IMF is even a member of the IFSB .
Conclusion and Further Research Implications
As demonstrated above , the Islamic
financial sector is neither easily defined nor unified at the national or international level . It is also confronted by a number of problematic tensions including :
53