Islamic Commercial Law Report 2017: An Annual Publication Assessing Key Issues and Global Trends in Islamic Capital Markets

Our report has highlighted several fundamental themes in the development of an au- thentically Islamic capital market. Among the most important are the development of sophisticated Shariah governance at the institutional level, the improvement of disclosure and supervisory rules at the national level, and the standardization and harmonization of Shariah rulings on the global level. Such efforts will make it easier for new Shariah-compliant products to spread, including tax-efficient cross border investments and socially responsible sukuk, as well as asset management and crowdfunding. As the volume of Islamic capital markets transactions continues to increase, demand grows for a range of profit-and-loss sharing products including sukuk and structured instruments, which will allow a broader range of investment strategies and risk profiles to investors.

The articles in our concluding chapter extend these themes to projections or recommen- dations for future development in the field. An examination of the role of the fatwa in Islamic finance recommends the development of a robust Shariah scholarship oriented to the particular problems of the capital markets: how to distribute risk across markets and portfolios, and how to structure fixed income securities in a way that is true to the Shariah.

There remains a wide range in the Islamic financial regulatory conditions in and coordi- nation between Organization of Islamic Conference member countries. Although there have been preliminary cross-border Islamic financial investments connecting members, the harmonization of legal frameworks will facilitate expansion. The most important areas are in insolvency, tax, corporate and securities laws. The unification of taxation rules for cross-border equity financing is particularly crucial.

A final recommendation to expand the global profile of Islamic capital markets is to better identify and align their goals and offerings with the worldwide movement towards Environ- mental, Social and Governance (ESG) based investment strategies. In general, implementing ESG standards lowers companies’ costs and improves performance and share prices. Moreover, this strategy will lead to a virtuous reinforcing cycle, in which Shariah scholars refocus their attention, whenever appropriate, on judgments that increase social benefits (maslaha). In turn, Islamic capital market products will become further identified with ethical investing strategies among investors worldwide, whether Muslim or non-Muslim.