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local auditor sign-off is required for Bermuda investment funds. Another benefit includes no exchange control for non-resident undertakings and no restriction on repatriation of funds. Umbrella or multi-class funds can be created as Segregated Accounts Companies which is highly advanta- geous. Lastly new fund applications or material changes can usually be processed expeditiously through the BMA which matches or exceed fund domicile’s speed to market.
Which sectors are the most profit- able for Shariah compliant hedge funds both in Bermuda and world- wide? Some of the most profitable Shariah compliant funds are in the sectors of trade finance, Shariah-compliant private equity and venture capital. Globally there are significant oppor- tunities to penetrate the untapped market of Islamic Microfinance. Ber- muda’s fund legislation provides op- portunities to set up microfinance private equity “fund of funds” in Ber- muda to capture growth in emerging markets, and invest in microfinance private equity/venture capital funds.
How important is Standardisa- tion for the progression of Islamic fi- nance? Standardization is a big challenge. A lack of standard financial contracts and products across the various institutions within the same country, as well as across jurisdictions is a problem. The standards for Islamic insti- tutions operations continue to be fragment- ed, notwithstanding international initiatives that have been taken by the AAOIFI and the IFSB to create general industry standards.
Local accounting standards used in the Is- lamic banking sector often consist of a mix- ture of IFRS, AAOIFI and other specific stand- ards, complicating the operations of Islamic institutions. Similarly, IFSB standards are not fully implemented in many countries.
While full harmonization might not be possi- ble given the nature of the industry, mutual recognition of financial standards and prod- ucts across jurisdictions would help limit this problem.
It would also reduce transaction costs, help implement an efficient regulatory over- sight, enhance the process of compliance, and contribute to confidence and industry growth.
Given the diversity of rulings of the various Shariah advisory boards from various ju-
50 Global Islamic Finance May 2012
risdictions, it is important for the Shariah scholars to try to work together to develop standards and practices which are more ac- ceptable at the global level.
Where do you see the Islamic asset man- agement sector heading in the next few years? I can see that the Islamic asset management sector will develop innovative strategies without compromising Shariah-compliancy. The future also looks positive for commend- able work being carried out by the IIFM/ISDA to develop Master Hedging Agreements and future developments promising to allow Shariah-compliant innovative investment strategies. My preference is private equity as there is a close relationship between Islamic tenets of investments and PEFs. Both are participatory in nature, this lead to the shar- ing of risks and rewards, and investment in the real economy, taking a long-term view on investments with an exit plan, and aligning the interest of the stakeholders.
Shariah-compliant PEFs focus on acquiring majority stakes in privately held Shariah- compliantcompanies and projects. One sig- nificant difference is profit and loss sharing and manager remuneration determination.
What do you personally feel are the key challenges that the Islamic finance indus- try faces?
Infrastructure and tools for liquidity risk management is a key challenge which remains underdeveloped in many juris- dictions. In addition legal framework which is incomplete or untested is another major challenge for countries wishing to tap into the Islamic finance industry.
The lack of harmonized contracts and standardisation needs to be further developed in addition to insufficient ex- pertise (at the supervisory and industry levels) relative to the industry‘s growth in addition to a standardised Shariah governance.
What are your future plans for PwC in terms of promoting the Islamic fi- nance industry? I will continue to support to the Bermu- da Government and private sector and work with the PwC Islamic finance glo- bal leadership as thought leadership s we can build product development and services.
In addition I will be a prominent pro- moter of Islamic finance in the media writing and speaking on the industry issues.
It has been reported that Bermuda is well positioned to deliver private equity
funds what is your view on this and what makes Bermuda an attractive option for investors? A Shariah-compliant private equity/venture capital, real estate or global infrastructure fund is typically structured as a limited partnership. Bermuda’s limited partnership rules accommodate both the Mudharaba and Musharaka structures. The Bermuda partnership acts do not attempt to regulate the affairs of a partnership to any great ex- tent, and rather, leaves parties free to tailor their partnership agreement to their specific requirements.
The specific requirements of either structure can easily be incorporated into the partner- ship agreement. Bermuda structures are also suitable parallel vehicles to accommo- date both Muslim and non-Muslim inves- tors.
The global Islamic finance assets have al- ready reached to $1.3 trillion what can you say about the future of Shariah compliant assets? The Islamic finance asset sector can only fur- ther grow in profitability. However it needs to continuously focus on the fundamental val- ues underpinning Islamic finance, which are integrity, trust, transparency and fairness.
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