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Bankers dismiss Islamic pricing benchmark plan - Islamic Finance ...
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Bankers dismiss Islamic pricing benchmark plan
03 June 2010
Malaysian Shariah bankers yesterday dismissed as impractical a proposed Islamic pricing
benchmark, highlighting the financing industry's struggle to replace conventional interest
rates as a pricing tool.
Despite the Shariah's ban on usury, Islamic financial products are routinely priced using
conventional rates such as London Interbank Offered Rates (Libor) in the absence of a
Shariah-compliant benchmark.
The International Shariah Research Academy for Islamic Finance (Isra), a research group
backed by Malaysia's central bank, has proposed that Malaysian Islamic banks use industryspecific benchmark pricing rates that are derived from underlying assets. But the plan drew
a lukewarm response yesterday, with discussions largely focused on the difficulties of running two policy rates within one banking system.
"Can the country actually afford a system where suddenly the price of Islamic financing is lower than conventional, then everyone flocks to
Islamic [banks]?" Nasiruddin Kamaruddin, COO of Standard Chartered Saadiq, told the meeting.
Azidy Daud, treasurer of Asian Finance Bank, said the proposed benchmark was better suited for private equity ventures. "This is a good
benchmark but it is not applicable to the banking industry," he said.
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21/06/2010 12:54 ‫م‬