This document discusses parameters for regulating new Islamic financial products. It proposes guidelines for product approval involving submission to a Shariah committee, legal board, and central bank. A process is outlined involving identifying the product objectives, structure, risks and mitigation measures. Issues that may arise with regulation include differing rulings from Shariah scholars, ensuring legal documents properly capture rulings, and aligning products with Maqasid al-Shariah. Harmonization is suggested to avoid inconsistencies between institution rulings.

1. International Conference on Islamic Microfinance in Mauritius CENTER OF ISLAMIC BANKING & ECNOMICS Organized By :

2. International Conferences on Islamic Banking and Finance in Mauritius, 5th-6th April, 2011, Gold Crest Hotel, Mauritius Regulation on the Parameterization of Islamic Financial Products Abdul Ghafar Ismail Shofian Ahmad Research Center for Islamic Economics and Finance Universiti Kebangsaan Malaysia

5. Reasons to Regulate the Islamic Financial Institutions Reasons Safety and Stability Promote Competition and Efficiency Basis for Monetary Policy

6. Nature of Current Regulations Guidelines on Regulations Shari’ah Advisory Council Corporate Govern ance Presentation of Financial Statem ent Rate of Return Capital Adequacy Standard

8. Item 12 Item 14 Item 13 Item 15 Item 16 Diagram : Flow chart of Product Approval Product Section Submit No Submit Shariah Committee Legal Board BNM System Development: (Including risk management and mitigation) Submit Yes

13. Issues Arise No Absolute Authority Legal Maxim & Legal Document Maqasaid Syariah What are the issues?

18. CENTER OF ISLAMIC BANKING & ECNOMICS Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056 E-mail : [email_address] Web: www.alhudacibe.com