IFSB Issues Consultation on Financial Inclusion and Islamic Finance
IFSB issued an Exposure Draft of Technical Note-3 on Financial Inclusion and Islamic Finance (ED TN-3). The comment period on the consultation ends on December 28, 2018. IFSB invites comments from regulatory and supervisory authorities, international organisations, institutions offering Islamic financial services (IIFS), academics, and other interested parties.
The aim of ED TN-3 is to provide guidance on good practices in regulating the financial sector to enhance financial inclusion through Islamic finance, while considering proportionality in balancing the benefits of regulation and supervision against the risks and costs. The ED TN-3 underscores the importance of financial inclusion, due to its intricate connection with economic growth, shared prosperity, and poverty reduction, while furthering an understanding of how financial inclusion policies and regulatory initiatives can support Islamic microfinance/savings/investment activities.
The ED TN-3 also covers recent developments in enhancing financial inclusion through digital finance and financial technology (fintech) platforms while further identifying the key challenges and emerging issues, as experienced by the market players and regulators, in microfinance and financial inclusion related to Islamic financial services. Finally, the ED TN-3 explores practical modalities for the integration of social finance modes in Islamic finance (for example, zakāh, sadaqah, waqf) with the commercial Islamic financial services industry (IFSI) to promote financial inclusion. The objectives of ED TN-3 include the following:
- Provide international benchmark guidelines on regulatory and supervisory policies to support financial inclusion initiatives in the IFSI
- Provide guidance to RSAs on the application of the proportionality principle so that the benefits of regulation and supervision can be balanced against the risks and costs
- Factor in recent developments in enhancing financial inclusion through Shari’ah-compliant mechanisms by digital finance and fintech platforms
- Consider a modality for the integration of modes of Islamic social finance (for example, zakāh, sadaqah, waqf) with the commercial IFSI
- Highlight challenges in, and propose solutions to, emerging regulatory issues in microfinance and financial inclusion activities in the IFSI
The scope of this ED TN-3 includes the banking sector as well as the non-bank financial institutions and the Islamic capital market in promoting financial inclusion, where needed. The ED TN-3, however, excludes takāful sector from its scope, as a recent joint IFSB–IAIS working paper has already covered aspects of regulation and supervision of microtakāful activities.
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Comment Due Date: December 28, 2018
Keywords: International, Banking, Securities, Islamic Finance, Financial Inclusion, Fintech, ED TN-3, IFSB
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