The IFSB issues Exposure Draft of Technical Note 3 on Financial Inclusion and Islamic Finance for Public Consultation
Date posted: 21 November 2018
21 November 2018, Kuala Lumpur - The Islamic Financial Services Board (IFSB) issues Exposure Draft of Technical Note-3 on Financial Inclusion and Islamic Finance (ED TN-3) for a Public Consultation period starting 21 November 2018 until 28 December 2018, and 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 also 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 current main 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 (e.g. zakāh, sadaqah, waqf) with the commercial IFSI to promote financial inclusion.
In particular, the objectives of ED TN-3 include:
- to provide international benchmark guidelines on regulatory and supervisory policies to support financial inclusion initiatives in the IFSI;
- to 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;
- to factor in recent developments in enhancing financial inclusion through Shari’ah-compliant mechanisms by digital finance and FinTech platforms;
- to consider a modality for the integration of modes of Islamic social finance (e.g. zakāh, sadaqah, waqf) with the commercial IFSI; and
- to 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.
In line with the IFSB due process on the development of Standards and Guidance/Technical Notes, the IFSB will be organising a roundtable for ED TN-3 on 5 December 2018 in Jeddah, Saudi Arabia on the sidelines of the 33rd IFSB Council Meeting. This platform aims to invite selected experts to provide critical feedback on the Exposure Draft, as well as solicit feedback on its contents, prior to its final submission to the IFSB Council in April 2019. The IFSB will also be holding a public workshop on contents and guidelines of the ED TN-3 on 11 December 2018 in Surabaya, Indonesia, to gather feedback from the attendees.
The softcopy of ED TN-3 and information on the roundtable and workshop can be seen on the IFSB website, www.ifsb.org. Accordingly, the IFSB Secretariat invites all interested parties, especially the IFSB members, to send their comments on the ED TN-3 to the Secretariat at: firstname.lastname@example.org latest by 28 December 2018.
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