What do we have to hide? Islamic finance must bare all
Many private firms prefer to keep their affairs private and they generally are able to do so without concern in the wider marketplace. In some cases, there are limits to the ability to avoid transparency, like when companies go to banks to receive financing. In situations where firms go to the capital markets for financing through debt and equity offerings, the required transparency is more stringent, as it should be when they are relying on third-party sources of capital. There are established standards for transparency in financial markets, and often in government too, where openness is seen as a “disinfectant” to discourage improper practices.
There is significant work needed to bring greater transparency into the Islamic finance industry. The issues are compounded by generally limited information made public on macroeconomic conditions in the GCC countries with large Islamic finance industries. There have been improvements in some data availability in the region. One of the criteria used by MSCI in determining which markets are ‘emerging’ rather than ‘frontier’ is whether exchange-listed companies are required to make “timely disclosure of complete stock market information item”.
These areas are improving in some markets like Qatar and the UAE which made the leap from frontier to emerging market status in MSCI’s latest review. Other countries still face challenges.
Get your complimentary copy of this week’s briefings to find out which countries lack transparency in both MENA and SEA regions, along with the main causes that lead to attacks on the Islamic finance sector and how to resolve them.
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