New Markets and Frontiers for Islamic Finance: Innovation and the Regulatory Perimeter

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1 New Markets and Frontiers for Islamic Finance: Innovation and the Regulatory Perimeter The need for Emerging Markets to have Effective Regulations in Place I keep six serving honest men, they taught me all I knew. Their names are what and why and when and how and where and who. These words of Rudyard Kipling are taken from his story: The Elephants Child but they have relevance for our debate today. For today, we will discuss new markets and frontiers for Islamic Finance in the context of both innovation and, more importantly, at least from my own perspective, in considering the regulatory perimeter. Within these themes I will focus on the need for emerging markets to have effective regulations in place. And so, like Kipling I will consider the what, the why, the when as well as the how and the where and who in the context of national and international regulatory structures. I will use the example of the Dubai International Financial Centre (DIFC) as a good case of applying worldclass regulation in an emerging market in an aggressive time-frame. Inter-connectivity and extra-territorial regulation Today the world is so inter-connected that it is impossible to escape from regulation nor should we as increasingly, regulation is seen as a force of good to show openness and transparency in the world of finance, to demonstrate selfconfidence of a nations financial affairs in opening these to public scrutiny and perhaps most importantly to protect and educate consumers and provide market confidence. Increasingly, regulated firms see regulation as way of providing added comfort to their clients making clear that they seek to follow the highest standards that are benchmarked with the best. Indeed, increasingly regulation has become extra-territorial often linked to the pursuit of tax evaders and other financial criminals. Led by the USA with the FCPA and now FATCA, many other countries (for example, the UK with its Bribery Act) are now attracted to this type of delayed justice that transcends borders. In short, both islands and countries that may once have thought they could have lived in splendid isolation can do so no more! Global financial crisis impacted everyone Since 2007, the world has witnessed extraordinary financial instability characterised by the failure of systemically important markets and institutions events that would have been nearly incomprehensible even a year prior to their occurrence. Thankfully the global financial crisis is drawing to a close but it has 1

2 been a sobering experience not least because it happened in the market and places where it was least expected - the Zone 1 countries of the West and not hedge funds but rather banks. Of course there have been many crises in the past often in Emerging Markets for example the Latin American debt crisis of the late 1970 s and 1980 s with hyper-inflation and civil unrest, the Russian rouble crisis of 1998 triggered in part by the collapse of the LTCM Hedge Fund and of course the Asian crisis in the late 1990 s. But this crisis was significant as it came left field different from the Wall Street Crash that occurred in a world with no financial services regulation. This global crisis occurred in a world filled with regulations and with regulators themselves subject to the regulation of the IMF and World Bank via its Financial Sector Assessment Program yet it still happened. And it happened not due to hedge funds rather it occurred due to banks. Regulatory arbitrage The crisis exposed weaknesses in regulation and supervision, especially in advanced economies, weaknesses in risk management in firms, and weaknesses in market discipline. The crisis has also exposed the scope for regulatory arbitrage and gaps in coverage, and for behaviour that at an individual firm level would be manageable to have serious systemic effects when practised marketwide. The latter issue prompted widespread recognition of the need for a macroprudential approach to regulation. In contrast to micro-prudential regulation, which involves firm-by-firm supervision, macro-prudential regulation aims to focus on system-wide risks, by assessing common exposures and correlations among financial institutions and acting to control their systemic effects. International Regulatory Structures Arguably the most significant development in the global regulatory landscape was contained in the G20 s April Declaration on Strengthening the Financial System. The Financial Stability Board (FSB) was established, with an expanded membership and mandate relative to its predecessor, the Financial Stability Forum (FSF). Reflecting the belief that a global crisis requires a global solution, the membership was expanded to include Spain, the European Commission and all G20 members compared to only G7 members previously. And so this merely serves to reinforce my earlier premise that there is no escape from regulations but these must also be effective and well regarded to attract the right sort of business and avoid international condemnation. Financial Stability Board (FSB) and Standard Setters The FSB membership is split between the Standard-setting members, the supranational members and the national members as follows: 2

3 Standard Setting Members 1. IOSCO (securities) 2. BASEL (Banking) 3. IAIS (Insurance) 4. IASB (Accounting) Supra National Members 1. IMF 2. ECB 3. OECD 4. The World Bank 5. EC National Members 1. G20 2. Spain 3. Hong Kong 4. Netherlands 5. Singapore 6. Switzerland Reflecting a number of regulatory shortcomings exposed by the crisis, the agenda of the FSB is wide-ranging when compared to the FSF s relatively modest mandate of To promote international financial stability through enhanced information exchange and international cooperation in financial market supervision and surveillance. The FSB s mandate is as follows: Assess vulnerabilities affecting the financial system and identify and oversee action needed to address them; Promote co-ordination and information exchange amount authorities responsible for financial stability; Monitor and advise on market developments and their implications for regulatory policy; Advise on and monitor best practice in meeting regulatory standards; Undertake joint strategic reviews of the policy development work of the international standard setting bodies to ensure their work is timely, coordinated, focussed on priorities, and addressing gaps; Set guidelines for and support the establishment of supervisory colleges; Manage contingency planning for cross-border crisis management, particularly with respect to systemically important firms; and Collaborate with the IMF to conduct Early Warning Exercises. 3

4 Even regulators are regulated Broadly, the FSB influences national regulatory settings via a range of standards to which members are committed. These include international accounting standards, and the Core Principles of the Basel Committee, IOSCO and the IAIS. Heavy emphasis is placed on exchange of information and non-co-operative jurisdictions may be named and shamed. This puts huge pressure on regulators as evidenced by the efforts countries made to be removed from the Financial Action Tast Force (FTAF) blacklist, or the OECD list of non-co-operative jurisdictions on tax matters. Adding further accountability to these FSB obligations are the on-going International Monetary Fund World Bank Financial Stability Assessment Programme (FSAP) and peer reviews of observance of these standards. FSB members will face monitoring of their implementation of FSB and G20 recommendations by the recently established FSB Implementation Monitoring Network. Although the balance between FSAPs, thematic reviews, FSB peer reviews and other means of assessment is still being determined, it is clear that the G20, through the FSB, will be both assessing its own members quite rigorously and applying serious pressure to other jurisdictions to be assessed against the same standards. It is clear that this has not been achieved without some resistance. Indeed, the IMF published a remarkably revealing note of the Executive Board discussion on the FSAP programme, in which it was clear that significant differences of opinion remain on whether FSAPs should be voluntary or mandatory, whether all FSAPs should be published, and how far (voluntary) FSAPs should be linked to (mandatory) Article IV reviews. This resistance has led some to question whether voluntary compliance with standards is enough, or whether a more formalised framework might be sensible, as the director of the UK former FSA s international division suggested at the height of the financial crisis, offering the World Trade Organisation as a model. Such a proposal is unlikely to be accepted, at least in the near future, but that it can even be made indicates how far we have come in the last few years. What gets measured gets done / international credibility Given the commitment of G20 countries to implement a range of international standards and accountability that follows, the work of the standard-setters has become more influential. This is particularly true for the Basel Committee on Banking Supervision (BCBS), the International Organisation of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS) and the International Accounting Standards Board (IASB). But though their work will become more influential, it is already clear that their agendas will be increasingly driven by the FSB, and some of them are already aware that they will need to raise their game to meet the FSB s expectations of them. The principles against which regulators are assessed provide international 4

5 credibility and are the first thing that other regulators look for when considering Memoranda of Association between regulators. It was not always thus in the early days of the conventional standard setters, high principles to be followed existed, but were not tested or enforced. This changed a few years later the same must now happen with the Islamic finance standard setters, who need to be given the teeth to get the job done. The IMF has also risen in prominence, after a period when some had questioned its relevance. Its mandate and membership have been reformed. In addition to its FSAP role, it will have a global early warning role, and will assist members to conduct mutual assessments of national policies to ensure that they are consistent with national and global economic stability. The initial phase of these assessments took place in International surveillance mechanism for new financial products? There has also been discussion, though no definite conclusions have been reached, about the possibility of some international surveillance mechanism for new financial products. Failure to understand the products we were dealing with was one of the major causes of the crisis. This of course has significance for the theme today of innovation. Innovation is a good thing and a key element of human progression but sometimes one should be careful what one wishes for. Laboratory geniuses are impressive but they must understand the responsibility of products falling into the wrong hands when the product becomes unsuitable for some audiences and perhaps even fraudulent witness the affinity fraud of the Madoff Ponzi scheme. Of course, this is very simplistic it was not just the nature of the products that caused problems in the global financial crisis, but more the methods by which these products were sold, the lack of responsible corporate governance surrounding the corporate structures, in some cases senior management who were either asleep at the wheel or had incentives to push as many products as possible for the ultimate accolade of achievement via gigantic bonuses. All of this reinforces the importance of having effective and enforceable regulations in place. Of course, this includes Islamic finance which could quite easily fall victim to affinity fraud. One issue for regulators is that new products may become established in relatively small niches of the market, generally between professional counterparties. In this context, they pose minimal risks. As they spread, the risks grow, but it then becomes politically difficult for any regulator to take unilateral action against something that others appear to accept. So there is much to be said for concerted international action to analyse the risks at an early stage. 5

6 National Regulatory Structures I now turn to national regulatory structures. First, the crisis did not offer clear evidence of the superiority of one regulatory structure over others. Examples of success and failure can be found within several structures. The one structure that has clearly failed is the highly fragmented one of the US, but that was probably indefensible anyway. It remains to be seen whether a more coherent structure will emerge in that country, or whether we shall simply see a yet more complicated quilt, with even less coherent design. Elsewhere, however, the experience of regulatory gaps and arbitrage does appear to have reinforced a continuing move towards integrated regulation, on either a full integration or a twin-peaks basis. Even though there is no ideal regulatory framework in an abstract sense, divorced from the size and structure of financial services in the jurisdiction, there is certainly a determination to ensure that entities offering similar products and services irrespective in which jurisdiction they operate, receive the same supervision and oversight. That is, the substance over (legal) form view is prevailing. Although some of the possible reforms under discussion in the UK and Germany may appear to go against this trend, I suspect their shape will change somewhat as the discussion moves from politics to practicality. Practicality is singularly important. For natural reasons, there has been strong political influence in the regulatory debate, but political influence is not always to the benefit of regulatory quality. At national level also, there is pressure at least to define responsibility for macro-prudential regulation, even though, as I have said, its methods and tools are largely undetermined. Because of its link to macroeconomic policy, the natural location in many jurisdictions will be the central bank. This will tend to strengthen the claim of the central bank to be the integrated regulator, where one is being created, though there is concern in large jurisdictions about whether a single institution can manage fully integrated regulation, both macro and micro, as well as monetary policy. At the pan-european level, a sectoral approach to micro-prudential regulation will continue, and the new European Systemic Risk Board (ESRB) has been created to monitor and assess potential threats to financial stability and, where necessary, issue risk warnings and recommendations for action and monitor their implementation. This body has no legal power and thus relies on moral suasion. Whilst this may be effective under normal conditions, we should not overestimate what it can achieve in a crisis, when real money is at stake and the natural instincts of Governments are to protect national interests and national treasuries. The saga of ABN AMRO and Fortis would offer a useful case study in this respect. 6

7 Global Regulatory Standards It may be worth highlighting challenges for standard-setters and regulators alike in the broader context. There is a need to avoid fighting the last war. We have faced a crisis dominated by prudential failings, and we have a great deal of work to do in this area. But we must not wholly neglect other areas of regulation. Some have argued that certain regulators were so absorbed by conduct of business issues, following a set of miss-selling scandals, that they took their eyes off prudential regulation. Whether or not that is a fair criticism, it would be ironic if we were now to make the same mistake in reverse. The next crisis may be an area none of us currently anticipates, for example some have suggested that it may be in clearing house regulation; it could easily be in ETFs or dark pools. We simply do not know. Related to this theme, we also need to be cognisant of the difficulty of anticipating the required reforms for tomorrow s regulatory challenges. The only conclusion I can draw is that we need a financial, and a regulatory, system that is resilient against a wide range of possible failures. Today s fighter aircraft fly on the very edge of instability. They do so because their computer systems can sense any move into instability and correct instantly. Unfortunately regulators are not so sensitive. They are more like old-fashioned human pilots. We cannot have a financial system that is like those aircraft; we need one that is inherently stable and capable of being managed and regulated by fallible humans. This includes emerging markets Creating a practical and effective model of financial services regulation in an emerging market - the DIFC and DFSA experience Let me now discuss a practical example of success in introducing top quality regulation within an emerging market. The example, I shall talk about is the Dubai International Financial Centre (DIFC) which is a financial free zone synonymous with high regulatory standards in the Emirate of Dubai, part of the United Arab Emirates (UAE). The DIFC has its own legal and regulatory system, based on common law, its own civil and commercial Courts, and its own financial services regulator, the Dubai Financial Services Authority (DFSA), which I am privileged to have worked for nearly 8 years. To revert back to Kipling, what I propose to do is explain what it is, why they did it and how the DFSA created a regulatory regime for Islamic finance, and the challenges it faces in keeping that regime up to date with such a rapidly innovating area of financial services. 7

8 The federal law under which the DIFC is established provides that within the Centre the normal civil and commercial laws of the UAE do not apply. That means that the DIFC has had to create its own legal regime (including, for example, Companies Law and Employment Law), and of course its own laws and rules for financial services. The significance of this is that we had to think through from scratch what kind of regulatory regime we should create for Islamic finance. But it helped being able to rely on the expertise of so many practitioners from around the world. As for common law, this made perfect sense given that so many of the key global financial centres such as London, New York, Hong Kong, Singapore and Sydney are all in jurisdictions which have common law and of course we wanted to attract the key players from these jurisdictions by providing a regime that looked familiar and was tried and tested. After all, there is not point re-inventing the wheel perhaps just improving it in places, which is what we have always sought to do with Islamic finance. There were several important factors that drove the DFSA s decisions: Risk-based regulator That means that we try to align our laws and rules, as well as our supervisory practice, to the actual risks posed by the business in question. A corollary of this is that similar risks should be treated similarly. So where the risks in Islamic and conventional finance really are similar, then similar rules should apply. But of course a regulator needs a substantial knowledge of Islamic finance to know when the risks are similar, and where they are subtly different. World-class regulation The DFSA offers world-class regulation based on international best practice and experience. So it will always look at the relevant international standards, which for Islamic finance are those of the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). We are active members of both bodies, helping to shape the standards as well as implement them indeed, the DFSA is playing a key role in drafting the new Core Principles for Islamic Financial Services Regulation which the IFSB is pioneering with the IMF, World Bank and BIS. But business models in Islamic finance continue to develop rapidly, standards are being created year by year, and there are still important gaps. So we cannot simply implement a full suite of standards that many regulators have implemented before. Character The third factor is the character of the Centre. It is an international centre and, primarily, a wholesale one. This means that most customers of DIFC firms will be either other businesses or high net worth individuals. Some issues concerned with the retail market will therefore be less important for them; for example, it is difficult to see the DIFC becoming a centre for microfinance. On the other hand, as an international centre, the DIFC has businesses from many 8

9 countries operating here. Where it can, the DIFC should offer them an international framework, rather than one that is tailored to the needs of a specific national market. Vital to have flexibility As a consequence, the DFSA made some fundamental decisions early on to allow a great deal of flexibility. For example, it allows the use of Islamic windows as well as pure Islamic firms, and it does not prescribe the contract forms that must be used for particular types of transaction. Shari a governance The most important decision was about Sharia governance. Although there are regulators in some countries who believe they should play no part in anything with a religious dimension, when a firm or product claims to be Islamic, that is a very significant representation it makes to its customers, and the DFSA believes that regulators cannot simply ignore that claim. Other regulators make themselves the arbiters of Shari a matters, typically by establishing their own Shari a Council as the effective authority within their area of responsibility. That has the advantage of securing uniform interpretation locally, but in a world where there is not overall consensus and if there were, a Shari a Council would probably not be necessary it does risk solidifying divisions along national lines. This is something to think about for Emerging markets exploring modern regulation especially, where they are seeking to fuse the Islamic with the conventional without prejudicing either. Cost / unnecessary regulatory burden Cost is another consideration especially where one is considering Islamic windows, for there will be a cost of having a Corporate Governance Committee and also a Shari a Governance element excessive cost, however justifiable, may well act as a disincentive to customers. Indeed, if the costs are passed onto customers then this may well attract the attention of regulators is this really treating customer s fairly? Cost can also manifest itself via duplication of regulation. It is always attractive to have passporting between nations be these via bilateral agreements or multi-lateral ones or international treaties but negotiations can take a long time. Just look how long it took the Europeans to introduce the MIFID 13 years after the Investment Services Directive (ISD) was introduced in 1993 but MIFID is now a high regional standard and so any emerging market must benchmark with such standards as adopting uniform standards can greatly help the growth of business and assist with the local economy. There are of course separate Islamic accounting standards published by AAOIFI. The approach taken at the DFSA early on was to prescribe that only Islamic 9

10 accounting standards should be used for Islamic firms. However, it soon became aware of industry difficulties arguing this could add cost particularly where an Islamic window was already using IFRS. And so after consulting with the industry, the DFSA proposed changing this so that IFRS would be the standard of all firms in the DIFC but if a firm wanted to use AAOIFI, or GAAP for that matter, then they need simply apply for a waiver from this requirement. This is an example of pragmatism and seeing to avoid unnecessary regulatory burden with concomitant cost. Shari a Systems regulator In a centre where both firms and customers are international, the DFSA decided to be a Shari a Systems regulator. This means that any firm that claims to be Islamic must have a Shari a Supervisory Board (SSB) made up of competent scholars. It must have systems and controls to implement the SSB s rulings, and must have annual Shari a reviews and audits, following AAOIFI standards. It must also disclose details of its SSB to its customers, allowing them to make their own decisions, about the reliance they are prepared to place in its rulings. As an active regulator, with staff well experienced in evaluating systems and controls, the DFSA supervises to ensure that these arrangements are working in practice as well as on paper. The DFSA believes, incidentally, that this is a model well suited to many Muslimminority jurisdictions, where regulators would balk at arbitrating on religious matters, because it places the onus of compliance on the firm, and transforms the problem into one of systems and controls. Prudential regulation for Islamic firms The next question to be considered was the prudential regime for Islamic firms, particularly how much capital they need to hold. For Islamic banks, the DFSA has drawn on the standards of the IFSB. In particular, it has recognised the concept of Displaced Commercial Risk (DCR) for Profit Sharing Investment Accounts (PSIAs). In principle, PSIAs are investment accounts, in which the investors bear risk to both principal and return. In practice, they are often offered as an alternative to a conventional interest bearing deposit account, and it is not always clear that banks customers understand the risks to which in principle they are exposed. Even if they do, many PSIAs share the basic problem of banking: maturity transformation. Fundamentally, the customers can withdraw their money faster than the bank can recover its loans or realise its investments. This created pressure on the bank to maintain returns at market-competitive rates, even where it is not obliged to do so so called Displaced Commercial Risk (DCR). The IFSB standards recognise this through variable parameter, which allows regulators to set a capital requirement for PSIAs at any level up to that which would be applicable to deposits, and on a similar basis of calculation. The DFSA 10

11 set a relatively low parameter, at 35%, reflecting the relatively sophisticated market I have already mentioned. The DFSA has also used IFSB Standards to give guidance on the treatment of Islamic instruments, even where held by conventional firms. So again, I would urge any emerging market when considering adopting regulatory standards to adapt these for your local market and audience. Takaful / Waiver and Modification of Rules For Takaful, although the DFSA included provisions on the treatment of Islamic instruments and Zakat, when it drafted its regime there were no international standards available. Indeed, at that time the business models of Takaful companies had not yet settled into a clear pattern. However, we have extensive powers to waive or modify our Rules in particular cases, and have used them to recognise properly the typical structure of a modern Takaful company, which involves one or more pools of money that are considered to belong to policy holders, within a shareholder company. In this area, the IFSB has issued a standard, in the preparation of which we have been heavily involved. This is aligned with the standards for conventional insurance that are emerging from the IAIS, and we may well implement both at the same time. Disclosures The DFSA has also implemented a set of disclosures specific to Islamic finance, in addition to those out the SSB. For example, a Takaful company has to disclose the basis on which any surplus in the Takaful fund will be shared; a bank managing a PSIA must disclose how profit is allocated between the bank and the client. Again, these disclosures largely follow standards from the IFSB and AAOIFI. There are also specific rules for Islamic funds and for Sukuk. In both cases these are reasonably straightforward, and related mainly to Shari a governance. Challenges for regulators For the future, the DFSA sees a number of challenges for regulators. One will be to keep up with the development of standards, both conventional and Islamic. The financial crisis has spurred the development of new standards in conventional finance, and Islamic finance will need to respond. To give just one example among many, the Basel Committee is consulting on new standards on liquidity and stress testing. Regulators of Islamic finance will need to consider their response, and in fact the IFSB is working on standards of its own. But standards are no use unless they are implemented, and we are also seeing new international pressure for standards implementation. So any regulator will have a sustained challenge to implement new standards. In Islamic finance the challenge will be greater because of the relative novelty and complexity of this area. 11

12 Secondly, regulators (including those in emerging markets) will need to keep up with the continuing rapid development of the business itself. New models and structures are constantly being proposed and tested in the market, and it is unclear which of them will survive. For example, the range of possible Sukuk structures is enormous and their economic characteristics, and hence the regulatory risks, are not necessarily specific by the principle contract involved. For example, it is possible to have a Mudarrabah Sukuk which, economically, looks very like a conventional debt instrument, or one which looks like a collective investment fund, or one which looks like an equity. Although in practice most Sukuk have been structured to resemble debt instruments, it is possible that future Sukuk will have more elements of genuine asset, rather than counterparty, risk and so need different market disclosures. In another area, there is a constant search for short-term liquidity management instruments not based on Commodity Murabahah, and should a new structure become an industry standard, regulators will need to consider what risks it poses. Thirdly, the whole industry faces the challenge of how to deliver Shari a governance as it grows. There are at least two sets of issues here. One is the relatively straightforward one that in an industry with more firms, and larger firms, a governance regime in which an SSB has to sign off on each new structure, transaction or product implies a requirement for more scholars, while the training and development of new scholars is a long process. The second, related, set of issues is that the existing governance and review standard were drafted Islamic banks mainly in mind. But the industry now has a wide variety of firms and for the intermediary sector brokers, advisers, etc. which is generally characterised by smaller firm sizes, the full burden of the standard Shari a governance structures may impose transaction costs which inhibit the ability to compete with the conventional industry, and which may not be justified by the volume and complexity of the Shari a decision that need to be made. Most likely, these problems will not be solved by one means alone. We are already seeing changes in the Shari a advisory industry, whose effect is both to shift some of the burden away from the most senior scholars and to provide a better development path for new scholars. Another means is the development of industry standards to reduce the need for individual transaction approvals. Standard documentation structures are one example, but standard Shari a screens for equity investments are another. A third may be the development of new governance standards. Regulators will have their part to play in these developments, which will be essential if the industry is to grow at anything like its recent speed. 12

13 Conclusion In conclusion, it is vital for emerging markets to have efficient and effective regulations in place that can withstand scrutiny and testing by the IMF / World Bank FSAP programme. Such regulations should be drafted cognizant of these Principles but equally benchmarked with the better regulators around the world. Self-assessments should be used in the same manner in which a mock exam is undertaken to help fine tune performance in advance of the final exam. This will also assist emerging market regulators to find willing regulators with which to sign bilateral and multi-lateral Memoranda of Understanding. The trend now is one of extra-territorial regulation and this will increase in the coming years. No country wishes to be named and shamed by appearing on a list non-co-operating countries of the FATF or any other standard setter as memories of non-compliance are long and reputations shattered quickly. Emerging countries should therefore embrace both conventional and Islamic financial regulation and do so in a manner that best fits their market. To do otherwise and wait for the solution to be imposed may well not provide the best fit or market opportunity that an emerging market is seeking. By fusing the conventional with the Islamic and providing such a flexible approach to Islamic finance in an emerging market, I believe that the DIFC and its regulator, the DFSA, has some unique advantages as a centre for Islamic finance, and the DFSA is determined to continue to do what it can, as a regulator, to help the industry to grow with confidence. Let me conclude by ending where I began and providing yet another quotation from Rudyard Kipling. This is taken from his poem: The Ballad of East and West and is often misunderstood as implying irreconcilable differences between two systems when this is not the case at all: Oh, East is East and West is West, and never the twain shall meet, till Earth and sky stand presently at God s great Judgement Seat; but there is neither East nor West, border, nor breed, nor birth, when two strong men stand face to face, tho they come from the ends of the earth! I can think of no better metaphor to describe the prospects and opportunities for the growth of Islamic finance in a well-regulated emerging market that seeks to innovate and to fuse the conventional with Islamic finance without prejudicing either. 13