S&P: Profit and Loss Sharing May Begin Gaining Ground In Islamic Finance

islamic finance

ISLAMIC banks might be inching closer to applying the principle of profit and loss sharing, says Standard & Poor’s Ratings Services in a recent report.

“We’re seeing global financial systems moving toward liabilities bailing-in through the introduction of resolution regimes and the requirement that some banks set aside a certain amount of loss-absorbing liabilities,” said Standard & Poor’s Global Head of Islamic Finance Mohamed Damak.

“We believe Islamic finance might be headed in the same direction, especially since economic conditions in some core markets for Islamic finance are becoming more challenging.”

“Although profit and loss sharing has not been widely applied by Islamic banks to date for numerous reasons, we believe this will change in the next few years if and when local regulators for Islamic finance core markets--which include the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates), Malaysia, and Iran--start implementing resolution regimes.”

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