National and Global Islamic Financial Architecture:
Problems and Possible Solutions for the OIC Member Countries
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criminal charges against the bankrupt entity, its directors, managers, etc. Bankruptcy
processes of both conventional and Islamic banks are controlled by the Central Bank of Egypt.
4.2.2. Financial System Regulation and Supervision Framework
Law No. 88, 2003 of the Central Banking Sector and Money Law stipulate that the Central Bank
of Egypt (CBE) is to be the regulator for the banking sector. The Executive Regulations of the
Law promulgated in 2004 further describe the specific roles of the CBE as regulator. Among
others, the Executive Regulations provide the rules for registration and operational issues
related to banks. There are no specific clauses for the Islamic banking sector in either Law no.
88 or the Executive Regulations. Even though a specific law was enacted that established the
Faisal Islamic bank, there were no accompanying regulatory framework for the Islamic
banking sector (Simmonds, 2014). Islamic banks are treated similar to conventional banks and
are required to fulfill all the same regulatory provisions such as maintaining minimum liquidity
ratios and abiding by deposit protection clauses. The Central Bank of Egypt has been exploring
Islamic finance in recent years but so far no new regulations have been issued.
Law 10 of 2009 established the Egyptian Financial Supervisory Authority (EFSA) replacing
three major regulators (Capital Market Authority, Egyptian Insurance Supervisory Authority,
and Mortgage Authority). EFSA is now responsible for regulating non-banking financial
markets and instruments. Other than regulating capital markets and the insurance industry,
EFSA also regulates mortgage finance, financial leasing, microfinance, pension funds,
government insurance funds and factoring. The regulatory body does not have any specific
regulations for the Islamic non-banking sector. However, EFSA is working on updating the
current legal and regulatory regimes for the insurance industry by drafting a new insurance
law and amending its regulations with a new law that is expected to have a dedicated section
on takaful (Akoob 2015; EFSA 2016).
4.2.3. Shariah Governance Framework
There is no legal and regulatory framework for Shariah governance for the banking sector.
Instead, Shariah boards at the organizational level ensure the Shariah compliance of their
products and activities (Tan 2015). Although the first Islamic financial institution, MitGhamr
Bank, was established in 1963, it did not refer to the Shariah except that its banking operations
were aligned with the Islamic principle of not dealing with interest rates. The Faisal Islamic
Bank of Egypt that began its operations in 1979 explicitly mentioned that its operations were
in accordance with Shariah principles (Mouawad 2009). To ensure Shariah compliance, Islamic
banks have a Shariah supervisory board that approves its products. The case with conventional
banks with Islamic windows, however, is different. Some of these banks do not have either a
Shariah board to verify their operations or a zakat account.
The Egyptian Financial Supervisory Authority (EFSA) provides guidelines for forming a
Shariah board for institutions dealing with Shariah compliant capital market products (EFSA
2014). Among others, the guidelines require that Shariah scholars meet the minimum
requirements in terms of experience, education and publications related to Islamic finance and
economics.