The case highlights the dangers ‘Sharia risk’ poses for the 2-trillion-dollar Islamic finance industry. The issue is compounded by the variety of models of Sharia governance that exist across jurisdictions.
The resolution of the Dana Gas case will take time, but its overall impact on the Islamic finance industry will be limited.
The Gulf Cooperation Council (GCC) is moving towards more centralised Sharia governance, but faces obstacles.
Even in centralised systems, heterogeneity of regulatory models is likely to persist.
Difficult questions of jurisdiction and enforcement would not be addressed by a shift to more centralised national Sharia governance.
The Sharia approach is already powerful in Gulf banking, but the Dana Gas case could set back its progress in credit markets.
