July 29, 2010 (LBO) – Informal entities that have been operating as Islamic financiers in Sri Lanka will have to get their houses in order and become fully compliant with supervisory regulations ahead of a new law on deposit taking, an industry official said. “Some IFIs (Islamic financial institutions), because the owner is a well known figure, have been able to raise a lot of money,” Faizal Salieh, managing director of Amana Investments, a Sri Lanka-based firm, told a forum in Colombo organized by Educonsult, a consultancy.
“The business finance act is coming around the corner and it will make it difficult for people who do not get their house in order.”
He said there were ‘Mom and Pop shops’ in ‘nooks and corners’ with ‘large sums’ in their balance sheets.
Islamic finance operates by being compliant to Shariah religious law, where formal interest is not charged but returns come in the form of a profit share.
Salieh said a forum had been established with the participation of KPMG, an accounting firm, to help informal firms become compliant with central bank regulations.
Unregulated firm are taking deposits due to a loophole in Sri Lanka’s laws related to finance businesses which is expected to be closed with the new act, whe