The Dubai government is creating quality management standards for businesses that will match Islamic principles with value-based management methods, said Harun Kapetanovic, economic adviser at Dubai’s Department of Economic Development (DED), during the annual World Islamic Finance Conference on 13 May.

Value-based management systems aim to maximise shareholder value by creating long-term sustainability within an organisation, setting standards for areas such as corporate governance, performance management, and organisation of the corporation.

Sharia-compliant firms will be asked to adopt the DED quality management standards on a voluntary basis, receiving incentives if they do. He was unable to give further details as he was not authorised to speak to the media.

“We have a number of Islamic banks globally and they’re only Islamic as far as their balance sheets are concerned,” he said during a panel session. “However, if you look at [their operations] closely, there are a number of things that don’t make a lot of sense. Conventional banks on the other hand are better at managing resources and people.

“One of the major challenges that [the Islamic finance sector] has is that it’s confined to finance. We’re running in circles, calling for increased regulation, without any solution.”

To address that the Dubai government is looking at the “softer side” of Islamic finance and developing the broader Islamic economy.

In January, Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s ruler, announced a host of initiatives that aim to make Dubai a globally significant Islamic economy, through the development of Islamic finance instruments, Takaful (Islamic insurance), Islamic contracts’ arbitration, the halal food industry and trade standards, and Islamic quality management standards.

“The problem is Islamic banks are converging with conventional banks,” said Kapetanovic, noting Islamic banks are reliant on the global banking system, which is built around interest rates. Islam forbids lending out money at interest.

“What Islamic finance needs to do is move away from the banking concept to an equity fund management type of concept, so that you’d be moving away from interest [rates] as well. That way you would not be talking about interest rates but about investment returns.”