"The main objective of this documentary standard is to reduce the over-reliance of financial institutions on raw material murabaha and to encourage greater use of wakala without restriction," IIFM said in a statement. Last year, iIFM introduced a standard contract model for Interest Rate Swaps in Islam and is currently working on other currency and currency swap contracts. "In six months, all banks will use Wakala," said a Malaysian Islamic banker. "He has fewer problems than the Murabaha merchandise. Often, a group of investors groups their capital into an ad hoc vehicle (SPV) managed by an agent who enters into the agency agreement (Wakala) with the mandated agent. It is hoped that the Standard will supplant the Commodity Murabaha, a joint cost-benefit agreement in Islamic finance, with a risk-sharing structure called Wakala, which industry purists prefer. Although this is not the first Wakala standard on the market - a model was launched in 2009 by the Association of Islamic Banks of Malaysia - the IIFM could benefit from wider geographical support. 2. The SPV, in its main capacity, enters into an agency agreement (Wakala) with the representative for the investment of Shari`ah-compliant assets, which were chosen by the representative on behalf of the SPV; Dubai: Last week, a standard contract model for Islamic interbank transactions was released as the industry works to diversify the offer of liquidity management solutions. Wakala is an agency agreement in which an investor authorizes an agent to manage a pool of assets according to religious principles such as interest ban and monetary speculation.

The Wakala standard could also accelerate the convergence of Islamic financial practices in its various regions, according to Khalid Hamad Abdul-Rahman Hamad, executive director of banking supervision at the Central Bank of Bahrain and president of the IIFM. In addition, no physical product is required under the Wakala contract. This raises the question of whether wakala is an effective governance structure in terms of risk and control. The mechanism actually fulfilled all the conditions agreed upon by the scholars and ensured fair and Shari`ah-compliant transactions. However, some problems need to be highlighted in this treaty. The Wakala contract has been criticized for conflicts of interest and can cause a charge (tuhmah) against an agent. The question is asked when agents act against the interests of their adjudicating entities. This problem is commonly referred to as an agency problem, which arises when the owner`s objectives do not correspond to the objectives of his agents.

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