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The memorandum of understanding calls for mutual cooperation on capacity building and human capital development in Islamic finance, as well as the promotion and development of their respective Islamic capital market segments.
Under the MOU, both parties will examine the possibility of establishing a framework for the mutual recognition of their regulatory regimes on Islamic funds to facilitate cross-border marketing and distribution of such funds.
Islamic funds aim to comply with the investment principles under the Islamic religious law of sharia. The sharia principles generally preclude investments in businesses such as conventional financial services, alcohol, pork-related products, gambling, leisure and entertainment. Sharia principles also preclude interest bearing investments and investments in companies with unacceptable levels of debt.
The MOU for cooperation on Islamic finance and capacity building was signed by Hong Kong SFC CEO Martin Wheatley and the DFSA CEO David Knott.
The DFSA is the independent regulator of financial services providers, financial services and products related to banking, securities, Islamic finance, asset management and insurance in the Dubai International Financial Centre. The SFC regulates Hong Kong's securities and futures markets and facilitates their development.
The SFC has been working with fund management companies interested in developing Islamic financial products in Hong Kong, in support of the governmentÆs initiative to develop the territory as an Islamic finance centre in Asia.
In July last year, Hong Kong financial secretary John Tsang said the government wants to develop an Islamic bond market amid fast-growing investor interest in products that comply with sharia or Islamic law.
In his annual policy address in October 2007, Hong Kong chief executive Donald Tsang said he hopes to have a planned Islamic bond market in place as soon as possible.
In November 2007, the SFC authorised Hong KongÆs first Islamic fund for sale to retail investors, the Hang Seng Islamic China Index Fund.
Elsewhere in Asia, Malaysia also has a mutual recognition agreement with the DFSA. It is the first such agreement between two Islamic markets for the cross-border distribution and marketing of Islamic funds.
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