Why Execution Now Shapes Islamic Finance

A proposed rule change could reshape the global sukuk market as regulators, scholars and issuers debate whether tighter asset ownership requirements would strengthen Shariah authenticity or disrupt liquidity and issuance.

The discussion focuses on AAOIFI Standard 62, which aims to clarify what constitutes genuine asset backing in sukuk structures. Recent coverage by the Financial Times has highlighted growing divisions within the industry, with some market participants warning that stricter interpretation could reduce flexibility, while others argue it is necessary to reinforce credibility in Islamic capital markets.

The debate comes at a moment when Islamic finance is no longer a niche segment. Sukuk issuance has expanded steadily across the Middle East and Southeast Asia and is increasingly distributed through global banking channels. As volumes grow, scrutiny has intensified. Investors, regulators and Shariah scholars are paying closer attention to whether sukuk structures reflect real economic substance or rely too heavily on legal form.

Industry observers increasingly agree that the real challenge is not whether standards should evolve, but how they can do so without weakening market depth or cross border operability. Sukuk today are issued by sovereigns and corporates, settled through international banking infrastructure and managed across jurisdictions with very different regulatory and cultural frameworks. This is where theory meets execution.

That operational dimension is central to the analysis of Prospero Pica, founder of ABP Partners, a Swiss based firm specialising in complex banking execution. With more than twenty years of experience delivering cross border banking and treasury programmes across Europe, the United Kingdom, Southeast Asia and the Middle East, Prospero Pica approaches Islamic finance primarily as an execution discipline rather than a product category.

According to Prospero Pica, debates such as the one around AAOIFI Standard 62 expose a structural reality. Shariah compliance does not live only in documentation or legal opinions. It is tested daily in how assets are governed, how cash flows move through treasury systems, how data is controlled and how institutions respond under operational stress. When standards tighten, those execution layers become visible.

This shift has direct implications for banking infrastructure. Stronger requirements around asset ownership and risk allocation demand traceability across core banking systems, treasury platforms and reporting frameworks. For institutions operating internationally, this is particularly complex. Compliance must be demonstrable across borders and auditable within different supervisory regimes.

In this context, Switzerland has quietly strengthened its role as a neutral execution hub for Islamic finance. Not as a retail market for sukuk, but as a trusted environment where governance, programme management and cross border banking execution can be anchored. Swiss based structures are often used to coordinate international flows, ensure transparency and support audit readiness, all elements that become critical as standards evolve.

ABP Partners operates within this space, focusing on execution rather than origination. Its work reflects a principle Prospero Pica often emphasises. “The technology must follow the bank, not replace it. The heart of change is banking DNA.” In the context of the Standard 62 debate, this philosophy translates into a practical message. Stronger rules will only succeed if institutions have the operational maturity to support them.

As Islamic finance continues to scale globally, the discussion around sukuk standards is likely to intensify. What it ultimately highlights is that the future of the market will be shaped not only by scholarly interpretation, but by the ability of banks and institutions to execute compliant finance across borders. In that transition, expertise grounded in real banking execution, rather than abstract design, is becoming increasingly central.