Islamic Finance to grab 4pc of world economy

KUALA LUMPUR: Islamic Finance industry, which grows about 15 per cent a
year, is projected to manage four per cent of the world economy soon.

Governor
of Qatar Central Bank and Chairman of Islamic Financial Services Board
(IFSB), Sheikh Abdulla Saoud Al-Thani said over the past 10 years,
Islamic Finance witnessed continued growth despite facing several
challenges in the wake of the ongoing global financial crisis.

"Islamic
financial institutions are now operating in well over 75 countries,
having a total financial asset size of over a trillion dollars," he
said when opening 10th IFSB Summit 2013 here today.

"With the
implementation of the Basel III gradually approaching, the IFSB is
working hard to introduce standards consistent with Basel III such as
IFSB exposure Draft 15 to assist Islamic financial institutions.

"The
challenge is that even with all the reform being created and developed,
our utmost concern lies with the implementation of these standards in
different jurisdictions that are increasingly getting involved in
cross-border transactions," he said.

Sheikh Abdulla said there was a need to reduce the cost of finance.

"According
to some reports, the cost of issuing sukuk can be as much as 60 per ent
higher than conventional bonds, which can have a negative impact on the
growth of the sukuk market.

"This brings back to the issue of standardisation and the continual debate of how much standardisation is needed.," he said.

Meanwhile,
IFSB secretary-general Jaseem Ahmed said the IFSB surveys and research
results indicated that national supervisory practices, supported by
IFSB standards, have made significant progress in reflecting the risk
characteristics of Islamic Finance.

"But many challenges remain,
including the progressive completion of a supervisory system and
supporting financial infrastructure that fully reflects the
cross-sectoral aspects of Islamic Finance.

"This is in addition
to the continuing need for a systemic liquidity management
infrastructure that will help strengthen risk management capabilities
at the level of financial institutions and macroeconomic level," he
added.

Islamic Development Bank Group president Dr Ahmad Mohamed
Ali Al-Madani said based on lessons learnt from the financial crisis,
there were calls for a new architecture to help minimise the frequency
and severity of such crises in future.

"The Islamic financial services industry is capable of providing the broad parameters of such an architecture," he said.

The
merit of the Islamic financial services industry should not, however,
be judged merely in the light of whether it was capable of providing a
worthwhile contribution towards the goal of minimising the frequency
and severity of financial crisis," he said in his opening remarks at
the summit.

The system should also be judged on the basis of its
ability to help developing countries achieve a reasonably high rate of
inclusive economic growth that was not only immune to excessive
monetary expansion and contraction but also provide a tangible way out
of crucial problems like poverty and unemployment. -- BERNAMA