|Islamic Finance Needs To Innovate To Sustain Growth
By Zakaria Abdul Wahab
SINGAPORE, May 7 (Bernama) -- The Islamic financial services industry which emerged resilient during the current global economic crisis needs to be improved further if it wants to be a greater player in the international financial market.
Islamic Development Bank (IDB) group president Dr Ahmad Mohamed Ali said the industry still had a long way to go although it showed that with the Islamic financial principles in place the industry could be stronger and more stable.
Speaking at the two-day 6th Islamic Financial Services Board (IFSB) Summit beginning here today, he said during the financial crisis in the last three years the Islamic finance industry was proven to be able to minimise its exposure to toxic assets and dangerous instruments.
Ahmad said the industry which had grown much since 30 years ago still needed to learn a lot from the other banking and financial systems.
He said the Islamic financial industry has to address several future concerns which could affect its growth and resilience post-crisis.
Ahmad said the industry should diversify and provide a wider range of financial services as it currently was highly concentrated in commercial banking, comprising more than 70 percent of Islamic assets.
He said there was a need for major Islamic investment banks that provided a different model of investment banking, and able to have a positive impact on economic growth without compromising stability and resilience.
He also said that the industry needed a variety of venture capital institutions, small and medium financing institutions, specialised financing, leasing, adding that the more the industry was diversified the more it was able to sustain its growth.
Ahmad said as international regulatory bodies were now critically revising financial regulations, the Islamic regulatory and accounting standards also needed to be revised.
He said since Islamic principles address both macro and micro dimensions of economic activities, regulatory standards of the Islamic financial industry now needed to reflect this comprehensive approach and translate these principles into an integrated stability framework.
The bank president also called on the Islamic financial industry to pay more attention to knowledge services and products, which in the past were neglected as the attention then was on capital and assets.
He said this was in line with IDB Group's Vision 1440 Hijrah (2020) to make the organisation a knowledge-based entity in which it would emphasise the knowledge dimension in its new services.
According to Ahmad, the Islamic financial industry should take steps to develop new instruments and products that created and improved efficiency.
There was also a growing need for a more standardised approach to the development of Syariah-based financial products that could cater to the various current and emerging needs of a dynamic, competitive and sustainable industry, he said.