Acknowledging that the Islamic Finance can play a very important
role for the
recession-ridden world, economists and bankers gathered at Jeddah
Economic Forum said, it is due to the shortage of experts on the
subject and absence of a regulatory authority to ensure full Shariah-compliance
system that the Islamic Banking & Finance Sector is not growing as
fast as it should.
"Islamic Finance is growing but it
needs a regulatory authority to ensure full Shariah-compliance", the
panelists observed during a session on Islamic Finance and Banking
on the final day of the 11th Jeddah Economic Forum March 22.
"The global economic slowdown,
witnessed in the past couple of years, was an eye-opener to most of
the advanced countries as they felt that they might not have been in
such a mess if they had adopted Islamic finance", they added.
Taking the discussion further, Jeddah
Chamber of Commerce and Industry Chairman Saleh Kamel felt that
Islamic economy had not been treated fairly. “Islamic economy cannot
find the place that is due to it unless it is introduced as a
subject in schools and universities,” he said.
He said that Islamic banks had been in
operation for 38 years but a shortage of experts had delayed their
“We require scholars and experts so that all the rules and
regulations related to Islamic finance and banking are unified and
individual banks or institutions do not have their own
interpretations,” he said.
He was, however, hopeful that the value of Islamic financial assets
would reach $4 trillion from the current $1 trillion by 2020.
“The Islamic Economy lays the rules
and regulations to guard against malpractices like usury and conduct
Shariah-compliant financial and banking transactions and this is
what makes the system practical,” Kamel added.
Al-Rajhi Bank CEO Abdullah S. Al-Rajhi also said the challenges
include the lack of institutional framework, expansion of market and
difficulty in managing short-term liquidity.
He agreed with Kamel that there is wide disparity in the application
of Islamic banking principles.
“Every Islamic bank has its own Shariah board. That’s why there is
contradiction in the number of Islamic products, which reduces the
confidence of customers. So, we have to unify Shariah parameters,
which now number over 40,” he said, emphasizing the need for a
unified Shariah board.
Stating that Islamic finance had
expanded globally and not just in Islamic countries, National
Commercial Bank CEO Abdulkarim Al-Nasr said, "It had expanded from
$260 million in 2000 to more than $1 trillion now and is expected to
grow up to $4 trillion by 2020. Islamic insurance alone is expected
to reach $25 billion by 2015."
“In fact, Islamic banking represents 95 percent of banking
activities for individuals in the Kingdom. They represent 30 percent
of the entire banking assets here,” he said, adding that the recent
global financial crisis had made Islamic banking more relevant.
Echoing similar feelings, Mutlaq Al-Morshed,
executive vice president, corporate finance, Saudi Basic Industries
Corp (SABIC) pointed out that innovative ideas such as the CDS
(credit derivatives) that J.P. Morgan launched recently would
strengthen the Islamic finance sector.
He also referred to the need for experts of Islamic finance who
understand Shariah and finance.
“There are a lot of Shariah scholars and financial scholars. But
they don’t seem to elated to each other. However, it is being
pursued and requires time to be fully witnessed", he added.