Be innovative to compete conventional banks, experts urge Islamic financial institutions
“In order to create a comprehensive and robust financial system, Islamic financial institutions need to be innovative and focus on developing Venture Capital (VC), private equity and alternative investments. This will create an industry with a niche that is capable of competing with conventional banks, with the added value of shared wealth for the society. It is hoped that Islamic VCs will play a major role in developing Muslim countries”.
The above observation was made by Mr. Khaled M. Al-Aboodi, CEO & General Manager of Islamic Corporation for the Development of the Private Sector (ICD), Jeddah while speaking as a guest speaker at the inaugural session of the New Delhi based Institute of Objective Studies, (IOS), two-day International Conference on "Prospects for Islamic Venture Capital Funds in India" which began here on Saturday at the Parliament House Annexe. The International conference is the part of the Silver Jubilee celebrations of IOS.
Continuing Mr. Al-Aboodi said the beauty of Islamic Finance is that it is a constitutionally developing and evolving industry, with new and innovative financial instruments and hybrid products being developed to fit particular business models, industries and countries, creating an edge over conventional products.
He said this is the best divine alternative economic system available before the world and in which ever country this system is in vogue the recent economic meltdown has not affected its economy. While in comparison to this interest-based conventional banking institutions have become victims of bankruptcy and the world is in the grip of worst economic crisis, he pointed out.
Mr. K. Rahman Khan, Deputy Chairman, Rajya Sabha who chaired the inaugural session in his presidential speech, while emphasizing the advantages of Islamic banking, said that it has originated from the Holy Qur’an which is not religious book of Muslims alone but for the whole humanity as it is a book of guidance for one and all.
Mr. Khan said that in every economic transaction four things should be kept in mind viz. (i) justice, (ii) equilibrium, (iii) truth and (iv) fairness. Any transactions which complies with these four principles as enunciated by the Holy Qur’an then it will ensure well being, peace and harmony among the people which is the hallmark of a good society. The Holy Qur’an has stated that none should be exploited and Islamic banking takes care of this. However, the conventional banking system fails to grow and assist the poor who are thus exploited at the cost of the rich people in society, he added.
Mr. D. R. Mehta, former Chairman, SEBI and Dy. Chairman, RBI, Jaipur, while delivering inaugural address said that if India has to progress then Islamic Venture Capital Funds, (IVCFs), has to be launched in the country as Malaysia and other countries are successfully experimenting with it. In India the prospects for IVCFs are very bright and it should be developed for different sections of society, he added.
Dr. Mohammad Manzoor Alam, Chairman IOS, while speaking a few words on the occasion said that responsibility and prudence, to be precise, are essential features of Islamic finance including Islamic Venture Capital. He said IVCF is an increasingly visible component of the capital fund scene globally. It has extraordinary potential to be of use in India’s expanding economy over the years, he added.