Though it was a mere tripartite memorandum of understanding (MOU) between Qatar, Islamic Development Bank (IDB) and the Dallah Al-Baraka Group, but it deserves importantance since it has settled to a large extent a debate on whether the Mega bank, whose idea has been mooted years ago, will ever come to being and who will be its main shareholders.
In fact, two years ago a poll was conducted among those interested in Islamic finance from institutions and individuals to see whether 2010 will see that the Mega Bank to emerge that year, the majority, though modest, did not see it happening.
But the MoU is reversing that trend.
Moreover, the issue of location has been settled and the new Mega Bank will be headquartered in Doha with branches across the Islamic world and whenever the need arises.
The MoU commits the three founders to underwrite half of the proposed $1 billion capital for the Mega Bank.
Two main goals were put for the bank that are funding infrastructure projects in Islamic states and more important work toward standardization of financial products compatible with Islamic Shariah.
During the signing of the MoU in Khartoum on the sidelines of the IDB Group annual meeting recently, IDB President Ahmad Mohamed Ali said the new institution is expected to, "facilitate the establishment financial market amongst the Islamic banks and provide innovative solutions to manage liquidity through generation of assets and launching of an Islamic securities market."
He said "the Mega Islamic Bank comes as an initiative to address the dearth of senior financiers, the absence of the Islamic tools of stock exchange and the absence of market liquidity between Islamic banks."
Aside from the procedural concerns, there are other issues like getting skilled and professional staff given the fact that Islamic finance became a growing industry, where even big conventional banks are having Islamic finance windows to cater for an expanding client base.
According to figures from the Islamic Council, assets of Islamic banks and financial institutions stand currently at $820 billion. And, the total assets operating in line with Islamic Shariah principles would top $1.3 trillion if Islamic windows in conventional banks are also taken into consideration.
That is a huge volume of money and needs more skilled professionals that are more or less in scarcity anyway.
A recent story in the New York Times spoke about a new phenomenon in the Wall Street where young Islamic bankers are trying to combine their professional banking training with spiritual dimension.
It pointed out that six years ago young Muslim bankers set up what they call Muslim Urban Professional as a forum where members can help each other and exchange experiences.
From a membership of some 50, it grew to more than 1, 000 currently.
Interesting enough the story noted for whatever reason clients tend to think religious bankers may have more integrity to a reasonable degree, and that genuine Muslim behavior of not drinking etc may actually work to the favor of Muslims, who stand a chance of being good bankers as well.
However, two more factors have to be borne in mind in discussing Islamic finance.
For one the Arab Spring brought to the scene a clear Islamic orientation that will help shape events in places like Tunis, Egypt, Libya, Yemen and probably Syria for time to come.
In fact with the emergence of the BRIC countries (Brazil, Russia, India and China) religion is taking a growing role and no longer modernism is expanding at the expense of religion as used to be the argument by secularists and thinkers such as Karl Marx, Max Webber and even social scientists in the US such as Walt Rostow.
The other factor is that Islamic finance has been in operation for more than three decades.
The theory has been put to test and there is more than criticism addressed to Islamic finance.
One of those critics Saleh Kamel, chairman of Al-Baraka Group, who was blunt in saying that current Islamic finance practices have to a large degree avoided the true intentions of Islam i.e. utilizing economy to do real work, provide opportunities instead of using money to generate more money.
It even moved to area of derivatives that was to a large degree one of the main reasons behind the financial and economic crises that has engulfed the world major economies for more than four years now.
Kamel, however, is optimistic that the Mega Bank can help address problems faced by Islamic finance by concentrating more on development and work along recognized Islamic tenets for the benefit of the people, not one concerned mainly with the mechanics and see how transaction are Shariah compatible regardless of what they do actually to people.
The Mega Bank may or may not provide answers to problems facing Islamic finance, but it is more important to have more open and transparent debate on its various issues without inhibitions.
(Mena Fn.Com / 22 April 2012)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:
Entries in English and Malay (Bahasa Melayu)