The challenge among Islamic banks is to maintain their credibility to push the growth of Islamic finance among non-Muslim countries, said Dr Hatem el-Karanshawy, founding dean of the Qatar Faculty of Islamic Studies at Hamad Bin Khalifa University (HBKU).
“The potential is quite great and the challenge is credibility, and so far, Islamic banks have been maintaining their integrity,” said el-Karanshawy, when asked about global growth prospects for Islamic banking on sidelines of the 10th International Conference on Islamic Economics and Finance held yesterday at the HBKU Student Centre.
He added, “The global presence of Islamic banks is still small in terms of international finance percentage, but when you are small, your potential for growth is big.”
Islamic Development Bank (IDB) president Ahmed Mohamed Ali al-Madani said in his keynote address Islamic finance assets saw a 17% global growth rate reaching $1.6tn, and are expected to reach $4.2tn by 2020.
El-Karanshawy noted that the increase in demand for Islamic finance products from both Muslim and non-Muslim countries has also contributed to the growth of the industry, such as the global issuance of sukuk by the UK, South Africa, and Luxembourg.
“At the same time, there is demand from both Muslims and non-Muslims; it is these financial products that have now developed the demand from Islamic and non-Islamic countries. Governments have been a very strong addition, which is another source of growth that is likely to be reflected strongly in the coming future,” he explained.
He added, “There are true merits for Islamic financial products that really fit the needs of many of these countries thus, the potential for growth. Once the experience is successful, other countries are going to study it. There is no rush for it but they will study and follow it.”
This was echoed by Azmi Omar, director general of the Islamic Research and Training Institute at IDB, who said aside from issuing sukuk, some countries have started to introduce regulations to enable Islamic financial institutions to operate globally. “Islamic economics and finance have gained prominence over the years and it is now becoming a part of public policy hence, the issues of institutional reforms and setting-up of the right standards are becoming important.
“We are also witnessing the sprouting of the third generation of economists interested in this discipline, who will have the opportunity not only to develop the theory but also to contribute to policy making,” Omar stressed.
He added that the global financial crisis and the sovereign debt crisis “highlighted a range of fallacies in the conventional financial system and underscored the usefulness of Islamic financial principles for stability and sustainable growth.”
El-Karanshawy also pointed to “friendly competition” in various areas, including finance, between economic centres like Bahrain, Dubai, and Qatar as another motivation for growth in Islamic banking.
(Gulf Times / 23 March 2015)---
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