If Islamic banking is to develop into a global alternative to conventional banking, the global financial industry must take responsibility for driving the sector forward and not rely on the regulators to lead the way, according to Hussain AlQemzi, CEO of Noor Islamic Bank and a leading Middle East authority on Islamic finance.
Speaking at the International Islamic Finance Summit in Kuala Lumpur, AlQemzi said the pace of development of the Islamic finance sector was too slow and that unless industry practitioners are more willing to challenge the regulators, whether Central Banks, legal structures or Shari’a scholars, the internationalisation of Islamic finance will continue to underperform and not reach its full potential.
AlQemzi told his audience of leading Islamic finance professionals, institutional investors and other senior executives from the financial world that in order for the Islamic finance industry to remain competitive, it must continually innovate and adapt.
“If we are to challenge the conventional banks’ entrenched position in international financial deals, we must develop the capacity to structure multi-currency and cross border transactions and to build scale. To do that we need to build deeper relationships between the key markets and between individual banks, so that we are better placed to compete on a global scale,” AlQemzi said.
“The time has come for us to stop focusing on our differences as reasons for not doing business. It is time to talk about how Islamic finance can contribute to long-term inclusive, equitable and sustainable economic growth not just in Muslim countries, but in every country across the globe.
“Instead of competing with each other, we (the industry) need to work together to build an Islamic finance industry which all of us can be proud to be a part of,” he added.
In order to iron out of the differences in interpretation of Shari’a compliance, between scholars in South East Asia and the Middle East, AlQemzi proposed the establishment of a joint Sharia Board, comprised of Shari’a scholars from both Malaysia and the United Arab Emirates. The board would be mandated with finding common ground between the two schools of thought with the aim of developing new products and services, which would be acceptable to the widest possible customer base.
AlQemzi cited an innovative sukuk launched by Cagamas, Malaysia’s national mortgage company, as a prime example of how offerings can be created that are acceptable to investors in both South East Asia and the Middle East. One third of the inaugural US $320 million sukuk was taken up by Middle East investors.
He added that the Eurozone crisis and the exposure of European banks to sovereign debt would almost certainly depress the European banks’ appetite for financing infrastructure projects, in both Asia and the Middle East. And as proof, he cited the example of Dubai-based Emirates airline, which announced last week it would be seeking sukuk funding after European banks backed out of plane deals because of the debt crisis.
Aparna Shivpuri Arya
Aparna Shivpuri Arya is Assistant Editor, Business Group, CPI, Dubai. Before joining CPI, I was working with UNESCAP in Bangkok. I have a Masters degree in International Law and Economics from Switzerland and a Masters degree in International Studies from National University of Singapore. I have worked with think tanks across countries on international trade issues.