Saudi-Malaysia bourses in deal to develop Islamic financial services

Malaysia and Saudi Arabia, the world’s two largest Islamic financial services markets, formed ties to help the industry grow at a greater clip in both the countries.

A report released by the Oxford Business Group (OBG), a global publishing and consultancy company producing annual investment and economic reports on more than 30 countries, said: “A cooperation agreement between the bourses of Malaysia and Saudi Arabia stands to help the industry grow at a greater clip in both countries.”

The report said that the deal, signed recently, will see the exchanges in Kuala Lumpur and Riyadh share expertise and develop human resources jointly.

It covers topics such as equities, mutual funds and sukuk (Islamic bonds) and comes after an agreement between Malaysia’s central bank and the UAE in October on bolstering economic ties, including in the arena of Islamic finance services.

According to official statistics, the Saudi Arabia and Malaysia jointly hold $682 billion in Islamic banking assets.

Tadawul, the Saudi stock exchange, lists the world’s biggest Islamic banks, while Bursa Malaysia hosts the largest and most liquid market for sukuk.

Moreover, the Malaysian market is set to expand this year due to greater international interest.

A recent report by international ratings agency Standard and Poor’s (S&P) said: “Malaysia already benefits from a broad sukuk investor base and liquid debt market. So the increased interest from issuers, notably in the Middle East and Asia, in tapping the Malaysian ringgit and dollar market should in our view continue over the next few years as Malaysia cements its leading position in the industry.”

Moreover, major international investors, too, are extending Malaysia’s clout in Islamic finance as the country has the right landscape and regulatory framework to further spur the development of talent in Islamic finance, which contributes largely to GDP at around nine percent so far.

According to AIG, the US-based insurance company, it is planning to start a Shariah-compliant reinsurance business, by June this year, in Malaysia — a country that accounted for 11 percent of the $20 billion global Takaful (Islamic insurance) market in 2013

According to experts the tie-up would ensure Islamizing businesses by making procedures Shariah-compliant. They feel it will boost Islamic finance sector and help adopt Shariah-compliant laws as many countries have setup regulatory frameworks to facilitate the development of Islamic finance products such as sukuk, but none has drafted Shariah-compliant laws that could be used to

settle the disputes that arise from their use.

This could provide an edge for the sector, which is already viewed as a model Islamic system.

Islamic financial assets are currently valued at $1.3 trillion and S&P expects the industry to grow at 20 percent annually from 2011 to 2015.

Linking up with the Gulf Cooperation Council (GCC) countries will help spread and develop Malaysian expertise on Islamic finance in general and the sector at large.

(Arab News / 23 March 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Banking and Financial Services

With Islamic Banking gaining popularity in the modern financial sector, at least three books on this subject hit the stalls in India in 2013

 The first book ‘INTEREST-FREE BANKING by Nazir A Nazir and Khurshid A Butt was published by Department of Business and Financial studies, Kashmir University. The second book GLOBAL ECONOMIC CRISES and ISLAMIC PERSPECTIVE by B Syed FazalHuq published by The New College, Tamil Nadu, and the third ISLAMIC BANKING and FINANCE authored by Ismail and Rehman. 

 The first two books are the outcome of international conferences where a variety of papers, rich in content, were presented. The third book is the result of academic venture undertaken by the young author.

 The first book is spread over nineteen chapters and the second accommodates fifty seven chapters on different sub-themes duly supported by empirical evidences. The third one presents conceptual framework in ten comprehensive sections. 

 In totality these books put forward intellectual discourses on various themes and come up with workable solutions from Islamic economics, banking and finance perspective, to so many issues of contemporary relevance as detailed hereunder:

• Regulatory framework and institutional mechanism for Islamic finance, banking and insurance,
•Islamic micro-finance models, social responsibility and sustainable development,
•Legal and regulatory challenges for developing an interest free economy,
•Recent economic melt-down and solutions available in Islamic Finance.
• Entrepreneurship development and interest free banking in 21st century,
• Islamic perspective and responses for global economic crises,
• Role of Zakat in reducing the gap between haves and have-nots,
•Growth and distributive justice in the economic system of Islam,
•Industrial cluster development through Islamic finance perspective,
•Scope and challenges for Islamic banking for inclusive growth and social uplift,
•Prudential approach for investment in shariah compliant share market and Islamic indices ,
• Role of Islamic banking in framing an egalitarian society,
• Islamic fund- asset management- venture capital- insurance-housing finance, etc. 

 Islamic banking and finance primarily focuses on value addition through an effective and productive process to widen the gap between input and output. This system has zero tolerance for wastage of resources and the people associated put in dedicated efforts to their best capabilities in order to enrich the process. The value addition thus generated is mutually shared by all the stakeholders as agreed upon by them on fair basis.

 At present there is shortage of human resource in Islamic Banking and Finance to run such institutions. 

 No doubt some scholars have done commendable research work in this branch of knowledge for award of doctoral degrees and now are working in different international universities and Islamic banks. Institute of Objective Studies, New Delhi has been putting in sustained efforts to sensitize the general public across the country with regard to Islamic banking and finance and organizes seminars, workshops and conferences for the academics and financial experts. 
 Islamic economics-banking-financial services and Islamic accounting are now comprehensive courses of study and have gained an independent status of academic 
discipline. To develop human resource in this branch of knowledge is quite essential in the context of employability. An additional degree or Diploma must be obtained by all those who want to work in Islamic financial institutions across the globe. 

 In this context it may be said that Aligarh Muslim University offers Masters Programme in Islamic Economics. Post Graduate Diploma in Islamic Economics and Finance (PGDIEF) is offered by Al-Jamia-al-Islamia, Kerala. However, both these programmes are transacted through formal mode of education to make stay of learners on the campus mandatory. 

 All the three books offer a very interesting read as the text is well drafted in a lucid style. 

The editors, contributors and authors of these books deserve appreciation for their sincere and serious efforts for discussing the issues pertaining to humankind and attempts they made to analyse vital economic crises confronting the global economy. The books under review can prove of great academic utility to research scholars, banking practitioners, subject matter specialists, policy makers and business academics. 

 Based on the bibliography, webliography and references to the context forming an essential part of these books one interested in will be in a position to develop a good personal library on the subject.

(Kreater Kashmir / 05 Jan 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com