Over three days of speeches, debate, policymaking, and plain old marketing one theme emerged as dominant from the 10th World Islamic Economic Forum in Dubai: Islamic finance has gone global, both as a concept and as a hard business reality.
After two years on the road — last year in London and 2014 in Dubai — the annual forum is set to return to its home base, Kuala Lumpur in Malaysia, next year.
But in the meantime, it will hold warm-up sessions in South Korea, Spain and Japan, all countries with small Muslim populations.
The World Bank recently had a session devoted to Islamic finance; the list of sovereign sukuk issuers recently includes countries well outside the traditional Muslim world, such as Luxembourg, South Africa and the UK.
The Dubai forum heard of Islamic financing schemes in Afghanistan and Tartarstan (an autonomous part of Russia); President Nazarbayev of Kazakhstan won the award of Islamic financial leader of 2014; there was talk of Brazil or Australia as the next sovereign sukuk issuer.
There was general agreement that Islamic finance, specifically, was the driver behind the worldwide growth of the Islamic economy. “We have learnt that Islamic finance provides fuel for the real economy,” said Abdulla Al Awar, chief executive of the Dubai Islamic Economy Development Centre, which aims to make the emirate the capital of the Islamic business within the next two years.
Although the forum addressed all the aspects of the Islamic economy — the halal food industry, tourism, fashion, education and others — there is no doubt that finance is at the heart of it. Of the US$6.7 trillion total estimated value of the Islamic economy worldwide, more than $4 trillion is in the financial sector.
Khalid Howladar, head of Islamic finance at ratings agency Moody’s Investor Services, said: “I could never have said this five years ago, but I think we are seeing a sea change in thinking about Islamic finance. This is where Islam meets capitalism, and where Islamic finance truly becomes a global concept.”
But the three-way tug in the global Islamic financial industry was still very much in evidence as the forum closed in Dubai. Figures from the organisers showed that the top attenders among the 3,200-strong gathering were from Malaysia, with 430 participants; followed by London with 201 and the UAE (on home ground) with 176.
Other notably large delegations came from India and Bangladesh.
These figures, however, raise the question: where were the other great powers of the Islamic economic world? Saudi Arabia and Iran, big regional powers in terms of economies and populations, were barely represented at the Dubai forum. Other GCC countries, notably Oman, had a slightly higher presence, but were still apparently publicity-shy at the biggest Islamic economy show in the world.
Some experts thought this reflected a lack of certainty in the Islamic financial world about how to take the project to the next stage. Ashruff Jamall, global Islamic finance leader at international accounting firm PWC, said there needed to be some “sustainable follow-through” on the good intentions and ideas expressed at the forum.
“There has to be lots more specialist training in Islamic finance, and there needs to be standardisation of Shariah boards in the GCC region. In Malaysia, it is centralised, but in the UAE, it is different for each bank.”
The urge to consolidate and unify was another of the themes of the forum. Mohammed Al Gergawi, UAE Minister for Cabinet Affairs, called for common halal food standards between Malaysia and the Emirates, while Hamad Buamim, chief executive of the Dubai Chamber of Commerce and Industry, urged the UAE financial industry to set up a standardised Sharia-compliance system.
Why had this not already happened, given standardisation has been a key feature behind Malaysia’s dominance of the global sukuk business? There were suggestions that the blame lay with the current system of disparate Sharia boards chosen from the relatively small number of scholars qualified to issue fatwas, who had a vested interest in maintaining their monopoly.
If this is the case, there was no shortage of new ideas at the forum to keep Islamic finance a dynamic force. Alberto Brugnoni, who runs an Islamic financial consultancy, advocated “Islamic crowdfunding”, which he called “umma funding”, to help finance small-to-medium enterprises along Islamic lines.
Several speakers suggested the notion of some form of Islamic equity, shares which adhered to Sharia principles and which would be less risk-prone and more socially responsible than conventional and Islamic debt financing.
Mr Howladar said: “There is no point in Islamic finance simply replicating conventional financial instruments. It is different and should create its own value adhering to Sharia principles and ethics.”
There was also a job or marketing to be done. Mr Jamall of PWC identified a “perception gap” between potential Muslim banking customers and the banks offering them services. “The banks need to be stronger in their messaging to customers that they are acting according to Sharia principles,” he said.
Mr Buamim summed up the message to the world from the Dubai forum: “A modern image of Islam needs to be projected, a kind of liberal but dynamic Islam the world is not fully familiar with yet.
(The National Business / 30 October 2014)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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