Need to keep in tune with time

19 June 2007- In an attempt to iron out minor clogs in its system and achieve complete harmony with the conventional banking system, the global Islamic banking and financial market was going through standardisation upheavals. But the churning process was inevitable to ensure a standardised single-structure for the sector to grow by leaps and bounds. The International Financial Market 2007 conference that got under way here yesterday reflected that global Islamic banking dilemma and its efforts to bail itself out of the uniform model muddle.

“Uniformity is possible only when we leverage on the centuries of experience of Islamic banking and at the same time keep in tune with the demands of the times. There is no difference between Islamic banks and conventional banks at the conceptual levels, only the routes adopted are different,” said the Director of Islamic Banking Department of State Bank of Pakistan, Pervez Said. He underlined the need for evolving standardised fatwas that could ensure that elusive standardisation in the Islamic banking sector at the local, regional and global levels, but with a word of caution. “There should be uniformity but not to a level where it will kill innovation.”

The market, he said, was dynamic and banks were competing and offering different products. “Allow the market to respond to the challenges and reach to a matured stage when standardised Shariah and fatwas for products can be considered,” he said.

Badlisyah Abdul Ghani, CEO, CIMB Islamic, a dedicated Islamic financial solutions boutique offering investment banking services in compliance with Shariah, emphasised the importance of a standard format of all Islamic financial instruments to put an end to the ‘annoying misconceptions and wrong signals being passed on by the industry to the people’.

Standardisation should be done at all levels – country, regional and bilateral. “If we come out with a global model, we will be only limiting ourselves,” he pointed out.

Islamic finance has witnessed tremendous growth over the decades rolling out new products and services in consonance with the demand for more structured products in compliance with the Shariah law. The global Islamic banking industry was worth a staggering $800 billion and there was a sharp rise in the volume of investors, particularly non-Muslims, capital markets, financial institutions and Governments the world over in last few years.

But this was just the tip of the iceberg, as non-Islamic parts of the globe were increasingly evincing great interest in the Islamic banking and finance model. “Islamic banking has gone global and greater fund flow from non-GCC countries is a big proof of it. The participation of conventional banks in countries where there is no Islamic bank presence is another,” said Prof Mahmood Faruqui, Vice-Chairman, Institute of Islamic Banking and Insurance, UK.

Rene Karsenti, Vice Chairman, International Capital Market Association, UK, and member of Strategic Committee of the French Finance Ministry suggested that conventional banking and marketing solutions could be considered on the basis of merit in drafting a standardised format for Islamic banking. Knowledge training and mutual exchange of plans, programmes and policies between staff of conventional and Islamic banks would also go a long way in bringing about uniformity on the global Islamic banking arena.

Reference:: Need to keep in tune with time

Islamic Capital &
Money Market
Unification
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