Final Sessions of the 10th IFSB Summit to Conclude the Future of Islamic Financial Services Industry

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Maan Barazy

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May 17, 2013, 1:38:17 PM5/17/13

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FOR IMMEDIATE RELEASE: 17 May 2013

Final Sessions of the 10th IFSB Summit to Conclude the Future of Islamic Financial Services Industry Moving Forward

Kuala Lumpur, 17 May 2013 – On the second day of the 10th IFSB Summit, key leaders in the Islamic financial services industry (IFSI) deliberated on the role of innovation and inclusion to further develop the industry and support economic growth. Themed, “The Future of the Islamic Financial Services Industry: Resilience, Stability and Inclusive Growth”, the Summit took place on 16 and 17 May 2013 atSasana Kijang, Kuala Lumpur. Bank Negara Malaysia is the host of the Summit.

The fourth session, themed, “Islamic Finance: Innovation and Inclusive Growth”, was chaired by Andrew L.T. Sheng, Chief Adviser to the China Banking Regulatory Commission and President, Fung Global Institute Ltd, Hong Kong. The speakers in the session included Professor Dr. Azmi Omar, Director General of Islamic Research and Training Institute, Islamic Development Bank Group, Abayomi Alawode, Manager Financial Systems Global Practice, The World Bank Group and Professor Dr. Volker Nienhaus, Visiting Professor,University of Reading, United Kingdom. Mr. Sheng in the opening of the session emphasised the roles of product innovation and risk-sharing principle in Islamic finance to help promote financial inclusion and support economic growth.

Professor Dr. Azmi Omar elaborated on the role of Islamic microfinance as one of the products that can help to reduce poverty levels among Muslim populations, increase financial inclusion and contribute significantly towards achieving economic growth. Meanwhile, Mr. Alawode shared how Islamic finance serves as an advocate of inclusive economic growth as it helps to reduce irregularity and improve financial sector development, has a direct impact on business growth, and enhances sustainability of economic growth.Meanwhile, Professor Volker Nienhaus stressed the importance of innovation. He suggested that financial engineering should also focus on developing risk-sharing financial instruments for small- and medium-sized enterprises (SMEs). The speakers concurred that for Islamic microfinance and SMEs to succeed, this requires certain policies to be put in place, which include a comprehensive approach to address financial inclusion, legal, regulatory and supervisory frameworks, capacity building and training to macro-entrepreneurs and SMEs, to be further supported by a credit guarantee scheme and a business and credit information bureau.

The fifth session, themed, “Panel Discussion on Lessons Drawn: Prospects for the Future”, was chaired by H.E. Dr. Zeti Akhtar Aziz, Governor, Bank Negara Malaysia. The speakers in the session included H.E. Sultan Bin Nasser Al Suwaidi, Governor, Central Bank of the United Arab Emirates, H.E. Dr. Ishrat Husain, Dean and Director Institute of Business Administration, Pakistan, Former Governor, State Bank of Pakistan and Professor Rifaat Ahmed Abdel Karim, Chief Executive Officer, International Islamic Liquidity Management Corporation. The speakers shared their views on the lessons learnt by the IFSI following the global financial crisis, the roles of the IFSI in promoting economic development and stability in emerging economies, as well as the prospects of the industry moving forward.

H.E. Dr. Zeti Akhtar Aziz highlighted that Islamic finance will continue to serve the economy in an effective manner and that its internationalisation will also continue due to interconnectedness and high interlinkages. However, she also warned that key prospects for Islamic finance would depend upon how the IFSI evolves. She also mentioned that the implementation of the IFSB standards is key in promoting the stability and resilience of the IFSI. H.E. Sultan Bin Nasser Al Suwaidi was of the view that Islamic finance can play an important complementary role in economic development and it can provide key support to the vulnerable society through financial inclusion, which will allow access to Islamic finance. He also stressed the need for strengthening the microprudential framework including strengthening the regulatory and supervisory framework covering buffers, liquidity, collateral, risk cultures, and contingency plans.

H.E. Dr. Ishrat Husain stated that the inherent nature of Islamic finance will stabilise the global economy and that in many jurisdictions Islamic finance has become the preferred choice of financial intermediation. He remarked that the asset-backed nature of Islamic finance, avoidance of speculation in financial transactions, and giving access to financial inclusion, will help to contribute towards the resilience and stability of the global financial system.

Professor Rifaat Ahmed Abdel Karim highlighted issues of legal risk, recommending an international court consisting of judges and scholars. He felt there was a policy challenge that was best addressed by transforming the Islamic Financial Stability Forum into a more deliberative and policy making body perhaps along the lines of the Financial Stability Board. He also emphasised the need for conducting more research and awareness in the IFSI and there is strong need for standardisation of the Shari`ah with common guidelines across the industry.

The Summit ends today.

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NOTE TO EDITOR:

About the Islamic Financial Services Board (IFSB)

The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and nationalorganisations, research/educational institutions and market players.

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisationsand market players, professional firms and industry associations.