'Islamic finance sector must be more innovative'

'Islamic finance sector must be more innovative'

Agence France-Presse, Kuala Lumpur

Malaysia's central bank governor Zeti Akhtar Aziz said on Tuesday
that the lucrative Islamic financial services industry must
become more innovative and offer a bigger range of products.

Islamic financial institutions must respond to the
increasingly sophisticated needs of Muslim consumers, she told an
Islamic Bankers' Forum, part of a series of events on the Islamic
finance sector here this week.

"In most instances, Islamic financial products are repackaged
along the (lines) of conventional financial products while
eliminating the elements that are not in compliance with Sharia
(law)," Zeti said.

"It is timely to move away from 'plain vanilla' innovation and
to embrace a new wave of innovation that will evolve Islamic
financial instruments into distinct products that will maximize
the potential and wisdom of the Sharia."

The Islamic financial services sector, which provides products
and services that comply with Sharia or Muslim religious laws
banning interest, is estimated to be worth between US$200 and
$300 billion and is enjoying double-digit growth.

The first country to introduce Islamic bonds, Malaysia has
also led the development of Islamic banking amongst Asian members
of the Organization of the Islamic Conference (OIC).

Zeti said that a key challenge for Islamic financial
institutions is to attract an educated workforce and create a
pool of experts in the field.

"Specialists in Islamic finance would need to combine
knowledge and understanding of the Sharia with the necessary
skills in finance," she said.

She also called on the sector to continually invest in
research and development, adding that universities should offer
courses in Islamic finance.

"Islamic research organizations and financial institutions
need to work towards developing a sufficient number of Sharia
scholars who are equipped with sound knowledge and expertise in
both Islamic jurisprudence and Islamic commercial law to deal
with innovative and cutting-edge products," she said.

The governor said Malaysia plans to establish an international
training institute on Islamic finance as part of its efforts to
educate the industry.

As the current OIC chair, Malaysia is leading a push for
Muslim nations to focus on economic development, build trade
links with each other and develop their financial sectors.

Islamic financial services range from basic investment
accounts, equity funds, bonds and more recently, Islamic hedge
funds and swap equivalents.