New panel takes Malaysia closer to becoming Islamic banking hub
New panel takes Malaysia closer to becoming Islamic banking hub
Agence France-Presse, Kuala Lumpur
Malaysia takes a step closer to realising its aim of becoming
a regional Islamic financial hub next month with the launch of an
international panel to set benchmarks for Islamic banking.
Central banks from eight founding members -- Malaysia, Saudi
Arabia, Indonesia, Iran, Kuwait, Pakistan, Sudan and the Islamic
Development Bank -- will ink a pact November 3 in Kuala Lumpur to
inaugurate the Islamic Financial Services Board (IFSB).
The establishment of the IFSB -- an association of central
banks, monetary authorities and other institutions responsible
for supervising and regulating Islamic banking -- was "in
response to the growing significance of the Islamic financial
services industry," officials said.
It is the culmination of two years of work by the founding
members, with support of the International Monetary Fund and the
Accounting and Auditing Organisation for Islamic Financial
Instituitions.
Bankers hailed the launch of the IFSB as a major boost to
Islamic banking and finance globally, saying it would serve as an
avenue to develop uniform intrepretation of Islamic Sharia laws
for processes, financing modes and regulatory standards.
"It will give Islamic banking players more credibility and
firmer ground to compete against conventional banks either
locally or internationally," said SBB Islamic Banking Group
manager Nordin Yahaya.
The growing market share for Islamic investments estimated to
be worth billions of dollars signified strong demand for Sharia
compliant financial products worldwide, he said.
There was "immense potential for business opportunities" with
experts estimating the wealth of Islamic nations -- home to one-
fifth of world's population -- at around 800 billion to one
trillion dollars, he said.
The launch of the IFSB was timely as it would focus on product
development, especially globally traded financial instruments
accepted by other Sharia boards, he added.
Bank Islam Malaysia managing director Ahmad Tajudin Abdul
Rahman said it would improve efficiency in the industry and
enhance Malaysia's prospects of becoming a regional centre for
Islamic banking and finance.
He said a growing number of non-Muslims were investing in
Islamic products, which were deemed more competitive and cost-
saving.
The government's plan to issue a new licence to a foreign
Islamic bank should serve as a wake-up call for local
institutions to beef up their Islamic banking operations to face
competition, he warned.
Islamic banking was first introduced in mainly-Muslim Malaysia
in 1983, and now has an eight percent share of assets in the
banking sector. The government aims to raise the level to 20
percent by 2010.
The system combines Islamic laws against interest payments
with modern banking principles.
Malaysia's central bank governor Zeti Akhtar Aziz is chairman
of the IFSB steering committee.
According to officials, the IFSB will set and disseminate
standards and core principles to supervise and regulate the
industry in line with Sharia principles for voluntary adoption by
its members.
It will also liaise and cooperate with other standard-setting
bodies in the areas of monetary and financial stability, and
promote good practices in risk management through research,
training and technical assistance.
The November 3 inauguration, at which Malaysian Prime Minister
Mahathir Mohamad will deliver a keynote address, will coincide
with a special forum entitled "Towards Fostering Financial
Stability of the Islamic Financial Industry" to be attended by
experts in Islamic finance.
Economists said there has been a boom in Islamic banking in
the aftermath of the September 11 terror attacks in the United
States as investors pulled funds out of the West.
The Islamic finance market worldwide is estimated to be worth
200 billion dollars and is growing at 15 percent a year, they
said.