Central bank governors from Iran to Saudi Arabia are to attend Malaysia’s first international Islamic finance forum this week as the nation works to cement its future as an Islamic financial hub.
The four-day Global Islamic Finance Forum starting today is expected to attract about 800 regulatory authorities and industry players.
Malaysia’s central Bank Negara, the event organiser, said it aims to highlight business opportunities as the nation ramps up efforts to draw foreign money-Muslim and Middle Eastern funds in particular.
“The forum will provide an avenue for global investors, issuers and financial industry players to discuss investment and business opportunities in Asia,” Bank Negara said in a statement.
Islamic finance fuses principles of Sharia or Islamic law and modern banking. Funds are banned from investing in companies associated with tobacco, alcohol or gambling considered taboo by Muslims.
Malaysia has been promoting itself as a centre for Islamic finance but faces rivalry from neighbours Singapore and Brunei. The mainly Muslim nation has 10 fully-fledged Islamic banks, after establishing its first in 1983, while a series of conventional banks also offer Islamic financial services.
Malaysia fast-tracked the liberalisation of its Islamic banking sector three years ahead of schedule in 2004, encouraging domestic financial institutions to set up Islamic banking units.
It also opened up the industry to foreign players. Licences have been awarded to Kuwait Finance House, Saudi Arabia’s Al Rajhi Bank, and the Asian Finance Bank, owned by a consortium led by Qatar Islamic Bank.
Meor Amri Meor Ayob, who rates Islamic financial instruments at Rating Agency Malaysia, said the conference will promote Malaysia to foreign players amid regional competition for the Muslim dollar. “This will showcase Malaysia as a country with the capability, capacity and human resources to provide Islamic financial services,” Meor Amri said.
Malaysia has the infrastructure and a vibrant capital market that is “very conducive” for the growth of Islamic finance, he said. “There is a lot of opportunities for Islamic banking” because the industry in Malaysia is still young, Meor Amri said.
Bank Negara has said the forum will also tackle contemporary issues relating to Islamic finance including regulatory standards, which analysts say are crucial for development of the sector in Malaysia. Senior economist at Malaysia’s Bank Islam, Azrul Azwar, said a major topic likely to be discussed is differences in the interpretation of compliance with Sharia, which bans the earning of interest.
Countries in the Middle East have a more strict interpretation of Sharia rules, compared to Southeast Asian nations, he said. “I think this is one of the challenges that Malaysian regulators should address. We should work towards higher convergence of Sharia interpretation,” Azrul said.
As part of the forum, the Islamic Financial Services Board-an international standard-setting body that regulates the Islamic financial industry-will hold its annual meeting as Malaysia assumes the 2007 chairmanship of the board’s council.
Bank Negara governor Zeti Akhtar Aziz will chair the high-level meeting to be attended by 15 central bank governors or their representatives, and the president of the Islamic Development Bank, a Saudi Arabia-based institution set up to promote economic development in Muslim countries.
Governors expected to attend include those from Bangladesh, Egypt, Iran, Pakistan, Qatar, Saudi Arabia, Singapore and the United Arab Emirates. Malaysia’s Islamic banking assets amounted to 117.4 billion ringgit ($33.9 billion) as of June 2006.
Total worldwide assets of Islamic financial institutions exceed an estimated $250 billion and are growing 15 per cent annually, according to the International Monetary Fund
source : KT