The principles of Syari’ah must not be compromised as Islamic banking has come of age, said Pehin Orang Kaya Laila Setia Dato Seri Setia Awg Hj Abd Rahman Hj Ibrahim, Second Minister of Finance, during the official opening of the First International Conference on Islamic Finance 2010 at the Rizqun Hotel, Gadong yesterday.
Based on the theme ‘Contemporary Challenges of Islamic Finance: Towards Realising the goals of Syariah’, the aim of the inaugural conference, which is organised by the University Sultan Sharif Ali (UNISSA), was commended by the second minister for its “aim of contributing towards the continued process of solution building in Islamic banking and finance, by consolidating the numerous views and principles, acting as a catalyst towards effective knowledge sharing, as well as exchanging views and experiences among all its stakeholders”.
“Our hope is not just to assist in the advancement of Islamic finance, but also bear witness to the industry’s ability in the development of the Muslim Ummah as a whole,” stated the second finance minister, but also emphasised the need to “remain humble and vigilant and that it is imperative that the principles of Syariah are not compromised”.
The second minister based his statement on the fact that since Islamic finance ventured into the market more than three decades ago, “the demand for Islamic finance has been estimated to grow between 15 and 20 per cent annually and the demand is continuing to outgrow supply, as the industry grows to exceed $1 trillion in assets”.
Furthermore, Pehin Dato Hj Abd Rahman also pointed out the encouraging indicator of the increasing number of conventional operators venturing into Islamic finance by “contributing towards innovation and assisting Islamic finance into many aspects of global trade and investment”.
The expanding appeal of Islamic finance can also be illustrated in the move by large international banks and other private sector financial institutions to provide Islamic financial services, which includes the establishment of exchange-traded funds that are vetted to ensure their conformity with Islamic investment principles, as well as offering `Takaful’ (Islamic insurance), said Pehin Dato Hj Abd Rahman.
The second finance minister was addressing the conference, attended by some 100 people, which include 24 Islamic finance scholars and practitioners from as far as the Middle East to countries closer in the region, as well as local academics.
Pehin Dato Hj Abd Rahman reminded that every growth story has its plentiful challenges. “In any fast growing industry, a healthy balance of regulatory supervision and self-regulation is critical. Many of the recent problems in financial institutions worldwide over the past 24 months are primarily due to poor corporate governance or inadequate risk management, or both.”
This was the reason why the minister called on the scholars and practitioners of “the present need to further strengthen corporate governance”, as well as “the need to build rigorous risk management systems”, which he added, “cannot be overstated”.
In reference to the industry’s relative infancy and limited product offering as compared to conventional markets, Pehin Dato Hj Abd Rahman noted the need for continuous product innovation. But he warned against “just imitating conventional financial products” and that whatever form future Islamic financial products offer, two criteria must be maintained:
“Islamic financial institutions must aim to be models of excellence in every respect and that innovation must not compromise Syariah principles”. As, in the second minister’s opinion, “it is only a matter of time that Islamic financial product innovations accelerate at a faster pace”, he emphasised on two other key areas of concern for the industry, which were the growing divergence of standards and Syariah principles between individual jurisdictions and the imperative of enhancing skill sets between Syariah scholars and the practitioners.
“We have no choice but to address these problems urgently,” noted Pehin Dato Hj Abd Rahman adding that it was only through “open collaboration between stakeholders that would greatly assist our goal of establishing a more progressive Islamic financial community”.
source : brudirect