Halal Hub Can Be Catalyst For Developing Islamic Banking And Finance Industry

Brunei has to make use of its intentions to establish itself as a halal hub to further develop the Sultanate’s Islamic banking and finance industry, said Universiti Kebangsaan Malaysia’s Professor of Banking and Financial Economics Dr Abdul Ghafar Ismail.

Dr Abdul Ghafar said that Brunei “needs” to combine the two industries as it will allow the country to kill two birds with one stone in terms of economy diversification. “The halal food and Islamic banking and financing industry goes together hand in hand. You want to produce halal goods but the big question I want to ask is, where does the money to produce this come from,” he said.

“If you want to create halal products then the money should come from halal financing… this is the concept. In this perspective, it will be good if the government can synergise these two because both industries should really go together,” said the professor.

He spoke of similar opportunities when it comes to Brunei’s oil and gas industry. “Oil and gas is the main revenue for the country and this needs money. In order to ensure that these big players can get the financing they need, they will have to be backed by a big financial institution,” he said. “They need these services so this is an area that these industries can cooperate, work and develop together,” he added.

Speaking on the topic of “Contemporary Islamic Finance: Challenges and Responses” at the International Conference on Islamic Finance 2010, the professor said the objective of establishing Islamic financial institutions in the country is not only to create wealth but also to contribute to the well being of the community.

“They have the task of distributing the wealth fairly and justly. It should not only be Syariah compliant but must also aim to achieve this objective,” he said. When asked what would be the best Islamic banking model in Brunei, Dr Abdul Ghafar replied that there is no single best method.

“There is no true answer because there are so many different models of Islamic banking in the world. The question should be which method or model can distribute the wealth most fairly. It depends on the design of the country,” he said. “It would be really good if you can have a variety of financial institutions that can offer the products or services that can fulfil what the community needs,” said the professor.

“If in Brunei, you need microfinancing services then why not do this to cater to the neglected individuals or community. Also those in the corporate sector will normally ask for corporate financing services so why don’t banking institutions offer this.” — source  TBTimes

Takaful market poised for growth but lacks Shariah compliant investments, talent

SINGAPORE: The Islamic insurance or takaful market is expected to see strong growth this year.

Still, challenges remain including low market penetration and a lack of Shariah-compliant investment opportunities for takaful players.

Industry executives said they want to see more Islamic bond, or sukuk, issuances in order to help them balance their portfolios away from equities and reduce risk.

The multi-billion dollar purchase of AIA last week was a massive vote of confidence in Asia’s insurance sector and Prudential is not alone in being bullish about the outlook.

At a conference on Islamic insurance or takaful, industry executives said they were optimistic about growth prospects.

Total takaful contributions only account for just one percent of the global insurance market.

But this is expected to increase significantly, thanks to growing interest among Muslims and non-Muslims alike in shariah-compliant investment and insurance products.

Daud Vicary Abdullah, global leader, Global Islamic Finance Group, Deloitte, said: “We’ll see more growth in the Gulf. I think it’s occurring here in Singapore, Malaysia and Indoneisa. I think the growth is positive. But to put a figure on it on a global basis, the numbers of 10 to 15 per cent in terms of growth of market are not unrealistic.”

According to an estimate by Ernst & Young, total takaful contributions can reach US$7.7 billion by 2012.

That’s compared with just US$1.4 billion in 2004.

Despite the growth prospects, there appears to be a lack of shariah-compliant bonds or sukuks.

And some central bankers say they are working to address the shortage.

Azleena Idris, Deputy Director, Islamic Banking & Takaful Dept, Bank Negara Malaysia, said: “Malaysia regularly issues shariah-compliant money market instruments so that it will facilitate the liquidity aspect of things. Now when it comes to the takaful space, the longer term instruments are something we’re aggressively promoting under the MIFC banner.”

Industry players also said they’re severely lacking in talent and the industry will likely see more consolidation as the smaller takaful players strive to become more competitive.

source : channel news asia