CIMB group chief executive Datuk Seri Nazir Razak (picture) and Bank Muamalat chairman Tan Sri Munir Majid spearheaded a panel discussion on Islamic banking at the World Muslim Leadership Forum that detailed how the principles of strict collateral, profit and risk-sharing and real economic activity that underpin Islamic financial transactions would help to bring in the required ethics and into conventional financing where sub-prime financing was seen as a leading cause of the global collapse of the last three years.
US$1 trillion (RM3 trillion), Malaysia is the largest holder of such assets and accounts for over 60 per cent of all sukuks (Islamic bonds) issued since 2006.
The country would definitely play a leading role in any expansion of Islamic financing, and a role in shaping reform of conventional financing would push Malaysia into the global economic limelight.
Nazir, who heads Malaysia’s top dealmaker, said that if a “fundamental overhaul of global banking to return to its basic function of financial services that adds value and generally build a less crisis-prone and more robust financial system” was desired, then Islamic economics in general had much to offer.
“The current calls for greater democracy of finance argues for stronger linkages between finance and real economic activity and higher checks and balances and transparency; these are already demanded by Syariah governance,” he said.
He added that when discussing Islamic finance with conventional financiers, the issue of no riba (usury or interest) occupies the discourse.
However, he said that he was not advocating a take over of the world of finance by Islamic regulations but rather, that it should “step back from preconceptions and dogmatism” and move towards “educating future generations of bankers to place the community first and how to tame some of the animal instinct that you see on investment bank trading floors.”
“We are not trying to convert anyone to a religion but when we talk about being ethical and restraining excesses, solutions are already there in Islamic finance,” he told The Malaysian Insider later.
Munir, who also chairs Malaysia Airlines, also extolled the stability of Islamic finance and while he did not want to “dance on the grave of something that is not actually dead yet,” he said it was time that Islamic finance advance from its “slowly, slowly” approach and play a bigger role in the market.
Munir said that the political economy of global finance was a sensitive one but noted that Islamic finance was growing at over 20 per cent annually for the past few years and the potential for growth continued to be considerable as it is estimated that the 1.5 billion global Muslim population would grow to 2.5 billion by 2020.
On top of this, non-Muslims are also simply looking for the best product and with regards to loans and mortgages, they simply sought out the lowest cost product, he explained.
Nazir also pointed out that in Malaysia, the fastest growing Islamic mortgage customers were Chinese.
Earlier in the day, Foreign Minister Datuk Seri Anifah Aman made an open offer to the Muslim world to tap into its knowledge and experience as the leader in this sector while Nazir also revealed that Malaysia has already been engaging non-Muslim majority countries like China, Japan and Australia to assist them in developing their own Islamic banking sector.
Source : http://www.themalaysianinsider.com/business/article/malaysian-bankers-push-for-islamic-finance-to-guide-banking-reforms/ - Oct 8, 2010
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