ISLAMIC finance is growing in popularity even in non-Islamic countries
and to perform better over conventional banking amidst the global
financial crisis, markets have to focus on the similarities and not
just the differences of Islamic financial systems in different
countries.
"Currently if you look in the context of Islamic finance in the global world, Islamic finance is spread over the world, originally from Malaysia, Southeast Asia and the Middle East, now it has gone to Europe and Japan and Australia, so it has globalised," said Professor Dato' Dr Mohd Azmi Omar, head of the International Islamic University Malaysia, who spoke at the conference on Envisioning the Future of the Islamic World in the Era of Uncertainties: Views of Scholars at the University Brunei Darussalam yesterday. (source)
"Currently if you look in the context of Islamic finance in the global world, Islamic finance is spread over the world, originally from Malaysia, Southeast Asia and the Middle East, now it has gone to Europe and Japan and Australia, so it has globalised," said Professor Dato' Dr Mohd Azmi Omar, head of the International Islamic University Malaysia, who spoke at the conference on Envisioning the Future of the Islamic World in the Era of Uncertainties: Views of Scholars at the University Brunei Darussalam yesterday. (source)
He said that there are now many countries that are not necessarily Muslim countries, but have a small fraction of Muslims in their population such as Luxembourg and Liechtenstein that are going on board with Islamic finance and showing interest in developing the system. "They have also come on board mainly because they are a global financial centre and many countries are now interested to participate in this system," he said.
He cited a recent study done by the International Monetary Fund (IMF) which compared the Islamic financial system with the conventional financial system and found that Islamic finance was less affected by the global financial crisis. The dean's theory was that it had to do with the principles of Islamic finance, which doesn't approve the idea of leveraging, as instead it takes on the principle called "ownership of assets".
"Islamic finance must be tied to real assets, and it cannot be financed without real assets, and other things include the issue of gambling and so on," he said.
He said his opinion was recently sought on a study looking at the future of finance. "They are trying to come up with a paper for the IMF on how the new financial architecture looks like in the future," he said, adding that in order for them to do this, they had to look into what is being done in Islamic finance.
He said that in order for this to happen, and in order for new Islamic finance products are introduced, bankers have to go back to the basics of Islamic finance and the Syariah committee. "It goes back to what is halal or haram, and also where it brings value and benefit to the society," he said.
Regardless of the differences in standards that each country's Syariah board has, Professor Dato' Dr Mohd Azmi said that one of the things that the Islamic financial services boards are trying to do concerned standardising the system. "I think we don't have to be so focused on the difference like the other scholars are saying, but they should be looking at the agreement of them and over time, these differences will be agreed upon," he said.
He explained that in the context of the "Western" banking system, there are differences as well. "A simple example is the accounting standards, where the accounting standards in Brunei, Malaysia and Singapore are not all the same, so that's why we should not be harping on the differences but commenting on the similarities," he said.
Asked about how developing countries can benefit from countries with a more developed Islamic financial system, in terms of products, he said that when a product is to be introduced into a new country, "it has to relate to the economic development of the country".
"This is because when you take products from a certain country and offer it to another country, the market may not need those kind of products because of the level of economic products," he said.
He said what financial centres need to do is level the type of economic products that they are offering depending on the income of the particular country, but not withstanding that they have to make sure that the banks are looking after the "ethical aspects and not purely on profit motives". The Brunei Times
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