India ‘learning potential of Islamic finance’

Organizers expect more participation of global leaders and policymakers to attend the 10th edition of World Islamic Economic Forum (WIEF) in November 2014 in Dubai.
The 9th edition, which saw Prime Minister David Cameron aggressively wooing Islamic investments into the UK, ended in London recently.
Jointly hosted by the UK and Malaysia governments, 18 global leaders, five central bank governors and more than 2700 delegates from 128 countries participated in the annual international conclave on Islamic economy.
“Dubai has good infrastructure and expertise to hold such big events. We expect wider and better participation of world leaders there,” said Musa Hitam, chairman of the WIEF Foundation.
Hitam, a former deputy prime minister of Malaysia, declared Dubai as the venue of the 10th edition of the WIEF at the closing session.
A memorandum of understanding was also signed between the Dubai Chamber of Commerce and Industry and WIEF Foundation.
Hamed Buamim, president and chief executive officer of the Dubai Chamber and Alan Duncan, Britain’s junior minister for international development also addressed the ceremony which was followed by a video presentation on Dubai.
Before the big event, the organizers are planning to hold roundtable meetings in various countries to promote the event.
Hitam said Europe realized the potential of Islamic finance and embraced it wholeheartedly after the global financial meltdown but countries such as the US, China, India and South Korea are shy of it and he wanted to see more active participation from such countries in Dubai.
“India is much more conservative, but they are slowly beginning to learn and understand its potential in the wake of the economic turmoil,” he said.
“I think it will not be long time before India hosts WIEF. We now have Indian representation on the international advisory panel and the country is very powerful to attract Islamic finance.”
One of the focus of the event, according to him, was standardization of rules and practices in different countries and the exercise of achieving the goal has just started.
A panel of the world’s leading central bankers gathered here to discuss the policymaking steps needed to standardize global standards in the Islamic Finance Industry also shared his concerns.
Sultan Bin Nasser Al Suwaidii, governor, Central Bank of the UAE, stressed the need for reducing the cost of financing.
“Prior to the growth of the industry there was a feeling that Islamic finance would be provided at a lower rate to conventional banking and what we see is the opposite… Our practice has been to look at the product. The UAE has always been open so there is no set of written rules for products. It is done on a case-by-case basis. We look at all products,” he said.
The panel discussed several issues with harmonization high on the agenda.
The need to standardize not just regulations but accreditations for Islamic scholars involved in banking was recognized by all the panel members.
The range and scope of Islamic finance was also discussed — all agreed that it must go beyond the issuance of corporate Sukuk.
“We are witnessing exponential growth in the Islamic financial system. We are also more significantly seeing cross-border transactions. Harmonization of global standards is key…we must distinguish between market practices and global standards… Shariah rulings in transparency and rationale will remain important,” said Zeti Akhtar Aziz, Governor, Bank Negara Malaysia (The Central Bank of Malaysia).
Hamood Sangour Al Zadjali, executive president of Central Bank of Oman, said: “Given the lead and nimble footedness of standard banks, Islamic banks need to be equipped with a range of products and services. This can come only through user-friendly approaches. It is not sufficient for markets to focus on sukuk only, but we must focus on SMEs… Greater consensus is required before the system can mature.”
Mallam Sanusi Lamido (CON), governor, Central Bank of Nigeria, said his country takes the position so as the market moves forward. Each year, they face circumstances without exact precedent.
“As long as we accept a need for pragmatism and balanced rules, we’ll find a way forward,” he said.
Paul Fisher, executive director for markets, Bank of England, suggested “deep and liquid markets” for the Islamic finance to become a force.
“But if you have markets based on buy-and hold investors, they are not normally liquid. We need higher frequency traders — I think this is acceptable — but we need to think about a wider participation for sharia products,” he said.
“The debate about harmonization is important. Products don’t have to be identical; but the legal basis underlying all of those must the same, so people don’t have to worry. Getting consistency over what is sharia complaint would reduce basis risks. People also want to see benchmark rates.”
The panel was moderated by Sayd Farook Global Head, Islamic capital markets, Thomson Reuters, UAE.