The current turmoil offers Islamic finance industry an opportunity to transform to emerge as a role model for the global economy, said speakers at the at the DIFC Week panel discussions.

Khalid Abdulla Janahi, Group Chief Executive of Dar Al-Maal Al Islami (DMI) and Chairman of Ithmaar Bank, said Islamic finance banks should look at acquiring large conventional banks that would give them the ability to become leaders and innovators in the global economy.

Participants in the session titled ‘What will it take to lead the next generation of Islamic Finance’ also included  Hari Bhambra, Senior Partner, Praesidium LLP; Prof. KC Chan, Hong Kong Secretary for Financial Services and the Treasury; and Iqbal Ahmed Khan, CEO, Fajr Capital.

According to the speakers, as the global economy creates a new financial architecture by incorporating lessons from the global financial crisis, Islamic banking could emerge as a role model because of its focus on ethical investments.

Panelists were of the common opinion that the global financial crisis will have an impact on the Islamic Finance industry. However, the industry has scope for considerable long-term growth. “If you look at the demographics of the market, for example in Islamic countries like Egypt, there is a large number of people who need banking services,” said Iqbal Ahmed Khan. “There is a large market out there that is underserved,” he pointed out.

He said the ethical investment principles on which the sector operates will allow Islamic finance institutions to align themselves with corporate social responsibility (CSR) groups to create a wider appeal for Islamic Finance products.  Khan argued that Islamic Finance should play a role in finding solutions to support people who belong to the most vulnerable sections of society. “The financial crisis will affect poverty-reduction budgets around the world and there is a risk of increased polarisation between the rich and the poor. Islamic Finance can play a role in helping the poorest sections of society by finding creative solutions to support them.”

Bhambra said the role played by regulators was critical to the progress of Islamic finance. “The operational framework can either hinder or promote Islamic finance. If you over-regulate it you are going to strangle it,” said Bhambra. Many panelists felt that Islamic Finance institutions need to be regulated differently from conventional banks and regulators are sometimes extremely stringent on the Islamic finance sector.

Panel members said building the capacities of practitioners and educating regulators were key areas of improvement within Islamic Finance. With over 70 speakers from the world’s major international markets, 21 separate sessions, and a televised debate, DIFC Week is designed to address the important issues faced by businesses in the region.

 issacjohn@khaleejtimes.com