Malaysia establishes programmes to train on Islamic banking
KUALA LUMPUR — The Central Bank of Malaysia and the Malaysian government have established programmes to educate central banks in other parts of the world on regulating Islamic financial systems.
The local universities in Malaysia will also offer programmes to educate and train bankers on Islamic financial products, Tan Sri Dr Zeti Akhtar Aziz, Governor of Bank Negara, Malaysia said while addressing one of the sessions at the sixth World Islamic Economic Forum here on Thursday.
Emphasising that Islamic financial products are innovative and competitive she said about 50 to 70 per cent Islamic financial products are used by non-Muslims in Malaysia while multinationals have issued sukuk bonds from the Malaysian bond market and this is a testament to the success of Islamic financial products.
Humphrey Percy, Chief Executive Officer, Bank of London and the Middle East said even though the global Muslim population was about 1.6 billion only 14 per cent use banks while Islamic finance represents less than one per cent of global finance systems.
He said Islamic financial institutions are faced with several challenges which have to be addressed before their financial products can be marketed at global level.
The challenges include lack of education on Islamic financial products in Western countries and the narrow range of products offered in Islamic financial markets with few instruments that hedge and manage risks, Humphrey argued.
“Another major challenge is the lack of standardisation of terms among countries offering Islamic financial instruments,” he said. He said London was an emerging Islamic financial market and the largest in Europe but currently there is little room for growth as most central banks in Europe do not have the ability to regulate Islamic financial instruments.
John Sandwick, specialist in Islamic Wealth and Asset Management, Switzerland said that $65 trillion worth of funds are under wealth management funds and of this amount only $ 2.5 trillion are owned by Muslims with most of the wealth being invested in deposits, bonds, stocks and real estate and less than two per cent in equity.
He pointed out that the Swiss banking system handles about $200 billion worth of funds but the country does not have an Islamic finance system.
He said traditional methods of wealth management are part of the problem as most of the wealth in the Muslim world was invested in real estate which has lost its some of its value due to the global economic crisis.
“These funds could have been invested in sukuk and other Islamic financial instruments but these are not available in most European nations,” he said.
Khalled Abdullah-Janahi, Vice Chairman Ithmar Bank, Bahrain agreed that there is a need to educate regulators and bankers on Islamic financial products. There is also a need to regulate investors and depositors to direct their fund managers to invest in Islamic financial products.
Mumtaz Khan, Chief Executive Officer of Maybank MEACP Pte Ltd Singapore said in order to move Islamic financial products forward, there was a need to put in place a new world order with more equitable distribution of wealth.
“The Group of 20 is one of the platforms for the new world order but there are only three Muslim nations in this group; Saudi Arabia, Turkey and Indonesia. The global financial system is still defined by the International Monetary Fund and the World Bank’’, Mumtaz recalled.
“The Islamic Development Bank is not a key player in the G20 or the G8. There is a need for the WIEF, IDB and Malaysia to be part of the G20 as many Islamic institutions based in Malaysia have strong ties with the West, Islamic nations, India and China. This group will be able to bring Islamic finance to the same global level as other global financial players,” he said. —
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