Tuesday March 3, 2009
Turn to Islamic finance, Muslim nations urged
JAKARTA: Now is the time for Muslim countries to take advantage of the current global economic woes and turn the crisis into an opportunity by capitalising on Islamic finance, the Prime Minister said.
Datuk Seri Abdullah Ahmad Badawi blamed “unbridled greed in a financial system with no accountability on money lending” for the collapse of the conventional financial system which caused serious implications in the global economy.
He said the inflationary pressures in the global market had caused immense damage to the economic wellbeing of the poor.
“Through lack of choice, we have inherited a system where people can trade what they do not own,” he said in his address at the opening of the two-day Fifth World Islamic Economic Forum (WIEF) which was opened by Indonesian President Susilo Bambang Yudhoyono yesterday.
The forum, themed “Food and Energy Security and Stemming the Tide of the Global Financial Crisis”, was attended by 1,500 people including government and company officials to discuss pressing economic issues.
Making a comparison, Abdullah said Islamic finance was fundamentally based on the principle of “no risk, no reward”, which was a huge departure from conventional finance where considerable gains could still be made on zero risk.
“Such a system has opened the door to irresponsible lending where greed has been allowed to take control. The sub-prime mortgage crisis is a classic case in point,” he said.
In calling on Muslim countries to capitalise on Islamic finance, he said the world was beginning to appreciate the need for alternative arrangements and there was much discussion about the need for regulations and prudence in the management of the financial system.
He said Islamic finance was also gaining credibility as an alternative. However, he outlined two challenges the Muslim countries needed to overcome.
Firstly, he said, practitioners and stakeholders of the system must prioritise harmonising Islamic banking and finance standards because as long as the markets remained divided by different jurisdictions and interpretations of syariah standards, Islamic finance was unlikely to grow beyond the shores of Muslim countries.
The second challenge was for them to be continuously innovative and come up with fresh finance products that set them apart from their conventional counterparts.
Abdullah also said there was a need to attract more young and bright practitioners to enter the Islamic finance industry, as they were crucial for developing the intellectual capacity to meet the challenges he outlined.
Abdullah, who is also the WIEF Foundation patron, said that since the last forum in Kuwait in May last year the global economic landscape had turned from bad to worse.