In mid January of this year, Euromoney Seminars held the third installment of its annual Islamic Finance Summit.  The London-based (UK) conference brought together some of the top Islamic Finance professionals from around the world, and conference participants were treated to numerous presentations, highlighting where Islamic finance has come from, where it is today, and where it is going.

 Seminar Manager Jamie Balderston stressed the idea that innovation was the key aspect to this conference and with a subtitle of “The Future of Islamic Finance”, the Summit showcased numerous examples of how the Islamic Finance industry is preparing itself for the future.  When asked about the interest in this topic from conference delegates, Balderston pointed out that the first Summit in 2002 had 170 delegates attend.  Comparing that to the 260 that attended this year, clearly the interest of finance professionals both Muslim and non-Muslim has been piqued.

 In his opening remarks, Adnan Ahmed Yousif, CEO of Bahrain Islamic Bank described Islamic Finance as a “global force in the worldwide financial system”.  That may be a slight exaggeration but it is undeniable that in the thirty years since the humble retail beginnings of Islamic Finance, what the industry has been able to achieve is extremely significant.  With an estimated US$ 280 billion in Gulf Banks, there does not appear to be any shortage of capital.  However, capitalization, while important, is not the only element important to the sustainability of a strong financial system.  The creation and enforcement of a regulatory framework is a critical aspect required to direct the growth of any quickly developing industry and the Islamic Finance sector is no exception.

 A New Regulatory Framework

 An international Islamic Financial market is not simply made up of the financial institutions, but rather is a network of the regulators, central banks, and the various financial players, according to Dr. Zeti Aziz, Governor of the Central Bank of Malaysia.  In her keynote address, Dr. Aziz outlined a number of areas that need attention in order to achieve a viable Islamic Financial marketplace.  In addition to greater transparency and disclosure of information, an effective legal, regulatory, and supervisory framework must underpin the industry’s infrastructure in a manner that is consistent with Sharia’a principles.

 The importance of the Sharia’a cannot be understated and forms the bedrock upon which the industry is based. Without the clear connection to the Sharia’a, no so-called Islamic Financial institution will be able to draw Muslims into the industry, particularly those who have remained on the sidelines of the conventional financial sector.  It is here that the Sharia’a scholars, among them Sh. Nazim Yaquby, Dr. Mohamed Elgari, Sh. Essam Mohammed Ishaq, all of whom attended the Summit, have a critical role to play in the development of the industry.  

Innovation and New Products

 The size and depth of the Islamic financial market has not gone unnoticed by conventional financial institutions and industry players. Muslims hold some of the highest social and economic positions in many countries of the world and a renewed interest in Islam has created a compliant marketplace, not only for Islamic financial institutions but also for products catering to the Muslim investor.

 In addition to product offerings from large conventional institutions, Muslim-owned and operated investment companies are also coming to the fore.  Oasis Group Holdings based in Cape Town, South Africa is a full-service money manager with numerous investment products for both institutional and private clients.  Working from a “sound and ethical basis”, the company has grown considerably and has opened another office in Dublin, Ireland transporting its business model outside of South Africa and into Europe.

 An Industry Well on its Way

 The most striking aspect of the Summit was the sheer volume of activity that is currently taking place.  Individual financiers, large and small banks, and other financial institutions are all seeking to take advantage of the increasing demand for Sharia’a compliant alternatives to conventional financial structures. 

 Despite this, however, it is clear that much more work remains to be done.  The considerable talent that exists in the global Muslim community must be harnessed in order to grow and expand the reach of Islamic Finance, not only as a profitable business, but also as a means of bringing Islam and the Sharia’a into the lives of Muslims everywhere.  The Muslim community has within it the ability to excel and serve as a model for others.  As Oasis Chief Executive Officer Adam Ebrahim said, “By being transparent [and] by being accountable” puts continued pressure on financial excellence.  And that’s exactly where it should be.

 Aftab Sabir has an MBA from the Schulich School of Business at York University and is Manager, Western Region of Salam Financial Inc.

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