Immense opportunity to develop talents in Islamic banking
KUCHING: There is immense opportunity to develop talents in the Islamic banking following positive reports on growth of the Islamic banking industry in Malaysia despite the pandemic, the Chartered Institute of Islamic Finance Professionals (CIIF) highlights.
Amidst the ensuing uncertainty, Fitch Ratings, a credit rating agency, assures us that it is not all “gloom and doom”, that within the thin silver lining, some sectors will thrive – one of them being Islamic banking.
According to CIIF chief executive officer (CEO) Dr Azura Othman, the key to Islamic banking’s resilience lies in the principle of Islamic finance itself, which is prohibition of interest, meaning that financing will be based on the real economy.
“At the core of all these is the principle of justice and equity which encompasses property rights, equitable distribution of wealth, risk-sharing, fulfilment of obligations and the sanctity of contracts.
“Unlike the conventional financial system that focuses primarily on the economic and financial aspects of transactions with their material outcomes, the Islamic system places equal emphasis on the ethical, moral, social, and public interest dimensions, to enhance equity and fairness in commercial transactions.
“This principle asserts that both the bank and its customers, have their share of ethical and moral obligations in fulfilling the financing contracts in contrast to an interest-based lending approach where risks are substantially transferred to borrowers.
“The borrower’s contractual obligation to repay the principal together with the interest, which is compounded over a stipulated time frame, notwithstanding his economic situation, in effect disconnects the relationship between the financing and the project or purpose for which the funds are needed resulting in divergence between the financial and real economy.
“Islam encourages lenders to provide borrowers in genuine difficulty be given time to repay moneys owed.”
Empowered by this principle, Islamic banks have long practiced foresight in looking into vast areas of risk, ensuring that their contingency plans during an unforeseen situation, like Covid19, will be effective.
The analysis as reported by Fitch Ratings further concurs Islamic banking’s preparedness to maneuver the economic crisis caused by the Covid-19 pandemic with results to show.
Owing to the flexibility Islamic Banking possesses, this financial industry has not only survived but also thrived during the pandemic.
According to Pew Research centre, the number of Muslims around the world is growing twice as fast as the rest of the population. By 2060, there could be as many as three billion Muslims on Earth - a 70 per cent increase from 2015.
Whether if they live in Asia, Europe, Middle East, or Africa, the next generation of Muslims will have at least two things in common: youth and technology.
The future growth of shariacompliant institutions will therefore greatly depend on opportunity, their ability to gain knowledge; and master technology and innovation.
Further, there are various efforts to develop an international regulatory framework governing Islamic finance.
Malaysia, Indonesia, Qatar and Kuwait have all taken significant steps to centralise and simplify their sharia compliance.
The challenge is putting Islamic finance conceptual values into action, the constraints and state of readiness of Islamic bankers.