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23 May | Friday
New and Emerging Economies: Final Sessions of the 11th IFSB Summit Explores the Role, Prospects and Challenges of Islamic Finance

Kuala Lumpur, 23 May 2014 – On the second day of the 11th IFSB Summit, key leaders in the Islamic financial services industry (IFSI) deliberated on the role, prospects and challenges of Islamic finance, in particular in new and emerging economies. Themed “New Markets and Frontiers for Islamic Finance: Innovation and the Regulatory Perimeter”, the Summit took place on 21 and 22 May 2014 at Le Meridien, Mauritius, hosted by the Bank of Mauritius.

The day started with a session, entitled: “The Role of Islamic Finance in Economic Development: Promoting Financial Inclusion: Sustaining Innovation, Expanding the Regulatory Perimeter – Striking a Balance”, was chaired by H.E. Abdelrahman Hassan Abdelrahman Hashim, Governor, Central Bank of Sudan. The speakers in the session consisted of Ahmadou Al Aminou Lo, Advisor of The Director General, Financial Stability and Inclusion, Edy Setiadi, Executive Director, Islamic Banking Department, Financial Services Authority, Indonesia, Daud Vicary Abdullah, President & Chief Executive Officer, International Centre for Education in Islamic Finance (INCEIF) and Professor Habib Ahmed, PhD, Sharjah Chair in Islamic Law & Finance, Durham University Business. The session reviewed the role of Islamic finance in promoting economic development, as well as identified gaps, challenges and prospects in increasing access to Islamic finance in Islamic finance jurisdictions.

The speakers shared their experiences in enhancing financial inclusion in their respective jurisdictions. This included the introduction of an action plan at national and regional levels to enhance economic wealth through poverty alleviation, income distribution, and support to the stability of the financial system by providing access to finance for all levels of the population. Strategies implemented consisted of creating awareness in Islamic finance, strengthening the relevant infrastructure, and developing products and services for the lower-income group such as safe-keeping, money transfer, savings, finance and Takāful. Main challenges to be addressed include asymmetrical information, mobilisation of resources, and capacity building. On the supply side, both Islamic banks and non-banking financial institutions are encouraged to play a greater role in providing financial products to both the small and medium enterprises as well as to the poor. This requires product development and innovation. However, innovation needs to be supported by regulation that goes beyond rules- or principles-based regulation to ‘meta-regulation’ that is proportional to the costs, risks and expected benefits. In essence, it is important to examine financial services offered and determine the regulatory perimeter based on their risks.

The fifth session, themed, “Panel Discussion on “New and Emerging Islamic Finance Jurisdictions: Opportunities and Challenges Ahead”, was chaired by H.E. Rundheersing Bheenick, Governor, Bank of Mauritius. The speakers in the session included H.E. Muhammad Ibrahim, Deputy Governor, Bank Negara Malaysia, Dr. Abdel-Rahman Eltayeb Ali Taha, Chief Executive Officer, Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), Mukhtar Bubeyev, Acting Chairman, Committee for the Control and Supervision of Financial Market and Financial Organisations, National Bank of Kazakhstan, and Hassan Varvani, Chairman, First Community Bank Limited, Kenya. The session explored the opportunities offered by the new and emerging Islamic finance jurisdictions as well as the corresponding challenges, and key success factors for the jurisdictions to grow and develop the industry moving forward.

The speakers shared their experiences as well as the key success factors for new jurisdictions in developing a successful IFSI. These include offering Islamic finance as a competitive alternative to conventional finance, introducing global best practices and international standards which are adapted to local circumstances. Central to Islamic finance are the Sharī`ah aspects, and the importance of mutual recognition of the diversity of Sharī`ah opinions for Islamic finance to prosper across borders. Another important factor is the role of the government and the regulatory and supervisory authorities (RSAs). The government’s commitment and action will subsequently influence and encourage the participation of private sector, while the RSAs can play a catalytic role in promoting the IFSI and ensuring its stability and resilience. Multilateral development banks such as the Islamic Development Bank (IDB) are also playing a role in assisting new jurisdictions in developing their IFSI. Initiatives include collaboration with the IFSB in providing technical assistance and developing human resources and talent, thus strengthening the capability of the IDB and the IFSB to provide technical assistance was regarded as a high priority. Challenges to be addressed by new and emerging markets include adapting Islamic finance to the existing legal and regulatory landscapes, tax regime, as well as a lack of skilled resources in Islamic finance, in particular in Sharī`ah matters.

The Summit ended yesterday. It was attended by key Islamic financial services industry leaders, from among regulatory and supervisory authorities and financial institutions from 28 countries, as well as the local Mauritian financial community.

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