Shariah as Key Pillar in Overall Islamic Financial Industry

Transcription

1. Keynote Presentation : Shariah as Key Pillar in Overall Islamic Financial Industry
2. Bismillahirrahmanirrahim Yang Amat Arif Datuk Sheikh Ghazali Abdul Rahman Chairman , Shariah Advisory Council of Bank Negara Malaysia Distinguished scholars Distinguished guests Assalamualaikum warahmatullahi wabarakatuh It is my honour to be here this morning to officiate the International Shariah Scholars Dialogue as part of our endeavour to strengthen further Islamic finance as a credible, dynamic and resilient financial industry in the global financial system.
3. As you are aware , this dialogue is a continuation of the inaugural Shariah Scholars Dialogue held in June last year. As the first dialogue has made a breakthrough in gathering prominent scholars to engage in a constructive dialogue, Bank Negara Malaysia is committed to continuously provide the enabling platform for the Shariah community. I hope this two-day dialogue would pave the way for further progress in fostering the cooperation and collaboration among scholars, in particular, to address important Shariah issues faced by the Islamic financial services industry. It is our aim that this kind of dialogue would become the platform to deliberate cross border Shariah issues and to reach a common agreement to facilitate the smooth running of Islamic finance globally.
4. Ladies and Gentlemen For more than two decades , we have witnessed the rapid expansion of the industry, and observed bright growth prospects in the Islamic financial industry which is now becoming more globally integrated. Islamic finance has now gained wide acceptance as a form of financial intermediation even in non Muslim countries. As the pace of development of the industry accelerates and as the environment becomes increasingly more competitive, the industry is continuously faced with more issues and challenges in areas such as banking practices, legal and product development which requires concerted efforts from a host of stakeholders to confront and resolve these issues. Now I would like to deliberate further some of the issues that I have raised earlier.
5. •  Rapid expansion with bright growth prospects •  Continuously facing issues and challenges •  Confront and resolve issues
6. Rapid Expansion •  Greater efforts to develop a comprehensive financial system •  Banking, takaful, and financial market •  Growing asset size •  Islamic finance is now globally integrated •  Facilitates cross border trade •  Active involvement of conventional markets in Islamic finance •  Islamic bank is governed by its own set of international regulatory and prudential standards • Malaysia Islamic finance initiatives Operates in more challenging environment ...
7. Malaysia Islamic Finance Initiatives Malaysia as an International Islamic Financial Centre •  Attracting players to establish business office in Malaysia to set up International Currency Business for both banking and takaful business •  Providing support and enabling platform in the origination, issuance and trading sukuk both Ringgit and multi-currencies •  Liberalizing foreign exchange policy to allow multi-currencies sukuk to be issued out of Malaysia •  Promoting fund and wealth management •  Granting tax holiday for 10 years under Income Tax Act •  Established one stop Executive Committee to facilitate the implementation initiatives
8. Islamic Finance – Internationally Integrated Greater participation of conventional markets •  New licenses in non Muslim countries e.g. UK and France •  Legal amendment (e.g. tax law) to facilitate Islamic finance - UK, S’pore •  Tapping Islamic funds through sukuk issuance • Multinational corporations and multilateral agencies e.g. World Bank • Strong interest from Japan Major advancement of IFSB •  Globally recognized institution encompassing banking, takaful, capital market sectors •  94 members (including IMF, World Bank, BIS) •  Globally accepted international regulatory and prudential standards
9. Islamic Finance Today •  300 Islamic financial institutions and more than 80 takaful operators around the globe •  Islamic assets of Islamic banks and window-based conventional banks: >USD560 billion •  Global market capitalisation of Dow Jones Islamic Index: >USD10 trillion •  350 Shariah-compliant funds have been established globally •  Increase in liquidity in particular from GCC countries by USD500 billion from high oil prices –  Great potential demand for sukuk market Source: Islamic Finance News
10. Issues and Challenges ... Given that... • Fast evolution of Islamic financial system • Rising competition from well established and emerging financial centres • Untapped potential in the industry There is this need to... Modernize and innovate Islamic financial system within Shariah boundary to meet customers’ demand Confront and resolve issues \ §  Continuously review regulatory and legal framework to suit Shariah requirements §  Develop and standardize global Islamic banking practices – promote uniformity to facilitate cross border transaction and global convention – equivalent to ISDA, UCP §  Conduct in depth research and find solution on Shariah issues relating to risk mitigation, liquidity management and hedging §  Address shortage of talents in particular financial savvy Shariah Scholars and Shariah savvy financial practitioners §  Continuous adaptation of Islamic financial products - is it sustainable?
11. Why are there issues on adaptation in Islamic finance products ? Conventional savvy Islamic practitioners Expect Shariah scholars to align Islamic financial products to suit conventional operating environment Relegate Shariah as product shaper as compared to environment shaper Need to develop conducive and robust Shariah environment •  genuine Islamic financial instruments • Islamic banking practices and disciplines • regulatory and legal regime Shariah scholars key stakeholder to facilitate this development
12. “...To each among you, We have prescribed a law and a clear way. If Allâh willed, He would have made you one nation, but that (He) may test you in what He has given you; so strive as in a race in good deeds. The return of you (all) is to Allâh; then He will inform you about that in which you used to differ.” Surah al-Maidah : verse 48
13. I hereby officiate the International Shariah Scholars Dialogue 2006 May we have a successful dialogue , InsyaAllah Thank you
14. Addressing Scarcity of Shariah Talents Malaysia ’s contribution... Fund for Shariah Scholars in Islamic Finance §  International scholarships to pursue post graduate studies in Shariah specializing in fiqh muamalat §  International scholarships to Shariah graduates to pursue Certified Islamic Finance Professional (CIFP) §  Grants (USD1million) for research and development in Shariah specializing in fiqh muamalat International Centre for Education in Islamic Finance (INCEIF) §  Offer world's first professional certification programme in Islamic finance §  CIFP Bright Scholarship – full time CIFP programme at INCEIF §  Offer post graduate studies in Islamic finance §  Conduct research in Islamic finance
15. Issue of non convergence ... meeting different expectations Shariah Expectations Must conform with Shariah tenets •  Instruments •  Legal •  Regulatory Leads to Practitioners Expectations • Constrained by conventional operating environment –competition • Subject to legal and tax regime which is not designed to cater for Islamic contracts Current operating environment limits full adoption of Shariah tenets leading to accommodative Shariah practices, resulting in non convergence. Given this operating environment, what would be our level of tolerance ?
16. Before I end my presentation , I would like to quote the meaning of verse 48 of surah Al-Mai’dah which says that... “...To each among you, We have prescribed a law and a clear way. If Allâh willed, He would have made you one nation, but that (He) may test you in what He has given you; so strive as in a race in good deeds. The return of you (all) is to Allâh; then He will inform you about that in which you used to differ.” It is in this endeavor that we really need to put our efforts and contribution to support the development of Islamic finance. Ladies and gentlemen, Dengan lafaz I hereby officiate the International Shariah Scholars Dialogue 2006 May we have a successful dialogue, InsyaAllah