Business

Saturday July 28, 2012

Need to build up confidence to promote Islamic finance globally

By LIZ LEE
lizlee@thestar.com.my


KUALA LUMPUR: Although Malaysia has one of the most established and regulated Islamic finance frameworks, local financial institutions need to build up confidence to promote it in the global Islamic finance market.

CIMB Islamic Bank Bhd chief executive Badlisyah Abdul Ghani said although Islamic finance had been thriving in the domestic market, most of the local banks had not been active in the global syndication market or even the sukuk market.

He said Malaysians tended to be apologetic about their own Islamic finance framework, perceiving it as inferior to other syariah-compliant frameworks, rather than introducing it as a quality market-leading financial product.

“This is not healthy for the international market because we are supposed to be the leader here. That is the only thing that is lacking in our initiative to internationalise our framework,” he said at the 16th Malaysian Banking Summit.

He said Islamic finance had helped Malaysia achieve financial inclusion and, if the World Bank could introduce the Malaysian Islamic finance model to its member countries and Organisation of the Islamic Conference (OIC) countries and encourage them to replicate it, it would help the countries to be financially independent. “And that would enhance global trade.”

Badlisyah also said that Malaysian Islamic financial institutions seemed to overlook the less popular OIC countries in favour of the rich nations in the Gulf Cooperation Council (GCC).

“Somehow, we seem to bypass the natural markets for Islamic finance. Malaysia can play the role of a big brother' for the OIC countries which have yet to develop their indigenous Islamic finance,” he said.

“There is a lot of talk in the international financial market that Islamic finance has too much focus on the rich, institutional investors, big corporates and the likes despite our affinity with ethics.”

Hong Leong Islamic Bank Bhd chief executive Raja Teh Maimunah Raja Abdul Aziz, however, noted that there would be much to overcome before the Malaysian Islamic finance model could penetrate the OIC countries.

“The objective of syariah and how to deploy equity in justness which is not easy because at the end of the day it is about bottomline and numbers (so) to go to the OIC countries as banks is also based on credit rating,” she said, highlighting that most of the banks in those countries were either poorly rated or not at all.

While local banks might want to reach out to introduce the Malaysian Islamic finance framework, she noted that without the acceptable credit rating, local banks would not be able to create any correspondent relationship.

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