MERVYN LEWIS: If only they had followed Islamic principles ...

The calls for moral and values in financial markets by top world leaders are proof that Islamic finance could assume a role in the global financial system.
These demand were made by Britain's Gordon Brown and Autralia's Kevin Rudd, at the recent meeting of the world's top 20 countries in London.
"Islamic finance is all about moral spiritual values. It is all about equity in commercial transaction. The whole basis of Islam itself is one should not be concerned solely in one's own but also seek the advancement of ummah (Muslim community)," academician Mervyn K. Lewis told Business Times (April 13, 2009) in an interview in Kuala Lumpur recently.
Islamic finance is not just about being interest-free but it prohibits gharar or uncertainty, gambling and only allows halal investment activities.
"Very importantly is the religious supervision provided by the syariah board of the respective financial institutions," he told the newspaper.
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If the West does not want to adopt Islamic banking directly, it could "copy and replicate the Islamic principles," he said.
Lewis is in Malaysia under the Securities Commission and University Malaya Islamic Finance collaboration. He is first visiting scholar to be attached to UM for a month.
The SC will also host a public lecture by Lewis this Thursday entitled "An Islamic Economic Perspective on the Global Financial Crisis."
"I will look at the western financial institutions and ask, had they followed the Islamic principles where activities are governed by a board of religious scholars, how would things be different."
In the West, there are ethical investment funds which are based on certain aspects of a religion. There are also funds guided by the environment and sustainability principles.
"There is no ethical banking. There are not too many banks that do not invest in alcohol or gaming activities. There is no ethical insurance companies... etcetera," he said.
The potential for Islamic finance is tremendous but Lewis conceded this will take time as the area is still a mystery to most people in the West.
Even in Malaysia, which has the best regulated Islamic finance sector in the world, Islamic loans make up only 15 per cent of the total market.
"The target of 20 per cent by 2010, I believe is going to be undershot," he said, referring to the target set by the government.
But Kuala Lumpur has the chance to lead the industry due to the huge Muslim population in the region. Indonesia has 180 million Muslims, China has around 100 million, while Thailand has 7 million.
Lewis does not specifically teach Islamic finance at his university. His interest came about back in 1994 when he had to mentor a post-graduate student from the Middle East working on Islamic finance at the University of Nottingham.
In 2001, the paper was turned into a book that touched on governance in Islamic finance.