Monday, January 13, 2014

BADLISYAH: Six wishes to enhance Islamic finance in 2014

Last year, we saw China landing a rover on the moon, the US shut down its government, NASDAQ was in error for three hours during trading time, Detroit filed for bankruptcy, the rise of Bitcoin, Malaysia ranked sixth most business- friendly nation globally by World Bank and the passing ofs South Africa’s hero, Nelson Mandela.

This year, I anticipate another memorable year as we see through the tapering of the quantitative easing in the US, the finalisation of Iran nuclear deal, the realisation of Bangsa Moro autonomous rule in Southern Philippines, the further implementation of major structural reform in Malaysia, and many more.

These interesting happenings, seen and to be seen, will surely make life more exciting but alas, this column is all about Islamic finance and I guess I can’t run away from it.

So, what is in store for Islamic finance in 2014? It’s timely for a new year wish list I reckon — I can’t speak for everyone in the industry but here are my wishes for Malaysia summarised below:

1. I wish for new business development in the Islamic capital market to fill market gaps and breathe more life into the market beyond sukuk. Let’s have more Islamic initial public offerings (IPOs), Islamic warrants, Islamic structured product, Islamic real estate investment trusts (REITs), Islamic exchange-traded funds (ETFs) etc., and carry out more Islamic equity capital marketrelated activities. The Islamic debt capital market is essentially fully developed with all the needed sukuk products.

2. I wish for the government to fully undertake its financial management in a Shariahcompliant manner considering Islamic finance is able to fulfill all their financial needs. The government does not undertake non-Shariah-compliant activities in the running of the country so there is no reason why they can’t manage their financial affairs 100% in accordance to Shariah, for example, issue all Treasury Papers as sukuk. Doing so will not have any negative impact on both local and foreign conventional financial institutions active in the Malaysian financial market, since they already invest in Shariah financial products directly or through their Islamic subsidiaries/ windows.

3. I wish for the National Fatwa Council to formally declare riba as haram to remind Muslims of their obligation to avoid riba. I do not believe Muslims see riba as haram in the same context as consuming pork or liquor. The Council could work with the government and the regulator to create greater market awareness across all segments of the Muslim society that is expected to make up about 80% of Malaysian population, thus financial consumers, by 2020. The right attitude towards riba by Muslims willensure a sustainable Islamic finance industry for the long term. Riba must be taught to be a more serious offense under Shariah in schools in the same way as Muslims are taught the do’s and don’ts in their diet.

4. I wish for all Islamic financial institutions to improve their service delivery and product suite to ensure all their Muslim and non- Muslim individual customers and private sector clients would get the optimal value for money when they take on Islamic finance products and services. They must develop a plan to accentuate the value of doing financial dealings in the Islamic finance industry.

5. I wish for all institutes of higher learning to provide courses in Islamic finance and Shariah to include mantiq and usul fiqh or the science of Hadith and Quran as full or elective subjects to ensure that new talents coming into the industry fully understand Shariah instead of just knowing what Shariah is. Today, people are taught Fiqh without much understanding of its origin and how it is derived. Universities should also ensure the teaching of International Financial Reporting Standards (IFRS) and/or its national equivalent in all subjects involving accounting for Islamic finance in Islamic finance courses as well as in accounting courses respectively. Today, most seem to neglect teaching IFRS as if it does not apply to Islamic finance.

6. I wish for all stakeholders in the Malaysian Islamic finance industry to work together to enhance and promote the country’s identity as a dynamic, conducive and stable global marketplace for Islamic finance by improving the eye-appeal of its industry infrastructure and frameworks. One way is by strengthening self-governance of its key players — Shariah experts and Islamic bankers. I have always thought we need a Shariah Professions (Financial Market) Act to govern Shariah experts just like lawyers or legal experts have the Legal Professions Act to govern them.

All Islamic bankers in the future should also be professionally qualified. Create a distinction between a chartered Islamic banker and an ordinary Islamic banker just like a chartered accountant and an accountant.

I think six wishes are enough for me in 2014. The same wishes can be made for other Islamic countries but I will leave that to others. I pray to God that my wishes would come through but to realise them, a lot of people need to come together and work on a lot of things. I have high hopes.

Last but not least, I wish for everyone to have good health, happiness and prosperity in 2014. Have a great year ahead!

[Badlisyah Abdul Ghani is ED and CEO, CIMB Islamic Bank Bhd]

THE MALAYSIAN RESERVE, 06 January 2014  

No comments: