Islamic banks urged to show the way

[Sophist]

Islamic banks urged to show the way

By John Aglionby in Jakarta

 

Published: March 2 2009 18:35 | Last updated: March 2 2009 18:35

 

Muslim presidents, prime ministers and princes on Monday called on the world to adopt Islamic financial practices to overcome the global crisis and urged Islamic banks to undertake “missionary work” in the west to promote shariah banking.

 

Almost every speaker at the opening of the fifth World Islamic Economic Forum (WIEF) in Jakarta lambasted the excesses of “irresponsible, unregulated western financial markets” for triggering the crisis, and touted shariah banking as a framework for a more stable global financial system.

 

But while Islamic banking could play a useful role, it would not be a “silver bullet” for the crisis. Bankers at the conference said greater standardisation of structures, improved transparency and more innovative products were needed for the industry to develop.

 

Islamic financial institutions do not pay interest and require transactions to be backed by real assets. Their assets comprise only a few per cent of the global banking industry but they have suffered less than their conventional counterparts because they did not deal in subprime mortgages or complex structured products.

 

But some, particularly in the Gulf, are starting to struggle as values of their underlying assets, notably property, start to tumble and liquidity tightens.

 

The politicians were extremely bullish in Jakarta. Musa Hitam, WIEF chairman said: “Our [conventional] gurus have failed us in theory and in practice. We need a new approach.”

 

Susilo Bambang Yudhoyono, the Indonesian president, told the 1,550 delegates from 36 countries that Islamic banking “should now be able to take a leadership role”. “Islamic bankers should therefore do some missionary work in the western world to promote the concept of shariah banking, for which many in the west are more than ready now.”

 

Mr Yudhoyono also proposed the creation of an Islamic World Expenditure Support Fund to help the many least developed Muslim-majority countries.

 

Standard & Poor’s, the rating agency, said last week that while Islamic financial institutions had strong long-term prospects, the immediate future was uncertain.

 

Mukhtar Hussain, global chief executive of HSBC Amanah, agreed that shariah banking had “an important role to play” and “should seek to become more mainstream”, but said growth was hampered by its immaturity and size.

Copyright The Financial Times Limited 2009

[Nur]

"We will show them Our signs in horizons ( Global Village) and in themselves, up until they realize that (Islam ) is Xaq ( the Solution to all of humanity's problems) Quraan.

 

Good topic Sophist, will contribute inshaAllah

 

Nur