Islamic banking gif
IFIs should not be abstracted or sidetracked by those ag- itators from creating a real economy that is robust and sustainable which is purely providing an ethically and so-
cially responsible financial alternative to enhance the prosperity and welfare of individuals and communities alike, while fighting poverty and elevating livelihood in spite of those individuals faith or religious conviction’’
crisis with their own austerity plans protect- ing their capital and savings. Business is not much better as they are struggling to stay afloat with fear of further credit tightening and consumers are avoiding spending.
In parallel, IFIs should study and evaluate the expansion of their geographic reach to new markets with large Muslim populations that are being underserved by the industry, including Asian, African and CIS countries or the countries that have just been freed as a result of the Arab Spring ( Egypt, Libya and Tunisia), which will eventually position those IFIs to enjoy the upside of the global econ- omy. IFIs should rediscover their niche and grow into those untapped segment, markets and products in addition to new geographic areas as dictated by needs and demands and not by trends or imitations.
Venture capital, private equity, particularly the small and med-cap enterprise (SME) segment the back bone of any robust mar- ket economy, is one of the asset classes that yet to be tapped by IFIs with great potential for growth since its in alignment with the fun- damentals and core nature of Islamic real economy with great emphasis on job crea- tion that is a necessity for economy recovery particularly in the emerging market coun- tries where most of IFIs are operating.
In a nutshell, IFIs, Islamic banks, Asset and fund Managers should find the need to fill a niche. Understanding that any given strat- egy is not time oriented, but events driven, for that reason IFIs need new strategies for new realities as they unfolds and uttered by the present financial crisis, thus strategies must be revisited and reviewed, if not a com- pletely revamped or abandoned to adapt new ones. Both internal and external envi- ronment of the IFIs should be involved in- cluding clients and services providers. IFIs, Asset and fund Managers should be ready to bounce back and get ahead of events to be transformational.
Conclusion Looking ahead, We should be aware and well informed about the growing well orches- trated animosity and uneducated blind criti- cism which the least can only be described
as a classic hostile rhetoric of Shariah law and Shariah-compliant system and dismiss any hint of profiling or politicising its mission, while doing so, IFIs should not be abstract- ed or sidetracked by those agitators from creating a real economy that is robust and sustainable which is purely providing an eth- ically and socially responsible financial alter- native to enhance the prosperity and welfare of individuals and communities alike, while fighting poverty and elevating livelihood in spite of those individuals faith or religious conviction.
IFIs as industry should be categorised and analysed as well as criticised by the other camps and critics through its added value, governance, transparency and compli- ance to Shariah guidelines while holding to best international practices as induced by institutionalisation and standardisation which eventually enabling the new Shariah- compliant system to be a worthy contender and player with equal footings in the grow- ing global financial market thus, making it a sustainable and unswerving alternative for Muslim and non-Muslim alike.
In closing, going back to the basics is not an option under the present market place con- ditions and the shifting global landscape, it is a must process to master our basic prod- ucts and services as an institutions while re- building Islamic banking industry future on a solid and sound foundations, thus creating a real economy for the benefit and prosperity of individuals, societies, institutions, busi- nesses and countries regardless of their be- liefs and political orientations as stipulated by Shariah-compliant system.
Islamic countries governments through their regulators should set in-motion the IFI indus- try evolution and transformation in all fronts instead of being hostage of procrastination and Indecisiveness of fully embracing Islam- ic finance as a financial system. Along the same line of thinking at the micro level, IFIs should Shift more assets and resources as well as human capital to the retail banking segment through the introduction of crea- tive and innovative products and services along with expanding their branch network meeting the growing demand and exodus to
Islamic banking in conjunction with meeting the needs of its customers who are mainly in the youth segment, the same youth who lead the Arab Spring. Expanding Sukuk in- dustry in all directions and capitalise on the fact that 2011 is going to be a record year for Sukuk issuances, particularly from the corporate side, such as intensifying Sukuk funds and Sukuk secondary market besides the rollout of more retail tranche Sukuk.
Investigate Waqf and bring it to the present best practices and regulations as well as its accessibility, to attract high level liquid- ity. Introduce more Islamic funds to address investor needs and savings inspirations. Establish Islamic REITs (IREIT) as an attrac- tive proposition while developing more solid regulatory platform and legal framework in the GCC for IREIT.
Strongly endorse and encourage the sepa- ration of Islamic banking windows into a standalone legal entity with its own balance sheet from conventional (interest-based) operations instead of shutting them down wherever it exist to protect the integrity and the creditability of the industry. At the lower end of income, Islamic Microfinance is to be administered and regulated under a legal framework by the regulator at the national level so the disadvantaged and destitute in- dividuals are well protected and can reap its real benefit without being exploited or held as a hostage for its basic needs by unregu- lated gung-ho operators who are in fact a micro loan shark.
Last but not least, promote investing in SME through venture capital and private equity either by direct investment or through fund structure due to its importance in develop- ing real economy that is sustainable and resilient which are what Islamic investment and finance as well as Islamic banking is about. Accordingly, IFIs must be transfor- mational which requires stepping out of the box and being innovative and creative in conducting Shariah complaint investment and finance with absolute transparency and without compromising the adherence and compliance to Shariah guidelines.
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2012 April Global Islamic Finance 65
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