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Published On:14 March 2012
Posted by Indian Muslim Observer

ISLAMIC FINANCE: And the award for contribution to the industry goes to ...

By Rushdi Siddiqui


“There is no greater calling than to serve your fellow man. There is no greater contribution than to help the weak. There is no greater satisfaction than to have done it well.” Walter Reuther
There is a hidden treasure-cum-unsung hero entity in Islamic finance. It is a “known but unknown” organisation that has a truly inclusive approach at a country-level in educating and promoting Islamic finance.


But it may not have the global recognition of Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) or Islamic Financial Services Board (IFSB) or Bank Negara Malaysia or Securities Commission (yet).


And it may not win awards at the Euromoney events (yet), but has been duly recognised for its contribution by a leading Islamic finance conference, Kuala Lumpur Islamic Finance Forum (KLIFF). And it may not be the official institutional Malaysian ambassador of Islamic finance (yet).


However, it could be the appropriate model for a similar organisation in the United Arab Emirates, Qatar, Saudi Arabia, Egypt, Pakistan and other jurisdictions where Islamic finance already exists or where a beachhead welcome mat is placed on the country shores.
It is a model that could seriously and realistically start the Islamic finance “standardisation” conversation for Muslim (and enlightened non-Muslim) countries. It is led not by regulators, scholars, academics or cheerleaders, but practitioners at the CEO level. However, it works closely with the stakeholders on inputs for a better output.


(Today, Islamic finance is national or domestic in nature and regional if one were to stretch the imagination on the cross-border reach. A few dedicated Islamic financial institutions having presence, via acquisitions or new licence, in neighbouring countries do not yet qualify the industry to say we are regional collectively. The natural evolution from domestic to cross border and eventually global may just be one of the recipes contributing to standardisation, especially if each jurisdiction has this type of industry organisation.)


Its website may just be Reuters, Wall Street Journal or Financial Times efficient for information coverage about the industry.


It provides collective thought leadership on the subject matter (Islamic finance) and it extends support and guidance to all those committed to the growth and development of the US$1 trillion (RM3 trillion) industry, including Fortune 100 companies.


Full Disclosure: The president of this organisation was the guest of honour at the launch of the research-based Thomson Reuters IdealRatings Islamic (TR-IR) Indexes in Malaysia.


Furthermore, this organisation’s involvement in Thomson Reuters Islamic Interbank Benchmark Rate (IIBR) provided much insight and balance to the GCC Islamic bank inputs. It is also is a member of the Islamic Benchmark Committee, where other members include Islamic Development Bank, AAOIFI, Bahrain Association of Banks, Hawkamah Institute of Corporate Governance, SESRIC (reach arm of the OIC) and Thomson Reuters. It is one of many examples on how this organisation is providing support for industry, be it domestic Malaysia or multinational companies, like Thomson Reuters.


AIBIM


By now, the informed reader has probably figured out the (well-known) hidden treasure of Islamic finance is the Association of Islamic Banking Institutions Malaysia (AIBIM).


The collective intelligentsia and experience of AIBIM members are the need of the hour (an often overused phrase by this writer for Islamic finance developments in Malaysia) for the following: Countries like Oman, Nigeria (and parts of Africa), Kazakhstan and CIS, etc, are embarking on establishing Islamic finance, where a holistic approach of enticing and including various stakeholders at the earliest stage possible is better than the fragmented and often ad-hoc approach found in another region. By extension, the US$640 billion (RM1.93 trillion) halal industry needs also to look at a model like AIBIM as the present situation has too many “chefs in the kitchen”.


For example, AIBIM may provide more value and better input than consulting firms, which eventually rely on data/surveys of practitioners, like the CEOs at AIBIM, to put forth suggestions in glossy power points.


Thus, there is more confidence and trust when experienced Islamic finance executives are discussing subject matter expertise over presentations by third parties referring to such executives, as the former can answer follow-up questions immediately.
Note: It is not suggested that AIBIM extends its mandate to Islamic finance consulting and advisory work, though it presents interesting direction.


Countries like India, the United States, Australia, Russia, China, etc, where an established minority wants to delink form the law of necessity and have deposit taking Islamic banks. However, the political sensitivities combined with the anti-syariah sentiments need to addressed without emotions.


The Malaysian blueprint and experience, with certain caveats, is exportable to any country interested in Islamic finance as a business opportunity, as eloquently stated previously by Tun Dr Mahathir Mohamad.


AIBIM’S steady hand on the public relations of Islamic finance in Malaysia, including doing damage control; that is, from misunderstandings to clarifications, etc, is about education and awareness and not promoting a particular bank or product agenda.


My last column entitled, “Media & Public Relations — the Missing Link in Islamic Finance”, could easily be about AIBIM’s work in the area as an example of the proposed industry body on the PR/Media of Islamic finance.


Challenges


To date, industry bodies from AAOIFI to IFSB to central banks, Islamic Development Bank to Central Bank of Bahrain and Bank Negara/Malaysia International Islamic Financial Centre (MIFC), regulators, Malaysia’s Securities Commission and Dubai Financial Services Authority (DFSA), enlightened syariah scholars and academics, consulting firms, Ernst & Young and PricewaterhouseCoopers and others have attempted to send a separate but unified message about Islamic finance with varying degrees of success.


There are many challenges or risks in Islamic finance that need to be measured, managed and monitored, from liquidity to capital, to credit, to concentration, to regulatory, to syariah, to marketing, and so on, and when a practitioner speaks from experience the audience provides captive attention. It may be time for these stakeholders to “tag-team” with the umbrella of AIBIM for a more credible output.


Conclusion


An organisation like AIBIM seems to be about the stability of an industry body over individuals and personalities, it is about continuity, refinement and longevity over stops and starts; it is about housing and sharing information over fragmentation and high information search costs; and it is about contributing to addressing fellow man’s desire to have finance according to their faith.


So, the Islamic finance Oscar goes to AIBIM for contribution to Islamic finance.


Here is the president of AIBIM Datuk Mohammad Redza to accept the award and say ….


[Rushdi Siddiqui is Global Head of Islamic Finance and OIC Countries at Thomson Reuters. He can be reached at rushdi.siddiqui@thomsonreuters.com]


(Courtesy: Business Times, Malaysia)

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Posted by Indian Muslim Observer on March 14, 2012. Filed under , , , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

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