Islamic Finance Industry – “Not a beauty contest”

Chief Economist for Bahrain Economic Development Board Dr Jarmo Kotilaine stated globalisation of Islamic finance is a work in progress. Kotilaine stressed that what the market needs more is a significant number of active jurisdictions to ensure Islamic finance lives up to its principles of risk sharing and asset-based financing.

Dr Kotilaine was speaking about the growth of Islamic finance centres in an interview with Malaysian news agency Bernama.
Bahrain remains a world leader in Islamic finance, boasting the highest concentration of Islamic financial institutions globally, with six licensed Islamic retail banks and 18 licensed Islamic wholesale banks. Other traditional Islamic finance markets, including Malaysia and Indonesia, are pushing for Islamic mega banks to accelerate industry development.

Mega Islamic Banks

Turkey, Indonesia and the Islamic Development Bank have accelerated their efforts to establish a “megabank” with the aim of creating a platform to serve as a “central bank” for the world’s Islamic lenders. In Malaysia, a proposed merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd fell through due to unfavourable economic conditions.

Central Bank of Bahrain Executive Director-Banking Supervision Khalid Hamad also echoed Kotilaine, saying that the need of the hour for Islamic finance is to further enhance existing banks in terms of additional qualified resources.

“(It also needs) a lot of capital to compete in a better way and to be able to take a lot of transactions,” he said at the World Islamic Banking Conference in Bahrain late last year.

In the broader sense, the challenging economic environment in the near future offers more opportunities for Islamic finance development due to the increasing need for safer and more stable instruments, including Islamic financial products.

Source: Bernama