العدد الحالي: تشرين 1/اكتوبر 2018       اختر عدد :
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كلمة المجلس العام

Abdelilah BELATIK

Secretary General of CIBAFI

Welcome to the 30th issue of the Global Islamic Economics Magazine. We keep you up to date with the industry happenings in the global market, and offer expert opinion from some of the industry’s foremost thought leaders on a various array of issues.

This month I would like to bring particular attention to the recent global interest in Islamic finance. Islamic finance has spread widely not only to OIC member countries but also to non-OIC countries around the world. While some of the non-Muslim countries use Islamic finance to serve their indigenous Muslim populations, the other countries attempt to adopt Islamic finance as a viable alternative due to its resiliency during the global economic downturn. In view of that, the regulators have enabled Islamic financial regulations, such as a parity of tax treatment and regulatory changes, to create a conducive environment for the Islamic financial services industry.

The country like the U.K. has witnessed development in the Islamic banking sector such as deposit scheme, overnight deposit and home financing.  In particular, the U.K. as a financial centre has hosted several full-fledged Islamic retail banks along with some Middle East’s largest banks offering Islamic products in this country. The growth in retail Islamic banking in these countries has leveraged from encouraging demographics and economic momentum of their Muslim population.

To expand the exposures to the global Islamic financial industry, many European countries have taken a number of steps to facilitate Shariah-compliant funds and Sukuk issuances and listings through some certain regulatory amendments and tax neutrality. Luxemburg, as the second largest investment fund centre in the world, has been promoted by its government and now become the leading non-Muslim domicile for Islamic funds.  Being home to world-class fund providers, Ireland has also accounted for approximately 20% of the Islamic funds market outside the Middle East. In addition, many Western countries aim to be the centre for global Sukuk listings, and treat Sukuk as a viable funding alternative for both sovereigns and corporates. The U.K. has become the first Western government in issuing Sukuk, with the lease of central-government properties. German firm took a leadership in the region through issuing an asset-backed Sukuk. The rising interest in Sukuk also emerges in Asia, where Singapore based Islamic REIT Sabana, has issued Sukuk for REIT financing. The launch of the US$1 billion five-year Sukuk raised by the Hong Kong’s government was oversubscribed 3.7 times. Japan also has stepped in through its largest lender, Bank of Tokyo-Mitsubishi UFJ, hoping to secure a license in issuing Ringgit-denominated Sukuk to satisfy the needs of existing clients in Malaysia. The overall evidence show that these high-developed markets and credible financial institutions from non-Muslim countries, supported by a skilled workforce, strong financial infrastructures, a stable regulatory environment, an investor-friendly policies, and good ratings, can attract Muslim investors to achieve better risk-return within the Shariah-compliant boundaries.

Another international institutional development is also evident from the increased interest by multilaterals such as World Bank and International Monetary Fund (IMF). The IMFhas established a new External Advisory Group in Islamic finance. The Interdepartmental Working Group on Islamic Finance (IDWGIF) of the IMF held its first meeting in Washington D.C., USA with its External Advisory Group (EAG) on October 9, 2014, to discuss critical issues in Islamic banking and the Sukuk market development. The EAG consists of international Islamic financial infrastructure institutions such as AAOIFI, IFSB, CIBAFI, IDB, IRTI, IIFM, and IILM. The World Bank has also launched the World Bank Global Islamic Finance Development Center, located in İstanbul, Turkey. Earlier in 2013, the International Accounting Standards Board (IASB) set up an advisory group on accounting for Sharia-compliant financial instruments and transactions, with the aim to define the key challenges of applying IFRS to Sharia-complaint transactions and instruments, as well as to propose approaches to address those challenges, where the second meeting held in Kuala Lumpur, Malaysia this year.

The overall development in non-Muslim countries and institutions serves as a wake-up call for Muslim countries, particularly the OIC member states. Among 57 OIC members, there are only 25 countries which have Islamic finance regulations or guidelines. The sector development is far from homogeneous, with Islamic banking holding 73% of global Islamic financial assets while the remaining sectors (i.e. Takaful, capital market, funds, etc.) lag far behind. Considering the competitive advantages of Muslim countries (such as the rising economic growth as emerging countries, Muslim majority population and huge reserves in sovereign wealth funds), hence the key issue lies primarily on the regulatory clarity and consistency in Islamic finance, as well as best practices shared amongst the Islamic financial institutions, in order to boost their Islamic financial industry.