Greater Collaboration Vital To Internationalise Islamic Finance

KUALA LUMPUR - Collaboration between Islamic finance market players must be strengthened further in the effort to ensure continuous growth of the industry, especially in the international arena, said Kamarul Ariffin Mohd Jamil, Chief Executive Officer of Affin Islamic Bank Bhd.

"A lot of effort has been taken by regulators and players so far in growing the Islamic finance industry and in providing competitive and sustainable offerings, whether for the traditional or non-traditional markets.

"However, greater collaboration among stakeholders would provide the necessary leverage to stimulate further growth

"If you believe in internationalising Islamic finance, there is no other way to do it other than through collaboration," he said in a statement to Bernama Wednesday.

Kamarul also said the size of the global Islamic finance industry was estimated to have reached US$1.8 trillion in 2013.

However, it remained a fraction of the size of the overall global financial industry with concentration mainly in majority-Muslim markets such as Saudi Arabia and Malaysia, which led the global industry in terms of asset size.

He also highlighted the fact that interest to venture into the Islamic finance industry has been expressed by non-Muslim countries such as Germany, Luxembourg, France, Australia, South Korean and Japan.

The establishment of market infrastructure and regulatory frameworks in these countries are currently at various stages of development, he added.

"You need the supporting infrastructure in order to grow that part of the market.

"The industry also needs more professionals who are conversant and well trained in Islamic banking and finance," he said.

Currently, a large number of them are in traditional markets such as Malaysia and countries in the Middle East, while in non-traditional market the numbers are still relatively lower, said Kamarul.

"In a way it is a chicken and egg situation; whilst established Islamic banks may need to move up and branch out into other countries by establishing a representative office or foreign subsidiary, they would only be able to do so effectively if the country they wish to move into has the required infrastructure, including a clear regulatory framework," he explained.

Global expansion may also require Islamic banks to grow their existing capabilities or enter into strategic collaborations, he said.

Dialogue amongst industry players is another key component to help expand Islamic finance and this is the main objective of the Global Islamic Finance Forum (GIFF), which will be held in Kuala Lumpur on 2-4 September 2014.

GIFF 2014, organised by the Association of Islamic Banking Institutions Malaysia (AIBIM), of which Affin Islamic Bank Bhd is a member and Kamarul is the Deputy President.

"We recognise, currently, there is no real forum catering for markets with different levels of development and we hope GIFF will be the forum," said Kamarul, adding that GIFF will provide a platform for market players to collaborate and help new entrants develop Islamic finance in their respective markets.

The forum, to be opened by Bank Negara Governor Tan Sri Zeti Akhtar Aziz, is themed "Marketplace for Global Linkages".

It aims to share lessons learnt in developing Islamic finance, including Malaysia's experience in building a comprehensive ecosystem for the industry and spur cross border transactions.