Riyadh - Arabstoday
Islamic Development Bank Group President Ahmad Muhammad Ali yesterday called for integrating Islamic finance with real economic activities of trade and industrial production. Through such integration, finance could be directed toward real activities rather than used for the build-up of unbearable debt or harmful speculation. “From this perspective, international connectivity will help nations build their economies and diversify their investments,” Ali said at the 3rd Annual World Islamic Banking Conference (AWIBC) Asia Summit in Singapore. The Jeddah-based IDB Group is a global multilateral development institution with 56-member countries from Asia, Africa, Europe and America. The two-day event featured an inaugural address by Ravi Menon, governor of the Monetary Authority of Singapore, followed by a keynote session addressed by Ali and Halim Alamsyah, deputy governor, Bank Indonesia. More than 450 key players and thought leaders in the international Islamic finance industry attended the summit including Jaseem Ahmed, secretary-general, Islamic Financial Services Board. The AWIBC: Asia Summit is one of unique platforms which aim to foster greater connectivity between Asia and the Middle East thus providing an opportunity for key industry players in these high-growth markets to develop the capacity to structure large-scale multi-currency and cross-border Shariah-compliant transactions. In his presentation on “Strengthening International Connectivity to Enable Further Growth of the Islamic Financial Industry,” Ali said the conference organizers have chosen an important topic of “Strengthening International Connectivity; Islamic Finance: Capturing Cross-Border Opportunities.” The subject is relevant at a time when countries worldwide are facing the repercussions of the continuing global financial crisis. “I thank the organizers for this vital opportunity to discuss these critical issues at a global level,” he said, adding: “I am confident that, with the prominent participants in this event, valuable contributions will be made that will guide the Islamic financial industry through the coming decade.” Menon said in his inaugural speech that Islamic finance had shown remarkable resilience during the last five years — perhaps the most challenging economic environment in the post-war era. The industry has grown by an estimated 20 percent annually in the last five years to reach $1.3 trillion in total assets in 2011. Islamic banks have grown both in number and scope. But the sustained growth of Islamic finance is in no way guaranteed. For Islamic finance to continue thriving, the industry has to overcome a few key challenges. But in every challenge, there is also opportunity. Talking on Islamic finance in the era of deleveraging, Menon explained that the clear and present danger to all financial activity, including Islamic finance, is the risk of contagion from an escalation of the euro zone crisis. Islamic finance is closely intertwined with underlying economic activity and will be affected by the impact of slower global growth. Contagion from the euro zone has already curtailed economic growth and capital inflows to many emerging economies where Islamic finance has taken root. But Islamic finance, he continued has a window of opportunity in the current climate of deleveraging in the global financial system. With its strict prohibition on excessive leverage, Islamic finance has been spared the worst of the financial crisis. Islamic banks are well positioned to reach out to new customers who are in need of financing as many global institutions pull back on their lending due to the need to repair their balance sheets, he said. Islamic finance should diversify into growth areas such as trade and infrastructure financing, where demand is still strong, especially in emerging economies. With a focus on supporting real productive activities, Islamic finance is naturally compatible with trade and infrastructure development. Tapping these sectors also brings about greater diversification benefits, especially for Islamic institutions, which have been hurt by their significant lending exposure to the real estate sector, he added.from arab news.