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Press Release > 2017

A Resolute Demand – Panellists See Promising Opportunities for Islamic Finance amid Challenges During Day 1 of the IFSB Summit 2017

Date posted: 24 October 2017

24 October 2017, Abu Dhabi – Thought leaders and key players of the Islamic financial services industry (IFSI) opined that demand for products by the Islamic financial services industry will remain resolute on account of various demand-pull and supply-push factors in recent times. Sharing their views during various thematic sessions of the IFSB Summit 2017, themed “Reinvigorating the Momentum of Islamic Finance: Solidifying Resilience and Sustaining Growth”, the speakers and participants held productive discussions on opportunities for Islamic finance amid challenges on the first day of the IFSB Summit 2017 being held on 23 and 24 October 2017 in Abu Dhabi, United Arab Emirates (UAE).

In the first panel session, themed “Discussion on Islamic Finance: From Niche to Mainstream”, the chairperson, H.E. Dr. Abdulrahman Al Hamidy, Director General and Chairman of the Board, Arab Monetary Fund, introduced the session by highlighting current challenges facing the Islamic financial services industry – for instance increasing market-share traction, solidifying institutional structures, and decreasing growth rates, as well as keeping up to-date on regulatory developments. The session then further discussed opportunities in the IFSI with a view to achieving mainstream penetration. Mr. Irfan Siddiqui, President and Chief Executive Officer, Meezan Bank Limited, Pakistan, shared his bank’s experience in expanding business over the past decade on account of promising consumer demand for Sharīʻah-compliant banking, as well as Islamic finance itself being a medium to enhance financial inclusion by bringing in previously excluded faith-aligned customers. Sheikh Osaid Mohammed Adeeb Kailani, Global Head of Shari'a, Abu Dhabi Islamic Bank, UAE, stressed the importance of sustaining credibility of the Islamic finance industry by ensuring sound application of Sharīʻah while assuring the universal nature of Islamic finance products, available to both Muslims and non-Muslims alike. Dr. Mohamed Damak, Senior Director, Global Head of Islamic Finance, S&P Global Ratings, UAE, acknowledged the Islamic finance industry’s measured progress in recent decades and indicated a need for achieving ‘global traction’ for the industry beyond the traditional markets in the Middle East and Asia. Overall, the panellists called for continued stakeholder efforts to achieve further standardisation and harmonisation in legal and Sharīʻah matters, while reducing complexities to lower costs and enhancing competitiveness of Islamic finance products.

The second session was themed, “The FinTech Innovative Progression: Boon or Bane for Traditional Financial Institutions?”. This session was chaired by Ms. Vineeta Tan, Editor, Islamic Finance News, Malaysia, who set the background by highlighting the recent progresses made in the FinTech space. While duly noting that Islamic FinTech is currently small, she invited the speakers to discuss the role of FinTech in Islamic finance, and whether FinTech is causing any disruption for the traditional financial institutions. H.E. Chuchi G. Fonacier, Deputy Governor, Supervision and Examination Sector, Bangko Sentral ng Pilipinas (BSP), shared BSP’s recent pro-financial innovation pipeline projects and discussed the proportionate regulatory approach adopted towards FinTech. She also noted that at the present stage, these FinTech developments do not create any major disruption as commercial banks are also part of the FinTech platform alongside non-bank FinTech service providers, and consumers can choose the offering which best meets their requirements. Mr. Luke Ombara, Director, Regulatory Policy and Strategy, Capital Markets Authority, Kenya, shared Kenya’s recent steps to amend existing regulations to enable Islamic finance. Kenya is a pioneer in mobile phone banking, and regulatory initiatives in FinTech are mainly to achieve financial inclusion objectives and to address large spread-differentials between bank lending and deposit rates. Mr. Craig Moore, Founder and Chief Executive Officer of Beehive Group, UAE, did foresee some disruption as FinTech has created a new approach towards market segmentation by facilitating small-sized financing transactions through FinTech platforms. This may cause some big banks to realign their business models to also target smaller-sized transactions. He further saw Islamic FinTech as creating a new asset class which can serve as an important medium to provide Sharīʻah-compliant funding to the SME sector.

The third session, themed “Implementing New Regulatory Reforms: Balancing between the Soundness and Competitiveness of Institutions offering Islamic Financial Services (IIFS)”, saw a stellar line-up of speakers chaired by H.E. Dr. Zamir Iqbal, Vice President Finance and Chief Financial Officer, Islamic Development Bank. The session saw panellists discussing issues concerning the implementation of new regulatory reforms, including market dynamics of financial sector deleveraging and de-risking. H.E. Jameel Ahmad, Deputy Governor, State Bank of Pakistan, recapped the regulatory reforms initiated post-global financial crisis and their implications for the Islamic finance industry. He stressed on the need for a wider implementation of existing IFSB Standards and called for focused initiatives in the areas of efficient liquidity frameworks, systemically important IIFS and Sharīʻah-compliant financial safety-nets to ensure sound and resilient regulation for Islamic finance. Mr. Jaseem Ahmed, Former Secretary-General of the IFSB, focused on the lessons learned from the global financial crisis and emphasised the increased focus on ethical standards globally for which principles of Islamic finance are very relevant. He recommended a structured approach to regulatory reforms by implementing the IFSB’s second-generation Standards (complementing Basel 3) and achieving a balance between costs of regulatory compliance and impact on competitiveness of IIFS. Mr. Ghiath Shabsigh, Assistant Director, Monetary and Capital Markets Department, International Monetary Fund (IMF) focused on two important aspects in his presentation – (1) the current supportive ecosystem for Islamic finance (e.g. legal framework, regulatory guidelines, etc.) and the identification of where gaps still remain, and (2) the extensive use of hybrid financial products such as commodity murābahah by IIFS with financial stability implications which are a concern for the IMF. He also shared the Fund’s ongoing preparation to include Islamic finance in its surveillance activities and assessment programmes. Mr. James O’Brien, Head of Regulatory Development, Banking Supervision, CBUAE, focused on the UAE’s efforts in recent revision of the central bank’s regulatory framework to ensure compliance with global regulatory developments – including in areas of risk management, corporate governance, financial safety-nets, compliance and audit. The updated regulations/standards included separate articles which covered the specificities of Islamic financial institutions while also having dedicated reporting for Islamic banks. He further shared with the audience CBUAE’s recent initiatives in setting up of a higher Sharīʻah authority.

The IFSB Summit 2017 continues into Day 2 on 24 October which will see a thematic session on Islamic capital markets and greater harmonisation in cross border activities and a wrap-up session on the way forward for Islamic finance by strengthening value propositions and sustaining resilience. 

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