KUALA LUMPUR, November 30 (IslamOnline.net & News Agencies) – Malaysia must address several challenges to face up to the cutthroat competition in positioning itself as the Muslim world's leading financial hub, the Malaysian deputy prime minister said on Tuesday, November 29.
"What I mean is that Malaysia may have made a head start but this will not be with us forever," Bernama News Agency quoted Najib Tun Razak as saying.
In his official keynote address at the Kuala Lumpur International Islamic Finance Forum 2005, Najib said that to maintain a head start, there are seven major challenges that needed to be addressed.
First, he said, the parties concerned in Malaysia must bear in mind that the Islamic finance industry was no longer the exclusive domain of Islamic institutions or Islamic intermediaries.
Secondly, the size of Islamic finance's potential market is extremely huge with an estimated asset held in Shari`ah-compliant accounts worldwide totalling US$200 billion - US$500 billion (RM754billion - RM1,885 billion) and are growing at 10-15 percent annually.
"To date, Malaysia, Bahrain, United Arab Emirates are racing to create Islamic banking hub to serve the estimated 1.2 billion Muslims around the world," said the deputy premier.
On the third challenges, he said, as a new player in finance, Islamic finance would require further research and study, and investment in human capital must be further improved.
He noted that in Malaysia, experts in both finance and Shari`ah were scarce while some of the local talents were attracted by other countries and global conventional banks.
Raising Awareness
Najib further said there was also an urgent need to create greater awareness on Islamic finance among market participants, both Muslims and non-Muslims, through research, education and training.
He also emphasized that Islamic banks must not shy away from technological know-how and advancement.
"Islamic banks must exploit the opportunities offered by modern technology to improve their distribution channels and back office operations to the same extent as conventional banks," said Najib.
He said issues related to regulation and supervision should also be equally and adequately addressed so as to bring Islamic banks and financial institutions at par with the international standards.
He said to meet these challenges, new supervisory and regulatory procedures must be considered and relevant modifications must be done to the existing structures or procedures.
Najib concluded that there was an urgent and immediate need to instantly and thoroughly address the issue of action of key performance indicators which was applicable to all Islamic financial institutions, locally and globally.
The key performance indicators are important in banking, said Najib.
"Obviously, the stakeholders and customers have the right to be certain of the level of performance of a particular financial institutions," he said.
Complementary
On the same topic, a banker said that the established conventional international banks, which have Islamic banking, actually complement the role of Islamic banks, and are not competitors.
"We should not look at them as competitors. In fact we should look at them as they complement the other because we are talking about distribution of products and services, they will be able to provide," said Jameelah Jamaludin, the deputy executive officer of the Kuwait Finance House in Malaysia (KFHM).
Jamaludin said the conventional international banks already had vast networking while most of the Islamic banks were just starting.
Even the Islamic banks in the Middle East until recently were very much focused on the gulf region and started to venture outside the region only recently, she told a media group at the Kuala Lumpur Islamic Finance Forum 2005.
"We should learn from each other's experiences and there are products which we can tap on each other networking," she said.
She said Islamic banking was about partnership and she encouraged other players to come to Malaysia.
"In fact the faster, the better, so that we can have more products to offer and able to learn from each other," she added.
She said Malaysia had the competitive edge in Islamic banking in the region compared with the neighbouring countries as it was well known in the industry, apart from being a Muslim nation.
The Islamic banking industry, which began almost three decades ago, has made substantial growth and attracted the attention of investors and bankers across the world.
Growing at an estimated 15 percent annually, the Islamic finance market is currently estimated to be worth more than $300 billion with more than 200 Islamic finance institutions operating worldwide.