|Islamic banking goes hand-in-hand with globalization
|THE WEST calls it the “sleeping giant.” They know its power, sophistication and efficiency. They study it, dissect it and integrate it into many of their banking systems.|
THE WEST calls it the “sleeping giant.” They know its power, sophistication and efficiency. They study it, dissect it and integrate it into many of their banking systems. The Islamic banking system has no doubt proven to be one, if not the only, successful system known to man.
In a recent conference, “Challenges of Globalization to Islamic Banks”, bankers and financial experts from Arab and Islamic countries convened in Amman this week to discuss Islamic finances in the region.
There are more than 200 Islamic banks around the world with an estimated operational capital of $6 billion. Speakers stressed the need for establishing a network between Islamic banks in the world to strengthen their joint operational ability.
Calls for a “free Islamic market” were discussed during the three-day event held under the Royal patronage and organized by the Arab Academy for Financial and Banking Sciences. This is in co-operation with the Jeddah-based Islamic Bank for Development and the Jordan Islamic Bank.
Islamic financial transactions are conducted under the Shari’a laws. According to Abdel Hamid Al Ba’li, financial consultant at the Kuwaiti Royal Court for Islamic Financial Affairs, Islamic banks are adapting to the global economic development in the world. “But this should not be at the expense of Shari’a, which is the basic pillar of the Islamic economy,” Al Ba’li told The Star.
Despite such a view many Islamic bankers are still reluctant about “going global”. Others however, see big opportunities in joining the global bandwagon but Islamic laws. This is not to mention Islamic banking in first place is a global system, but in its own unique way is governed by Shari’a teachings. Speakers discussed the possibility of mergers between Islamic banks. For Mohammed Anass Al Zarqa, a consultant at the Gulf-based International Investment Corp., Islamic banks should merge to upgrade their facilities and compete with their international counterparts.
“Many Islamic banks can easily tap the global markets,” Al Zarqa told The Star. “International investment is a must. Strategic mergers would help us face future challenges.” He reiterated the need for Islamic banks to work rapidly in the face of rapid economic development. “The volume of the banking industry in the Arab and Islamic worlds is huge. Mergers reduce cost of services and with the establishment of banking consortiums based on Islamic values and laws, Islamic banks would definitely become pioneers on the international level,” Al Zarqa explained.
According to the Shari’a, the bank and customer are partners with regard to all investments carried by the bank. Profit is shared but it is not fixed, or else it would be considered as usury. Hence, partnership between an Islamic bank and its clients becomes stronger and transparent.
The majority of participants agree that financial markets could play a key-role in helping Islamic banks to increase their revenues. The 64-year-old Al Ba’li sees in financial markets an opportunity for Islamic banks to imprint Islamic values in stock exchanges for instance.
“There are many tools that Shari’a laws provide for Islamic banks to operate in stock markets, including financial speculation and investment,” he said. “These tools can help Islamic banks make legal money and deal through judicial transactions. Many countries, including Jordan, provide a suitable environment for Islamic banks to develop and support their businesses,” he pointed out. Most Islamic banks today are realizing the need to integrate and interact in the global market within the laws and teachings of Shari’a. The “Challenges of Globalization on Islamic Banks” conference is step forward into this direction.
The Star redaction