RIYADH: The total assets of Islamic finance sector in the six-nation Gulf Cooperation Council (GCC) countries, which exceed $600 billion, have prompted the calls for regulating the Islamic finance industry and for imparting more training and skills to professionals working in this area. This was one of the findings of a major survey conducted by Deloitte's Islamic Finance Knowledge Center (IFKC), which was shared by Deloitte's experts, Tuesday.
Addressing a press conference here at Deloitte's office, Hatim El-Tahir, IFKC director, said "66 percent of the Middle East's Islamic finance leaders believe that the Islamic finance industry is under regulated." A panel of Deloitte experts including Daud Vicary Abdullah, a Malaysia-based Islamic finance leader; Youssef G. El-Haddad, senior executive partner in Riyadh-based Deloitte and Touche; and Sami M. Al-Shorafa, another partner also spoke to newsmen.
Referring to the main points of the survey, El-Tahir said that a majority of Islamic finance leaders are more optimistic than last year about Islamic finance prospects. In fact, the survey from Deloitte reveals insight from Islamic finance leaders on a wide range of pressing issues and prevailing trends within five key areas of regulatory and Shariah compliance, risk management, corporate structuring and capital management strategy, investment and capital markets, as well as human capital management.
"This survey provides a truly regional picture of market sentiment and how Islamic Finance leaders perceive the current economic slowdown, business performance, and the way forward," said El-Tahir. "Although Islamic finance is expected to continue its growth path, the development of the industry's infrastructure and regulatory framework is of great concern to most executives who took part in this survey," added the IFKC chief.
Referring to the growth of the Islamic finance industry and the results of the survey, Abdullah said that Islamic finance had recorded a growth of 15 percent annually. "This growth is precisely because of the demand for more Islamic banking and financial products as well as services," said Abdullah, adding that the Islamic banking was gaining ground in the West and Far East also. Of course, "it is more in demand from Muslims, who will predictably represent half of the globe's population by 2050", he added.
He said that the survey had products with four key themes including the importance of introducing new or revised regulatory measures, chief among them being Islamic accounting standards and risk management. The importance of adopting best practices and transparency in financial reporting is another theme, while the necessity of adjusting investment strategies through diversification is another point. The fourth key theme is the need for investment in human capital and talent development to cope with the growth and industry challenges.
The survey titled "The Deloitte Islamic Finance leaders survey in the Middle East: Benchmarking Practices", provides a wealth of statistical findings as well as analysis of the themes. In reply to a question about other key findings, Abdullah said that 80 percent of Islamic finance leaders surveyed in the Middle East expect levels of corporate structuring and organizational change to increase. Only 35 percent of Islamic finance executives believe that Islamic banks are properly/adequately capitalized, he added.
"In the survey, 79 percent of the respondents support a convergence initiative of the AAIOFI (Accounting & Auditing Organization for Islamic Financial Institutions) standards with IFRS (International Financial Reporting Standards)," said El-Haddad. A total of 64 percent of survey participants agree that Islamic finance institutions are lagging behind on the implementation of risk management systems, said Al-Shorafa, another Deloitte local partner.
In addition to the findings, the results of two face-to-face interviews conducted with the respective heads of the AAOIFI and the International Islamic Financial Market (IIFM) are published within the report in order to give an update on current concerns on the regulatory and practice front. "One of the core aims of Deloitte's Middle East Islamic Finance Knowledge Center is to promote thought leadership and research for the Islamic finance industry," said El-Tahir, while concluding his presentation.