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Islamic Finance needs regulatory framework not impeding its growth: Experts

Published: 05/10/2012 05:47:00 AM GMT
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Kuala Lumpur: Islamic Finance needs a regulatory framework which does not impede its growth but helps it flourish across the globe. This was demanded by experts of the Islamic Finance industry who want to see a balanced regulation for Islamic finance, the one that does not impede its growth or allow for abuse.

By Farhan Iqbal


Kuala Lumpur: Islamic Finance needs a regulatory framework which does not impede its growth but helps it flourish across the globe. This was demanded by experts of the Islamic Finance industry who want to see a balanced regulation for Islamic finance, the one that does not impede its growth or allow for abuse.

CEO at CIMB Islamic Bank Bhd, Badlisyah Abdul Ghani, said that the Islamic finance industry needs a balanced regulation as there is always fear for any industry to be over regulated.

He said, “We need regulation and the financial regulator must always strive for a balanced regulation so that it is not too rigid as to choke the industry or too slack, thus allowing for abuse.”

The kind of regulation needed for Islamic finance for any jurisdictions will be the kind that is found in Malaysia but tweaked and adapted to the specifications of each jurisdiction, he added.

He continued that financial regulators must not see the act of regulating Islamic finance as an act of regulating religion but merely regulating commercial transactions just like any other financial transactions.

CEO at Maybank Islamic Bhd, Muzaffar Hisham, asserted that there is the uncertainty surrounding the shift to an over regulation of the industry.

He said, “I believe, where appropriate, there should still be proper adequate regulations based on the needs of the market but do, however, feel an open and free market economy mechanism is able to provide the required market discipline.”

He also said that intervention by the regulators should take into account the overall long term impact of the efficiency of the market, adding that the potential uncertainties in the changes in Islamic finance regulations could impact the risk management of the industry in the long run.

CEO at HSBC Amanah Malaysia Bhd, Rafe Haneef, while agreeing that there should a balanced regulation in Islamic finance, said that Bank Negara has done the right thing in setting up a comprehensive standard for regulating Islamic banking to ensure prudent banking even though some quarters feel that it is over regulated.

He commented, “Malaysia’s Islamic finance industry is one of the most comprehensive in the world in terms of regulatory framework and shariah governance framework. This is because the regulatory framework, among others, clearly spells out the responsibilities of the board, management and shariah committee etc.”

Asked whether Islamic finance can enhance or promote global financial stability in view of the current global economic environment, Badlisyah answered that it can, if the ethics in Islamic finance (as enshrined under Shariah) are codified within a country’s banking and financial regulatory framework. Without codification of these ethics, the financial market including Islamic finance will still be subject to abuse from human greed.

He feels that Islamic finance biggest contribution in the enhancement and promotion of a more stable global financial market and economy, will be the facilitation of optimal financial inclusion in any nation and the encouragement of a broader and wider distribution of wealth between the poor and the rich and between nations as well as within any nation.


Badlisyah Abdul Ghani, CEO at CIMB Islamic Bank Bhd

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