Flaws In Conventional Finance Create Interest In Islamic Model, Says Bahrain's Central Bank Gov

MANAMA, Nov 23 (Bernama) -- Bahrain's Central Bank Governor, Rasheed Al-Maraj, said the obvious flaws in conventional finance have created great interest in the Islamic financial model, and this should provide the basis for the industry to sustain a period of strong growth for the rest of this decade. He said the growth opportunities are especially strong as Islamic finance has its largest presence in rapidly growing economies that have been least affected by the global financial crisis. "The global financial crisis has given the Islamic financial industry a great opportunity," he said in his keynote address at the opening of the World Islamic Banking Conference, here on Tuesday. A new report by Ernst & Young shows that Islamic banking assets with commercial banks globally, will reach US$1.1 trillion next year on the back of the Arab Spring, the eurozone crisis and the Occupy Wall Street Movement. It had reached US$826 billion in 2010. However, the industry needs to learn from the mistakes of interest-based finance, if Islamic finance is to make the most of these opportunities, Rasheed said. "The industry need to ensure that its management and control functions keep pace with growth," he added. He said there is a need for firms, especially those that become internationally active, to ensure their risk management, control systems and IT are capable of providing an accurate picture of a financial institution's overall risk profile. "Boards of directors and senior managers also need to ensure that they have the knowledge, expertise, and professional skills to manage businesses that are growing in complexity. "Building high quality human capital is an essential building block for the expansion of the Islamic financial industry," he added. Rasheed said the regulatory framework needs to keep pace with an expanding industry. He said the Islamic Financial Services Board, the International Islamic Financial Market and the Accounting and Auditing Organisation for Islamic Financial Institutions needs to take the lead in adapting to the new international standards, including Basel III, and to the specific circumstances of Islamic finance. "Ensuring that firms have strong capital and liquidity buffers should not be seen as an optional extra for the industry, but as an essential foundation for its next stage of growth. "The industry will be stronger if it strengthens its foundations, just as those of interest-based finance are now being strengthened," he added. --BERNAMA Malaysia