Islamic Banking Needs To Develop Capacity To Undertake Cross-Border Deals

By Noor Soraya Mohd Jamal KUALA LUMPUR, Nov 29 (Bernama) -- South-East Asia and the Gulf Cooperation Council (GCC) nations are the two largest Islamic finance hubs but there are not many cross-border transactions between them, said Dubai-based Noor Investment Group chief executive officer, Hussain Al Qemzi. Hussain said if both could not trade among themselves, then they were not doing it right. "If we are to challenge the conventional banks’ entrenched position in international financial deals, we must develop the capacity to structure multi-currency and cross-border transactions and to build scale. "To do that we need to build deeper relationships between key markets and between banks, so that we are better placed to compete on a global scale," he told Bernama here Tuesday. He said the advantages of conventional banks over Islamic banks were that they had the right products; could undertake cross-border businesses because they had good network; and, had the scale and size. "These are the three things we should focus on. Time is not an issue but you need to launch the initiative. "We need to have more cross-border deals and size. If we don’t do these we cannot compete with conventional banks, we can only be domestic or regional banks," he said. Hussain said in doing this, bankers and practitioners needed to lead the industry and not wait for the government and regulators. "Now the structure and regulation are there, we become lazy," said Hussain, a banker with over 26 years of experience working with leading financial institutions. He said Islamic banking has progressed to a sufficient degree but needed to simplify product's names and iron out differences in syariah-compliant interpretations. "Our products, especially at consumer level, can offer almost everything the conventional banks can offer but sometimes we make them complicated by making the names difficult, we need to simplify that. "On syariah, we see two kinds of evolvement at two different places, sometimes not exactly identical. "So we need to create synergy by at least getting the scholars together," he said. Hussain proposed the establishment of a joint Malaysia-UAE Syariah Board, comprising syariah scholars from both countries. The board would be mandated with finding common grounds between the two schools of thought with the aim of developing new products and services, he said. Citing an innovative sukuk launched by Cagamas, Malaysia’s national mortgage company as an example, Hussain said, the offerings that were acceptable to investors in both South-East Asia and the Middle East could be created. He said the high level of infrastructure spending in both Asean and the Middle East offered Islamic finance an opportunity to establish itself in the global financial market, especially with the eurozone crisis that certainly depressed the European banks’ appetite for financing infrastructure projects. "Islamic finance has not stopped growing despite all the crises. "I think 2012 would be a much better year especially in the sukuk market, which is expected to rebound once the issues in the Middle East settled down. "We should take advantage of this by showing ethical way of banking, which is the root of Islamic banking system," he said. -- BERNAMA