KUALA LUMPUR — Islamic finance has come a long way in the last four decades, and now has significant new challenges to face in the coming decades, said panelists at a session to discuss the future of the industry.
Speaking at The Economist Conversation panel of the Global Islamic Finance Forum 5.0, the four experts offered ideas on how to move the industry forward even as the Islamic economy begins to emerge along with new markets in different geographical locations.
Dr Adnan Chilwan, CEO of Dubai Islamic Bank, said consumer demands will increase rapidly with the emergence of new geographical markets among the world’s 1.5 billion Muslims, for instance from the African nations.
“There will need to be new products to suit their demands,” he said.
He added that although technology offered opportunities, a solid foundation has to be put into place first before Islamic finance fully embraces disruptive technologies.
Raja Teh Maimunah Raja Abdul Aziz, CEO of Hong Leong Islamic Bank, however, believed that technology may help the industry face new challenges such as coming up with a “differentiated proposition” to make it different from conventional banks.
She said greater inclusion can also be achieved through a wider use of mobile technology to reach the under-banked community. She added that as Islamic banks were often small and young, they needed to embrace technology especially mobile solutions as more and more people owned phones.
Abdelilah Belatik, Secretary-General of the General Council for Islamic Banks and Financial Institutions, said a lot can still be done for greater product offerings and better risk management. He noted that ‘shared prosperity’ benchmarks such as job creation and economic impact should also be used more extensively to assess projects for Islamic financing. Bank of Indonesia’s Assistant Director Dr Rifki Ismal said while Islamic finance had performed well in the commercial sector, it lagged in the social sector, and needed to strive harder to assist the under-banked and alleviate poverty.
He said Indonesian banks have adopted strategies such as using a personal approach to work with borrowers to develop their businesses, or employing ulamas to counsel those with debt problems. In certain circumstances, the debt can also be forgiven.
To a question on introducing Islamic finance to the US and Europe, Dr Adnan said the greater need at the moment was the Muslim world where Islamic banks had yet to get a foothold.
Raja Teh Maimunah said Islamic finance needs to be marketed with a different approach in countries which have a low comfort level with Islamic institutions. This could, for instance, mean calling it ‘participatory banking’ instead of Islamic banking, and dropping Arabic terms to describe its products.
“Call the products what they are, in the language that they understand,” she said, adding that Islamic finance also needs to be marketed as being good for all instead of an exclusively Muslim institution. If Islamic finance can reach bigger markets, it can be a vehicle to distribute wealth more fairly, she said. — SG