The Islamic Financial Services Board (IFSB), the transnational organisation whose mandate is to set prudential and supervisory standards for the global Islamic finance sector, is organising its 5th Annual Summit to be held on 13-14th May 2008 in Amman, Jordan on the theme ‘Financial Globalisation and Islamic Financial Services’, under the Royal Patronage of Her Majesty Queen Rania Al-Abdullah.
The very nature of cross-border capital flows together with the phenomenal advances in information technology and pressures on financial market liberalisation has meant that globalisation has inevitably impacted on the financial services sector per se.
In this respect, the Islamic financial services sector is no exception. Indeed, in an aspiring universal Shari’ah compliant system of financial management, globalisation at least is a potential force for good.
Islamic finance is a phenomenon that has attracted participation by anyone interested in ethical and socially-responsible financial services and investments. The cross-cultural penetration of Islamic finance is taking an exciting new turn in markets such as Malaysia, with Islamic financial products now being used as wraps even for conventional products by non-Muslim customers because they are deemed more competitive.
The impressive year-on-year growth of Islamic finance augurs well for the future viability of the sector. Despite the absence of empirical research on market size, the sector is estimated by some to grow at a robust 20 per cent per annum over the next few years.
With financial globalisation, whether in the conventional or Islamic financial sectors, comes innovation and financial engineering. The pace of innovation is so rapid that very often regulatory authorities find it difficult to keep up with new developments in products and the concomitant legislation, technology and market trends.
The importance of this Summit cannot be overstated. Its timing could not be more opportune. With more and more IFSB member countries now acceding to the World Trade Organisation (WTO) provisions, including those relating to financial market liberalisation, and more cross-border opportunities inevitably emerging, it is important for regulators, market players and other interested parties to familiarise themselves with how financial globalisation is impacting on Islamic financial services.
As such, the IFSB Summit will discuss pertinent topics which include:
•Globalisation of Islamic Financial Services: Opportunities and Challenges. These include Supply and Demand trends for Islamic Finance; Growth in Different Industry Segments; Potential Returns to innovation and Specialised Technology; and Issue Relating to Legal Infrastructures, Regulation and Human Resources.
•Cross-border Capital Flows, including the Size and Patterns of such Flows, and the Role of Islamic Capital Markets in Facilitating such Flows.
•Key issues in Regional Integration of Islamic Financial Markets, including Islamic Capital Markets – Promotion and the Catalytic Role of Governments.
•Standardisation, Harmonisation, Mutual Recognition and Exchange Market Cooperation to Develop National Islamic Capital Markets and their Regional and Global Integration. These would include Shari’ah Rulings; Contracts and Documentation; and Exchange Market Alliances. and
•The Way Forward in Financial Globalisation and Islamic Financial Services. These would include the Development of National Islamic Financial Markets and the Priorities for Standard-setting Organisations.
This Summit has important implications in other aspects as well. International Monetary Fund studies in the past have shown that Islamic finance, by its very nature, may be in a stronger position to absorb the shocks of the global financial system.
At a time when the conventional banking sector is facing a serious credit crunch following investments in subprime US housing mortgage loans, which have since collapsed, there may be even more migration to Islamic financial services in certain countries, and more lessons to be learnt for both financial systems.
In this respect, this Summit is imperative also for all those involved and interested in Islamic financial services – government departments and agencies; regulatory authorities, international agencies, market players, investors, end-users, academics, allied services such as rating agencies, law firms, accountants and auditing firms, consultants, and informed lay people.
The IFSB is convening a group of six governors of central banks, top experts and practitioners in their respective fields to address the Summit on the various topics above. More details to this effect will be released in due course.