The growth opportunities for the Islamic financial industry are particularly strong as Islamic finance has its largest presence in rapidly growing economies that have been least affected by the global financial crisis, according to Bahrain’s central bank governor H.E. Rasheed M. Al-Maraj.
Speaking at the 18th annual world Islamic banking conference in Bahrain, Al Maraj noted that the “obvious flaws” in conventional finance have created great interest in the Islamic financial model.
He said: “This should provide the basis for the industry to sustain a period of strong growth for the rest of this decade. “
In Al-Maraj’s view, if Islamic finance is to make the most of its opportunities, it still needs to learn from the mistakes of interest-based finance.
“As Islamic financial institutions expand, they need to make sure that their management and control functions keep pace with their growth.”
He added: “Building high quality human capital is an essential building block for the expansion of the Islamic financial industry.”
Al-Maraj said the Islamic financial industry is fortunate to have several well-established standard-setting bodies including the Islamic Financial Services Board and the Accounting and Auditing Organisation for Islamic financial institutions.
“These bodies now need to take the lead in adapting the new international standards, including Basel III to the specific circumstances of Islamic finance,” said Al-Maraj.
Within Asia, Malaysia is a good example of the opportunities for Islamic finance. For example, Ernst & Young showcased its World Islamic Banking Competitiveness Report at the conference in Bahrain, which revealed that the Malaysian Islamic banking sector registered a four-year compound annual growth rate of 19.3% to reach $87bn in 2010.
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