LACK of experts on Islamic finance is one of the main issues facing both local and international Islamic financial institutions, said the dean of Sultan Sharif Ali Islamic University’s Faculty Business and Management Science.
Dr Mohamed Sharif Bashir said that most of the Islamic financial institutions all over the world, including Brunei, have generally been recruiting bankers and financial professionals from conventional institutions based only on their experience in banking system operations and not on their expertise in Islamic finance.
“The need for expertise in Islamic finance is very crucial because they will be (responsible) for explaining and creating awareness on Islamic financing among the society,” he said.
He added that to ensure the efficiency of Islamic financial institutions, a safe, sound and stable financial system needs to first be developed.“To have a stable financial system in the institutions, there must be robust financial institutions, strong regulation and reliable infrastructure. Corporate governance in the Islamic financial institutions is necessary to reinforce sound regulation and supervision,” said Dr Mohamed.
“It also contributes towards maintaining market confidence, strengthening transparency and accountability,” he added.
The dean used Malaysia as an example as he explained that Malaysia has now adopted a comprehensive domestic Islamic financial system that is diversified in terms of its institutions, markets and players.
“The strategy has been to institute the entire financial system chain to ensure the smooth functioning of the system. The initiatives include building the required financial institutions, including, the Islamic banking institutions, the takaful industry, the non-banking institutions and developing the Islamic money and capital markets,” he said.
“These respective components have recently been progressively liberalised to become internationally more integrated. The supporting financial infrastructure includes a robust regulatory and supervisory framework reinforced by the legal and syariah framework, the payment and settlement systems, the development of the pool of talent and the mechanism for the liquidity operations of the central bank as part of its monetary policy,” he added.
Dr Mohamed cited areas of improvement that should be pursued by Brunei Islamic financial institutions. “All Southeast economies, including Brunei, are experiencing a rapid change in economic environment due to globalisation. The changes in business landscape and market expectations, as well as demand create a new challenge in Islamic financial institutions in this country,” he said.
Addressing “the challenges in terms of globalisation, product innovation, increasing acceptance among customers, good corporate governance and producing expertise will ensure the effectiveness of Islamic financial institutions in this country,” he added.
He said Islamic institutions here are said to have slow product innovation and this could be caused by a number of factors.
“As the business environment moves towards globalisation, syariah-compliant versions of product portfolio including investment and underwriting services, asset and commodity finance and commercial insurance merits further development. Research and development therefore need to be intensified. This calls for greater cooperation between scholars and the practitioners,” he said.
Dr Mohamed added that there is also competition among Islamic and conventional financial institutions in providing products and services.
“Increasing public demand in this regard requires Islamic finance (institutions) to introduce and offer better quality and speedier products and services,” he said, further enforcing the need to broaden the product range of Islamic financial serves.
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