Is Islamic banking an alternative to the Western capitalist banking system? To date, the total assets of global Islamic financial system are estimated to exceed US$1 trillion, and it is one of the fastest growing financial segment in the international financial system with an estimated annual growth of 15-20 per cent.
One of the Muslim leaders who issued a call for the global Islamic banking industry to capitalize on the global financial crisis to build an alternative is influential Egyptian-born, Qatar-based Sunni cleric Sheikh Yusuf al-Qaradawi. He made this call on 12 October 2008.
Sheikh Yusuf argued that the failings of the capitalist system based on paper and not on goods traded on the market indicates that the Islamic economic philosophy stands stronger to profit from the crisis. In other Islamic states in the region of Southeast Asia, attention is now focused on Islamic banking as a possible panacea to the current global financial crisis.
Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz argued that the Islamic financial system needs to have an appropriate pricing benchmark for Islamic securities so that they are efficiently priced and credible in the goal to construct a stronger, competitive and dynamic financial system that reflects the internalisation of Syariah principles.
Malaysia is riding high on Islamic banking with the country’s economy indicating positive results beginning in 2002 with its first issuance of a global sukuk to liberalise greater market access in Islamic banking to foreign players. Consequently, foreign corporation, MNCs and multilateral agencies may raise ringgit and foreign currency denominated instruments in Malaysia’s market.
This has led to Malaysia’s private debt securities market becoming the largest in Southeast Asia with a high level of liberal exchange administration rules that facilitate the free inflow and outflow of funds. Malaysia is still looking for more strategic alliances to shore up its reputation.
Bernama, “Islamic financial system needs apt pricing benchmark” dated 1 September 2008 in the Brunei Times [downloaded on 9 November 2008], available at http://www.bt.com.bn/en/business/2007/09/01/islamic_financial_system_needs_apt_pricing_benchmark
Brunei Times, “Islamic financial system the answer” dated 13 October 2008 in the Brunei Times [downloaded on 13 October 2008], available at http://www.bt.com.bn/en/world_news/2008/10/13/islamic_financial_system_the_answer