Association of Islamic Banking Institutions Malaysia

Islamic banking to become a leading global economic power

Thursday, 02 July 2009

Islamic banks will play a stronger role in the global economic system post-crisis, according to a top banker.

Chairman of the Union of Arab Banks (UAB), AdnanYousuf, said that the UAB, which comprises nearly 470 Arab banks, has apparently offered to initiate efforts to strengthen cooperation between Arab and EU banks.

"The Islamic banking services industry has proved that it is a solid and powerful industry over the past 30 years. It is now poised to become one of the global economic powers in any new financial order," he said.

"The international financial system is currently passing through radical changes in its essence and infrastructure because of the crisis. These changes will directly and indirectly affect the Arab banking system. We believe that it is time for both Arab traditional and Islamic banks, particularly those which have established a strong presence in the EU market, to seize this golden historic opportunity and enter into the new financial order with full force... this of course should be done in co-ordination with the national central banks."

Yousuf added that EU Foreign Policy Chief Javier Solana was aware of the prominent role that Islamic banks would play in expanding financial ties between Europe and the Middle East, and that he had discussed these issues with Solana recently in Brussels.

On another occasion, Yousuf said that Arab banks should take appropriate measures to boost coordination in order to play an effective part in the new economic order.

The global economic downturn has led many to turn to Islamic banking and finance as an alternative to conventional products and services as a result of the sector's relative immunity from the negative effects of the crisis.

In late May, Professor Rodney Wilson, who wrote the London School of Economics and Political Science’s report for the Kuwait Programme on Development, Governance and Globalisation in the Gulf States, said: 'There has been much questioning of the values underpinning the conventional financial system, and the search for alternatives means that Islamic banks are likely to receive more attention, especially as their raison d'être is morality in financial transactions, based on religious teachings.

The Islamic finance industry is growing at an exponential rate, increasing by as much as 15 to 20 percent per year. According to Asian Banker Research Group, the growth rate has reached 26.7 percent amongst the largest 100 Islamic banks.

Source:
Emirates Business 24/7 2009