BAHRAIN. CEO of Capinnova Investment Bank, Mr. Jamal Hijres, strongly believes that standardisation of the ‘Islamic banking policies, procedures and regulatory framework’ on a global level is important to propel the growth of Islamic Banking across geographies. Capinnova Investment Bank is the Shari’a compliant investment banking arm of BBK.
“An important effort towards achieving international consistency was the creation of two multilateral institutions: the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which issues internationally, recognized Shari’a standards on accounting, auditing, and governance issues; and the Islamic Financial Services Board (IFSB), which issues standards for the effective supervision and regulation of Islamic financial institutions. The growth of such institutions will definitely improve and propel the industry at a faster pace,” said Mr. Hijres.
According to Moody’s Investors Service - assets held by Islamic financial institutions may rise five-fold to more than $5 trillion as demand increases for products that comply with Muslim principles.
“The Islamic banking industry is a fast growing sector that offers an array of opportunities yet to be exploited. Although the Middle East still represents the biggest share of the total Islamic banking sector, Western countries are gearing towards this new trend that presents a unique opportunity to diversify. With a growing market share and a considerable growth rate recorded over the past decade, it is essential for a unified global Islamic banking authority to be established. This authority can be entrusted with standardizing Islamic banking operations and facilitating communication between the different entities, leading to the full exploitation of the sector's potential,” added Mr. Hijres.
On the challenges faced by the Islamic Finance industry, Mr. Hijres stated that, “One of the most important challenges faced by the Islamic banking sector is the unavailability of experts in both banking and Islamic issues. An Islamic banker must possess a profound knowledge of Shari’a rules and principles, in addition to finance. The shortage in experienced and qualified scholars is forcing them to field positions on multiple Shari’a boards, which in turn increases the risk of a conflict of interest”.
“Even though the financial crisis did not affect the Islamic banking industry in particular, the drop in Gulf real estate and oil prices had repercussions on the industry. However, now with oil prices back to the normal range it has definitely brought confidence back to the industry, added Mr. Hijres.
“I would like to mention that while Islamic finance is one of the big success stories in finance today, it is worth looking at the current credit crunch in conventional finance to see how easily one problem can spiral out of control. This is something that Islamic finance practitioners need to take on board and make sure they are prepared to expect the unexpected. Rigid corporate governance programmes, transparency on compliance, learning from conventional banking successes and failures and achieving greater market penetration are all goals that will help sustain this area of Islamic finance. The year 2010 will also be a year that surely will test the strengths of the Islamic Finance industry and I am confident that the industry will deliver and go beyond expectations,” added Mr.Hijres.
Capinnova Investment Bank, the Shari’a compliant investment banking arm of BBK recently offered a US$16.5 million bridge financing facility to support the financing of a religious hospitality project in Mecca. The project consists of a hotel located 1.3 km away from the Haram. The development is in the final stages of completion and will be the first of its kind providing Muslims worldwide (including non-GCC residents) an opportunity to have an interest in Mecca project.
For more information about Capinnova Investment Bank, plesae visit www.capinnovabank.com.