Islamic Finance: Meeting Global Aspirations
global growth
inclusion and increased market penetration
and market development key challenges
Once a very esoteric industry, the market for Islamic financial products is becoming
more global. According to recent estimates, worldwide Islamic finance industry assets
exceed $1.87 trillion—a quantum leap from merely $150 billion in the mid-1990s.
In the lead up to the Islamic Finance: Meeting Global Aspirations conference
taking place on November 11, 2015 in Kuwait City, His Excellency Dr. Mohammad Al-Hashel,
Governor of the Central Bank of Kuwait (pictured), spoke with IMF Survey
about the role that Islamic finance plays in today’s global financial system.
IMF Survey : What is the purpose of the Islamic Finance Conference?
Al-Hashel: Although still a comparatively small share of all global financial
assets, the role and relevance of Islamic finance in the global financial system
is gaining significance. The Islamic Finance Conference can provide a forum for
a global dialogue to develop a vision for the sustained growth of the Islamic financial
industry, and build a platform for continued work in order to further cultivate
and exploit the core competencies of Islamic Finance that make sustainable growth
possible.
IMF Survey : What are the key issues and themes that will be discussed
at the conference?
Al-Hashel: The first theme concerns increasing financial inclusion
through access to finance, which is vital in stimulating the economy and improving
the welfare of the underprivileged. Research suggests that over one third of the
world's adult population—about 2.5 billion people—lacks access to formal
financial services. Islamic finance can help remedy this situation by promoting
Islamic microfinance, financing to small and medium-sized enterprises, and microTakÄful
(pooled insurance where shareholders contribute money to protect against loss
or damage). Nevertheless, financial inclusion also requires enhancing access to
basic banking services, creating a conducive regulatory environment, and promoting
public awareness on financial matters.
Second, we will discuss how to strengthen regulation and supervision to foster
financial stability. A recent IMF study noted that Islamic standard setters,
including the Islamic Financial Services Board, have established "rules of the road,"
but these are not being applied consistently, potentially stifling the development
of Islamic finance and creating systemic vulnerabilities. Continued efforts are
needed to refine regulatory frameworks for Islamic finance institutions—in
line with recent recommendations of both the Basel Committee on Banking Supervision
and the Islamic Financial Services Board—while ensuring greater consistency
in their...
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