Last week I hosted a breakfast meeting with some of the key people involved in the Islamic finance sector.
We talked about the role Islamic finance could play in helping in the current credit crisis. The discussion revolved round a recent ACCA paper – Islamic Finance: An Ethical Alternative to Conventional Finance? – which explores the basic tenets of Islamic finance, the role of the UK in leading its development and whether it is a serious alternative to conventional finance.
Once seen as a marginal industry by some, Islamic finance is now recognised as a vital and thriving market. It has been widely acclaimed as the fastest growing sector within the world of finance and positions itself as an alternative model. Some suggest much of the current problems might have been avoided in an Islamic system (for example, because short selling and derivatives are generally prohibited). Advocates of this view point to the fact that funds adhering to Islamic (Shari’ah) investment principles have so far avoided the worst effects of the credit crisis.
ACCA has the most diverse student and member base amongst the world's accountancy bodies, thousands of whom live in countries with a thriving Islamic finance market in the Middle East, Malaysia and Pakistan. This is why ACCA is keen to play its part in increasing the understanding and development of this sector.
Although the breakfast was under the Chatham House rule, points I took away were:
- the need to raise awareness of the principles of Islamic finance, with particular emphasis on the embedded principles of ethics and social responsibility
- further development of Islamic finance will require a wider range of products to stimulate competition and provide the best service to the public
- while it is not possible for UK regulation to distinguish Islamic finance from other forms of banking on a non-secular basis, there is a need to ensure a level playing field as far as possible
- however, Islamic banks are not a panacea – they are increasingly beginning to feel the effects of the slowdown, due to the interconnection with the global financial system.
ACCA wants to encourage debate on the issue and gauge your opinion on the subject of Islamic finance. Over to you.
Listen to Aziz Tayyebi, ACCA's financial reporting officer, discussing Islamic finance here.
Existing subscribers to this blog feed
Due to the changes in our format, please re-register to continue receiving your blog feeds.
Comments