Saturday, March 28, 2009

Islamic Development Bank wants G-20 to look at Islamic finance and inclusion in the IMF's Financial Stability Forum

The Islamic Development Bank says that the G-20 meeting in London should include a discussion on the opportunities offered by the Islamic finance industry. Ahmed Mohamed Ali also said that Islamic financial institutions should have representation within the G-20 and the Financial Stability Forum of the IMF. The article describes his comments:
"The major selling proposition of Islamic finance is its strong ethical foundation. Financial stability also requires to go back to basics under a new leadership, a special moral fiber and a character-and-integrity-based governance," he said.

However, it also entails recourse to "people values" and to "principles-oriented governance" and a strong linkage between financial services and real economic activities and transactions. It also requires a sense of responsibility and accountability. Islamic finance of course has an extra tier of compliance in the form of Shariah governance.
One of the important things discussed in the article is that the President of the IsDB remains confident about the Islamic financial industrty's resiliency but remains concerned about the effect of a slowdown in economic growth on the industry.

Bahrain based Al-Salam Bank and Bahrain Saudi Bank are planning to merge. Mergers between Islamic banks should continue through the next few years to reduce the number of Islamic banks and increase their average size. Regulators should be concerned about allowing Islamic banks to become 'too big to fail' especially without interbank lending markets and no lender of last resort. However, the risk of too big to fail is offset by the need for Islamic banks to be better diversified on the asset side of their balance sheets.
Other News
  • There is an article about the Shari'ah screening process that includes a description of one of the most important developments the industry will need to make: the inclusion of positive (not just negative) screens.
  • The sukuk market is expected to recover in 2009, although local currency sukuk will be more prevalent according to Islamic bankers like Badlishah Abdul Ghani, CEO of CIMB Islamic bank and Salman Younis of KFH Malaysia. The Islamic Development Bank is planning to issue local currency sukuk in Singapore, Indonesia, Kazakhstan and possibly Hong Kong.
  • Bahrain's central bank is planning a $500 million sukuk to rollover a maturing $250 million sukuk as well as $250 million for a new issue.
  • The Islamic Bank of Thailand is planning to issue its first sukuk this year.
  • Indonesia plans to sell up to Rp 7.5 trillion ($650 million) in sukuk before June. The treasury director said that depending on changing valuations of the underlying asset could cause the issuance to change.
  • Amana Bank Ltd will become the first Islamic bank in Sri Lanka when it opens. It recently received provisional approval from the country's central bank.

No comments: