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A shortage of expertise in the Islamic finance industry and the lack of regulatory harmonisation are the biggest obstacles facing the sector’s growth, according to Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Dr Mohamed Nedal Alchaar, the secretary general of the AAOIFI, said the Islamic finance industry would grow by 10 to 20 per cent in the next three years but there were some obstacles to this growth have been identified.
In a speech on Islamic finance, entitled Saviour in the downturn?”, Dr Alchaar said a real concern was the lack of expertise within the industry. However he also added 600 people have already graduated through a training scheme set up by the AAOIFI, to help combat this void. Meanwhile, a global survey conducted by BDO Stoy Hayward among 150 financial services, found many felt there was also a significant lack of demand among Muslims for Islamic finance, “which could reflect both scepticism on religious grounds, a lack of awareness and concerns about cost-competitiveness.”
The BDO survey concluded however there was still strong growth potential for the market and with people looking for a new system after the financial crisis, perhaps Islamic finance could be the answer. There has been more attention paid to the sector since the crisis, however Dr Alchaar does not believe Islamic finance should be considered a “saviour” rising from the downturn. He said an Islamic system would never completely replace the conventional system, it will only ever exist as an alternative option.
He said: “We will see growth in the sector for one simple reason. There are 1.6m Muslims in the world and that number will grow. We breed and we breed well.” Dr Alchaar was more concerned that harmony could be achieved between the two systems. He said: “It is not ethical or appropriate for us to say as a result of the recent breakdown, Islamic finance should rise over other ailing bodies. “The system has its own merits and lots to offer. The system should rise on its own and not as a result of the demise of something else.”
Dr Alchaar added that by embracing Islamic finance, the world could make strides to ending violence in the Middle East and extremism around the world. He said that a lot of the problems, for example in Palestine and Lebanon, were simply down to economics, and he was looking to strike harmony between these different economies. Islamic finance is there to fulfil the needs of people, and is built on a model of financial inclusion, social responsibility and ethics. He said that for those with no alternative to grow their money an Islamic financial system would offer people the opportunity to get a higher return, buy that book for their child, or put dinner on the table.
He said: “It is easy to convince someone with no dinner on the table to turn to extremism and violence, whereas you would not expect someone happily driving a bentley to blow themselves up. “The system strives for harmony, communication between peoples, and the ability for them to connect and accept each other. “By helping us grow you will be helping yourself and helping the world.”