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KUALA LUMPUR, Oct 31 (Bernama) — While Malaysia is doing a great job in promoting Islamic finance, the adaptation process to some of its products will need a deeper look or “a second visit”, according to a renowned Muslim scholar. Dr Hatem El-Karanshawy, founding dean of the Qatar Faculty of Islamic Studies, has voiced caution over the need to quickly Islamise products just to be at par with other conventional instruments. “We should not rush to adopt products and Islamise them in a way because we would like the products to be on the same footing as other western institutions or non-Islamic banking that are not based on Islamic principles,” he said.
Egyptian-born El-Karanshawy, who was previously director of the Central Bank of Egypt, however, declined to name the products concerned when interviewed by Bernama during a recent financial event in Doha, Qatar.
He said that he had discussed the matter with those involved in the industry in Malaysia. However, El-Karanshawy said Malaysia had done a great job in promoting the industry by hosting important international associations working for Islamic finance with the government giving a push in the social development of the system. He dispelled the notion that Islamic finance is not progressive, saying that it is one of the fastest growing industries in the world. However, he pointed out that some Islamic financial institutions are not adhering as they should be to the proper Islamic finance and this is where the real challenge is.
“If they can develop innovative products that would really correspond to the needs of society and adhere to the basic principles, then the growth would be faster and attract more financial institutions,” he said. On the notion that Islamic bank should not be profitable, El-Karanshawy said no one said that financial institutions in Islam should be charitable organisations. “Yes they have to make profits but what type of profits? They have to make profits, they have to be successful. They are talking about corporate social responsibility after the aggressive movement of the market,” he said.
This, he added, has been the misconception of Islamic finance. Asked whether Islamic finance should be incorporated into the new global financial architecture, El-Karanshawy said the market then should be involved in social responsibility. “If the financial sector job is financing investments, in the sense, it will study what’s the money, where the money is going to and then have its returns based on fundamentals of investment and develop ways to share the risks, I think that is the direction that Islamic finance principles would help,” he said.
He added that some elements for venture capital companies in the world could be easily adapted to accept or adhere to the idea of Islamic principles. At the recent CNBC Global live debate in Doha, El-Karanshawy said current banking and finance had strayed from its function of being the “servant of the real economy” in facilitating productivity and development. “People are talking about the secondary market, derivatives. Thinking about making profits rather than the real reason for making investments,” he said. With the problems posed by derivatives, El-Karanshawy questioned the action taken by the free market to address this. Such innovations, according to him, have to be balanced and not risking investors’ money. BERNAMA
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