Malaysians ’embrace Islamic gold dinar’
September 5, 2010Eid Mubarak from Blog of Knowledge
September 8, 20102009: A Critical Year for Islamic Finance
By Lahem al-Nasser Available at: http://aawsat.com/english/news.asp?section=6&id=22217
Riyadh, Asharq Al-Awsat- According to a report issued by the General Council for Islamic Banks and Financial Institutions, we could call 2009 the ‘critical year’ throughout the age of Islamic Finance across the Gulf region. In that year, numerous events took place which had an impact on the development of this industry throughout the region. The Gulf is the ‘cradle’ of this particular industry, the place where it was born and launched. It is also very much the backbone of Islamic finance, with the greatest concentration of assets and institutions.
2009 witnessed the first recorded instances of a decline in the value of Islamic finance assets, at a rate of 2 per cent in Kuwait and 6.4 per cent in Bahrain. When compared to the previous year, Kuwait achieved a growth rate of 15.6 per cent, whilst assets Bahrain grew in value by 45.5 per cent. Simultaneously, there has been an unprecedented slump in the financial growth of the industry’s assets in other GCC member states. The growth rate stood at only 5.4 per cent in Saudi Arabia, 3.8 per cent in the UAE and 23.8 per cent in Qatar. Comparably, the Islamic finance industry’s growth rate last year stood at 35.2 per cent in Saudi Arabia, 21.5 per cent in the UAE and 48.8 per cent in Qatar.
This year also witnessed a serious incident, namely a takeover bid, initiated by a supervisory body in one of the major countries that support this industry. This ‘coup’ happened after the banking sector in that country suffered a crisis, when some financial institutions failed to meet their obligations. Without a doubt, the coup was an irresponsible act, capable of eradicating all that country’s accomplishments in the field of Islamic finance, and hampering its ambition to become a regional financial centre for the industry.
In my opinion, the takeover bid was merely an attempt on behalf of the supervisory body to shirk its responsibility, for failing to meet its obligations in the correct manner, thus causing the crisis. Subsequently, the supervisory body put the onus on the industry and its institutions. As the proverb reads: “Cutting off the nose to spite the face”. The supervisory body was trying to benefit from neglecting in to supervise such institutions over a long period, during which these institutions went unchecked.
Is it conceivable, for example, that one of the Islamic financial and investment firms that went bankrupt was administered by e-mail? Is it conceivable that its management board had not physically met for an extended period, or that money was being secretly embezzled and even the managing director was unaware of it? Is it logical then to say that was the error of the Islamic finance industry? The Islamic finance industry – just like any other financial industry – suffers from corruption in some of its institutions. Subsequently, the lack of rules to govern its activities, accurately and strictly, and monitor its businesses and movements, creates an ideal environment in which to commit offences in pursuit of quick profits. This is especially true when we consider that many of those responsible for this industry, whether executives or board members, are disillusioned with the industry itself or by the principles governing it, and that they regard it as nothing more than a means of marketing. Therefore, they are completely detached from the application of Islamic Shariaa, its principles and morals. As we mentioned previously, the presence of strict supervision is necessary, for “God would deter by force what he would not deter by the Holy Koran”.
This year, there has been also been a decline in the issuance of Sukuk, as numerous cases were observed in which debtors failed to pay on time or demanded that their debts be rescheduled. Among the most prominent cases was that of the “Nakhil” company, which drew great controversy from the moment it failed to pay its debts on time, until the moment a payment was finally made. Likewise, the Kuwaiti Dar al-Istithmar company was also lagging with repayments, and the total unpaid Sukuk around the world totalled 51. However, despite these difficulties, Sukuk are still proving to be desirable today, as evidenced by the large interest which both the Saudi Electricity and Bin Laden companies have attracted.
The year 2009 and its events should not go unnoticed by the Islamic industry, those responsible for it, and the supervisory bodies. Rather they should see it as a lesson, and address the errors that caused such incidents. The industry must also devise an early warning system for crises such as these.
The 2009 incidents emphasize the importance of enacting laws and regulations for Islamic banks, and for developing accurate and strict supervisory systems that are suited to the industry and its activities. It is also necessary to establish professional and qualified executive departments, which are characterized by strength and honesty, and which are fully convinced by the principles of the industry, and are utterly committed to its morals.
The world is divided today into two large blocs, the Communist bloc in the East and the Capitalist bloc in the West. That is what appears on the surface, what everybody is saying and thinking. But we believe that it is a superficial division and not a real one, a division based on interests and not on principles, a struggle for goods and markets and not for ideas and convictions…. We should not be deceived by the fact that we see a strong and violent struggle between the Eastern and Western blocs, for both of them have a materialistic notion of life; each is similar to the other in its thinking, and neither struggles for ideas and principles but only for influence in the world and profits in the market. The real and profound struggle is between Islam on one hand and both the Eastern and Western blocs on the other. (Sayyid Qutb 1949)
Best Regards
ZULKIFLI HASAN
DURHAM, UK
London