Islamic finance needs regulatory reformszulkiflihasan
International Seminar Calls for Regulatory Reforms
By: MUHAMMED PALATH Available at: http://www.radianceweekly.com/226/6208/DOES-THE-VERDICT-LEGITIMISE-MASJID-DEMOLITION/2010-10-17/Islamic-Finance/Story-Detail/International-Seminar-Calls-for-Regulatory-Reforms.html
An international seminar on Islamic finance concluded in Kochi on October 6, raising immense scope for easing Indian regulatory system to adopt Islamic banking and insurance system. The three-day seminar was jointly hosted by Islamic Research and Training Institute of Islamic Development Bank Jeddah and Al-Jamia al Islamiya of Kerala with participation from various international institutions from different countries including USA, UAE, UK, Malaysia, Indonesia, Bangladesh and Qatar. Key industry players from Indian financial sector also participated in the seminar. The papers presented in the seminar and the discussions on Islamic financial regulations and instruments proved a step forward for popularising Islamic finance among the public and Indian financial experts.
The inaugural session of the seminar was held at AJ Hall at Kaloor in the presence of huge gathering. Veteran Justice V.R. Krishna Iyer inaugurated the seminar. He said Islamic banking is promoting human values. A country like India with 50 per cent of population living below poverty line needs the financial system which considers human values. A banking system which considers mercy, justice and values is necessary. So Islamic banking is fit for our country.
Islamic banking is not only for Muslims but for all community. It is free from exploitative mode of interest. It is practising the method of sharing of earned income between the participants in economic activities. So the people who believe in God should support the Islamic banking system, Justice Iyer concluded.
The chairman of the Organising Committee and General Secretary of Indian Centre for Islamic Finance H Abdur Raqeeb chaired the session. He explained the present condition of Islamic banking and finance in India and the progress he has achieved in introducing it to the large segments of masses as well as to the authorities concerned.
Many secular countries like Britain have made changes in their laws in favour of Islamic banking. If London, Paris and Hong Kong have chance to become hubs of Islamic finance, why not Mumbai and Cochin? he asked. The introduction of Islamic banking in India is for the development of the country. Dr. Muddassir Siddiqi, a renowned financial consultant, made the keynote address. He explained the present condition of Islamic finance in the world and added that opening the window of Indian regulatory system for Islamic finance will drive to flow of foreign direct investment to the country. It will promote growth of the nation. He also inaugurated the International Islamic Finance Academy to be started in Al Jamiya al Islamiya.
The members of Parliament from Kerala E.T. Mohammed Basheer and M.I. Shanavas in their speeches explained their missions to the Finance Ministry for introduction of Islamic banking and offered all their support for the same. Dr. M Obaidullah (IDB), M.Y. Khan Mumbai, Syed Mohammed Bairy, Prof. K.A. Siddiq Hassan, H Jayesh, Munavir Ali Shihab Thangal, Hussain Madavoor, Bahavuddeen Kooriyad, T Arifali, Dr. Kanniyappan, and Dr. Abdussalam Ahmad also addressed the gathering.
The five resolutions to change the Indian regulatory system to help introduce Islamic banking and finance in India were adopted in the seminar. One of them urges the Government of India to accept the recommendations of the Committee on Financial Sector Reforms (CFSR) of Planning Commission of India headed by Dr. Raghuram Rajan to introduce interest-free banking in the main banking sector for inclusive growth through innovation.
Another resolution urges the Government to suitably amend Banking Regulation Act 1949 and taxation law to provide a level playing field for Conventional Banking as well as Islamic banking as done in several modern, secular and industrialised countries. Yet another resolution urged the Government to accommodate Shariah-compliant mechanism in Microfinance institutions which are mainly operating as NBFC’s along with conventional mechanism based on interest.
One resolution urges the Reserve Bank of India (RBI) to open interest-free windows as a pilot project in few conventional banks which can operate within the framework of Indian Banking Regulation Act 1949.
And the last resolution urges the Insurance Regulatory and Development Authority (IRDA) to amend the Insurance Act in order to introduce Takaful (Mutual Insurance).
Mohammed Palath read out the resolutions and Thanveer Muhiyudheen, the convenor of the organising committee made the vote of thanks. The Business Session of the seminar started at Lemeridian Convention Centre on October 5. The first session was about Shariah compliance of Islamic financial products. Dr. Ausaf Ahmed, former head of research in IRTI Jeddah pointed out that as the minorities in the country Muslims are facing a lot of problems to invest their funds. He highlighted the relevance of providing adequate avenues for investment compliance for Islamic way of banking. Dr. Muddassir Siddiqi, Dr. Mohammed Daud Bakkar, Dr. Musthafa Khemira, Tawfique Al Mubarak, Rafeek Ahmad Sheik also presented their views on Islamic Shariah regulations in Islamic finance.
The second session concentrated on developing framework for Islamic finance in India. Sunil Giduani, representative of Price Water House Coopers, an international financial service company, said Islamic banking is a rapidly growing phenomenon in the international financial market. The global market for Islamic investment products was growing at a remarkable pace of approximately 15 to 20 per cent per annum. After the emergence of the era of globalisation Indian financial sector opened up. Now foreign investors, both individual and institutional, are allowed to invest in India and Indian investors make similar investments abroad. The international financial market enjoyed the existence of Dow Jones Islamic Index. Malaysian financial market had Shariah index. In this scenario Indian financial regulatory authority also made enough steps to promote Islamic financial products. It will promote the flow of foreign direct investment and growth of the country, the speakers added. Prasanna Seshachellam, Abizer Diwanji, Mohammed Abdussamad also presented their papers in this session.
The third session was a panel discussion on institutional feat for Islamic infrastructure financing in India. Khurshid Najmi from India Law Service was the chair for the session. H Jayesh (Juris Corp), M H Khatkatey (Bearies Amanah), Abizer Diwanji (KPMG), Robin Roy (PWC) and MA Mehaboob (Secura) also participated in the discussion. Islamic financial instruments are more suitable for infrastructure financing than the conventional interest based system. In Islamic finance various instruments including istisna, Mudaraba and Musharaka are best fit for infrastructure finance. Several projects in the country including Kerala and Maharashtra state governments are thinking on the way. India needs a jump in the infrastructure sector by constructing new roads, bridges, metros, railway lines etc. for the growth of the country. But financing is our problem. If we are ready to raise funds by using Islamic modes of financing, flow of funds from different nations can well be expected. So the governments try to increase infrastructure facilities by attracting funds by using these modes, the speakers concluded.
The fourth session was about Islamic banking regulation. Aishanth Muneeza Malaysia, Rifqi Mohammed, Indonesia, Abdul Ghafar Ismail Bangladesh presented their papers on Shariah corporate governance, risk based supervisions, and Islamic banking reports about Middle East and Asia.
The second day of the seminar opened with a panel discussion on marketing Islamic financial products in India. Dr. Shariq Nisar, Syed Alauuddin, Mazhar S Beary and MH Khatkatay were the participants. In the discussion the speakers pointed out the difficulties facing the marketing of Islamic financial products in the country.
The sixth session was on Islamic Charity and Philanthropy, chaired by Mufti Talha Azmi from UK. Hidayathul Ihasan Malaysia, Syed Khalid Rashid Malaysia, Dr. Rahmatullah Mumbai and Dr. Waqar Anwar Delhi presented their views on Islamic charity system.
The session on Islamic microfinance and co-operatives was a major highlight in the seminar. Microfinance is now recognised as a tool for financial inclusion and poverty alleviation by the world financial sector. But the interest rate charged by these microfinance institutions is too exploitative. Interest-free microfinance institutions developing in different parts of the world are more pro-poor than the conventional one. It helps to effect financial inclusion, poverty alleviation and economic empowerment, the session concluded. The papers presented in this session included different views and studies from different parts of the world. Interest-free nidhis from Kerala, Co-operative societies from Bihar, Micro takaful in Indonesia and economic empowerment study from Indonesia were presented. Dr. Mohammed Obaidullah chaired the session. Yulizar D. Sanrego Indonesia, Najmul Huda from Delhi, Muhammed Palath from Kerala, Ahmad Affandi Mahfuz from Indonesia and Arshad Ajmal from Bihar presented their papers.
The business session was chaired by Dr. Rahmatullah. Dr. Mahmood Ahmad, Dr. Shariq Nisar, Miranthi Karthika Dewi and Ikramul Haq presented the papers. The papers included potential of Islamic banking, sukuk and capital markets, and takaful case study from Indonesia.
There were three parallel workshops on different parts of Islamic finance industry in India like private equity and real estate investments in India by Anand Kakarla from PWC, structuring of Islamic finance in India by H Jajesh from Juris Corp and Non Banking Financial companies by Rohith Narula from KPMG. Many delegates were registered for these workshops; they made the sessions lively with active participation in the discussions.
The valedictory remarks were made by the famous columnist MD Nalapat. He blamed the Government of India, especially the financial regulatory authority, for not adopting Islamic banking in our country. Acting against Islamic finance due to religious matters is not a good thing. If it has a capacity to contribute to Indian financial sector, it should be promoted. It is not promoting negative attitude for new inventions that have potentials to contribute to the country, he added.
H Abdur Raqeeb chaired the concluding session. S Srinivasan, the executive director of Cochin Stock Exchange inaugurated the session. MY Khan, Dr. Abdussalam Vaniyambalam and Dr. Mohammed Obaidullah also made their concluding remarks. Thanveer Muhiyudheen presented vote of thanks.
The three-day international event was a historical event in the country because it was the first largest international gathering in terms of numbers of participants, variety of delegates and peculiarity of sessions. The organisers expect this would be a milestone in the Islamic finance history of the country.