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Islamic finance sector 'facing key challenges'

Manama, May 15, 2012

Islamic finance industry is facing key growth constraints that need to be addressed, said Central Bank of Bahrain (CBB) executive director of financial institutions supervision Abdul Rahman Al Baker.

"We are seeing continuing fragmentation in Islamic financial products," he told delegates at an Indonesia-Bahrain seminar on the industry at the Ritz-Carlton Bahrain Hotel and Spa.

"Unless products can be standardised, there will be less liquidity and documentation costs will remain higher than for conventional banks," the banking expert said.

"Furthermore, Islamic banking needs to gain a larger share of the retail market by providing investment accounts that are as flexible as conventional deposit accounts and to continue its provision of retail credit products such as credit cards and other products which are flexible enough to be competitive with conventional products," he noted.

"This is where teaming up scholars and bankers from different countries can facilitate developments. There needs to be a greater exchange of personnel between countries to facilitate exchange of ideas. Perhaps this seminar is one of the ways to push this process forward," said Al Baker.

The CBB, he stated, intends to remain at the forefront of the Islamic banking and finance and "we look forward to work closely with our Indonesian brothers and market players to develop this key industry."

Al Baker said Bahrain is the home of modern Islamic banking and finance within the GCC.

"From the setting up of Bahrain Islamic Bank in 1978, through to the publication of the first set of Islamic finance regulations in 2001, Bahrain has been at the forefront of developments in Islamic finance," he pointed out.

"In order for the Islamic finance to develop further, both here in Bahrain and in Indonesia, a robust training and educational support is essential. It is only by developing expertise Islamic finance can build up the critical mass of qualified individuals necessary for the industry to reach its full potential in the global marketplace."

"We have also witnessed important developments in the standardisation of wholesale Sharia-compliant financial instruments by the International Islamic Financial Market here in Bahrain," said Al Baker.

"I am proud to say that the CBB has played a key role in its programmes of sukuk issuance since the first sukuk issues in 2001," he observed.

"These sukuk give banks and financial institutions an eligible liquid asset and a liquid form of collateral for secondary market trading and liquidity generation," he added.-TradeArabia News Service




Tags: banking | Central Bank of Bahrain | sukuk | Islamic Finance | challenges | . indonesia |

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