Islamic finance, despite its unique characteristics, is diverse in its application and has universal appeal as a viable alternative means of financing, according to secretary general of the Islamic Financial Services Board (IFSB) Professor Rifaat Ahmed Abdel Karim.

Despite having its own nomenclature, the Islamic financial services industry (IFSI) operates within the existing global financial infrastructure, he added while making the opening address to the delegates of the second Islamic Financial Services Forum: The European Challenge.

The interlinking of the IFSI with the conventional financial system subjects it to similar risks and challenges, and may still affect financial markets (albeit in a relatively minor way) should any adverse conditions occur. Thus, it is necessary that there be a set of prudential standards that cater for the specificities of Islamic finance.  

The IFSB, an international organisation with the mandate to develop prudential standards, believes that standardisation efforts will largely contribute to promoting the soundness and stability of the IFSI, improving the supervision of institutions offering Islamic financial services (IIFS), and most importantly, providing a level playing field for IIFS to enable them to achieve their full potential in domestic and global markets.

In its preparation of prudential standards for the IFSI, the IFSB adopts existing globally acceptable standards, for example Basel II, and adjust them to the specificities of the IIFS.

This approach is adopted to bring about the seamless integration of the IFSI into the mainstream market. For the IFSB, the application of its standards should not compromise, but rather complement, the existing supervisory practices.

The forum is the result of joint collaboration between the Deutsche Bundesbank, the Financial Stability Institute and the IFSB.

Governor Bank Negara Malaysia and chairperson of the IFSB Council Dr Zeti Akhtar Aziz delivered the keynote Address. The forum drew the participation of 22 internationally recognised chairpersons and speakers, including four other central bank governors of IFSB member countries.

They are:  Governor Central Bank of Jordan Dr Umayya Toukan, Governor State Bank of Pakistan Dr Shamshad Akhtar, Governor, Qatar Central Bank Shaikh Abdullah Saoud Al-Thani and Governor, Central Bank of the United Arab Emirates Sultan bin Nasser Al Suwaidi.

The aim of the forum, which was attended by more that 130 delegates, is to provide a better understanding of the intricacies of the IFSI as well as cast light on the operational aspects of the IFSB Standards. – TradeArabia News Service