KUCHING: It is proven that Malaysia holds many superlatives with regards to Islamic finance.

Beginning from 2009, it has continued to command substantially between 50 per cent and 60 per cent of outstanding global sukuk originated from the country – more than those from the Gulf Cooperation Council (GCC) nations such as the United Arab Emirates (UAE), Saudi Arabia and Bahrain.

In global equity market and fund management, Malaysia has also been ranked first where syariah-compliant products now make up around 87 per cent of all securities listed on Bursa Malaysia.

“It all started with the Islamic Banking Act 1983. The progress that we see today was triggered from that act,” related CIMB Islamic Bank Bhd’s chief executive officer Badlisyah Abdul Ghani to The Borneo Post.

Prior to Islamic finance, he observed that the nation was regarded as a ‘non-entity’ in the global financial market.

“Islamic finance changed that. Malaysia is now officially recognised as the premier hub for the industry. More significantly, it is all ‘inhouse’; meaning that beginning in 1983, all the infrastructure, the regulatory framework, governance and mechanism are wholly laid out by Malaysians.

“So comprehensive is our framework that what we have here does not exist elsewhere. Under the regulations by Bank Negara, the Securities Commission, Bursa Malaysia and Labuan Financial Services Authority, Malaysia has a specific legislation and provision for each of its financial segments,” explained Badlisyah.

For Syarikat Takaful Malaysia Bhd’s managing director Datuk Mohamed Hassan Kamil, the core of Islamic finance remained at its openness and transparency.

“It is a financial avenue for all – Muslims and non-Muslims alike. The ‘heart’ of Islamic finance concept still underline the transparency aspect across its mechanisms, structure right down to products. The obvious provisos are that there must be no transaction done that involves or originates from ‘haram’ (unlawful) businesses like winery or gambling.

“The rest are applicable, so long they stay within the syariah principles,” he told The Borneo Post in a recent telephone interview.

With a global industrial value estimated at around US$1 trillion (approximately RM3.06 trillion), Malaysia could easily capitalise upon such strength with its expertise and offerings. However, one should not overlook that the industry was once ‘shaken’ last year due to the Dubai debt standstill – indicating that as with the conventional system, the Islamic financial mechanism was not immune to challenges.

Malaysia was also ‘attacked’ by some Islamic countries some time ago when it approved and implemented the ‘bai bithaman ajil’ (deferred payment) concept in its financing which according to Badlisyah, was unnecessarily ‘fuelled’ by misconceptions.

“Malaysia was condemned at the time for practising a concept that was deemed haram due to a confusion in understanding the syariah. Remember that the bai bithaman ajil concept has existed for the past 1,400 years since the Prophet Muhammad’s time.

“How can the concept be condemned haram if it had been practised and advocated by Muhammad and followers? This is the outcome of not having syariah knowledge,” he stressed.

To this, Badlisyah pointed out that it was vital for people to learn and understand syariah and its application into Islamic finance.

“They – financial practitioners and the public alike – cannot impose their personal views on how syariah works, since the system is already standardised across the globe. It should be the other way around.

“It is important that we should get rid of such confusion, as confusion would lead to uncertainty and further on, to speculation. Remember, these two aspects – known as ‘gharar’ – are stately prohibited in Islamic finance.”

Another major challenge for the sector was be the insufficient pool of talents, to which Mohamed Hassan referred to as a ‘major impediment’.

“Together with lack of talent development, there’s a ‘chronic’ talent shortage at the moment. However, I believe that this is a temporary impediment. As the talents continue to grow and develop over the next five to 10 years, we should be able to overcome the setback.

“Also, there are several institutions in Malaysia, which have been developed under Bank Negara, that develop human talents in Islamic finance. So, there are trainings undergoing today that deal with fresh graduates as well as experienced practitioners, slated for them to better understand the industry,” he listed out.

In a similar sentiment, Badlisyah further said, “you talk about human talent, what we do in Islamic finance is, basically, finance. So in order to be better at what we do now, people who know finance should also know syariah. Unfortunately, these are the very talents that we are critically lacking in the market.”

On the bright side, Badlisyah disclosed that it was a ‘good problem to have’.

“It further shows that the industry is growing really fast, resulting in we having to catch up in terms of human talents. Just as Malaysia has a dual banking system; conventional and Islamic, we also need players and practitioners who have financial knowledge, at the same time also knowing how to go about doing it within the ambit of syariah.

“Efforts are being done by the authorities and our very own CIMB Islamic Bank. Upon achieving this, only then we can hold true to our status as the global Islamic financial oasis,” he said.

source : borneo post