Islamic finance can play major development role: Kabir

• Acknowledges Islamic finance as key instrument in world’s financial structure
• Says Islamic finance part of global alternate finance system with $ 2 t assets, to surpass $ 3.5 t by 2020
• Calls on financial industry to make best use of alternate finance to spur SL growth

By Charumini de Silva

As Sri Lanka searches for new growth avenues, Public Enterprise Development Minister Kabir Hashim yesterday said Islamic finance could be used as a form of alternate finance to spur more investment and development for the country.

Addressing the 2nd Islamic Finance Forum in South Asia held in Colombo, he pointed that Sri Lanka had played a pivotal role in many South Asian initiatives that encompass a wide array of industries.

“The role played by Sri Lanka in Islamic finance in the region is significant. This I believe is a strong reflection we have with our counterparts in the region as well as across the world,” he added.

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Pointing out that world over Muslim and non-Muslim countries are using alternate finance as an established practice of financial intermediaries, Hashim said the Asian Development Bank (ADB) acknowledges Islamic finance as a key source of investment finance in both advanced and developing countries as well as a means for diversified funding and broadening risk exposure at institutional and macroeconomic level.

“This establishes the fact that countries all over the world are adopting alternate finance. Institutions such as the World Bank and ADB are acknowledging Islamic finance as a key instrument in the financial structure in the world,” he emphasised.

Outlining the background and history, he said the first Islamic Bank was established in Bahrain in 1978, and by 2014 it was popular among over 75 countries, where more than 300 institutions were using alternate finance which had $ 13 billion paid up capital and over $ 800 billion investment capital through Islamic finance.

Hashim said alternate finance assets that at present were over $ 2 trillion were expected to surpass $3.5 trillion by 2020. “That is a colossal amount of money for growth and investment funds.”

Differentiating alternate finance from traditional practice, he said it partakes in the risk with the customer and was one of the key factors for its growth within a short span of time in the global financial landscape.

“Normally, bankers give the umbrella when there’s sunshine, but take it back during rain. However, in alternate finance, the banker gets under the umbrella with the customer and stands out the storm together. I believe this is one major reason why Islamic finance is growing across the world.”

According to him, currently there are over 622 institutions providing alternate finance globally, with 109 such institutions existing in Europe alone. “International banks such as HSBC, Deutsche Bank, Citi Bank and Barclays started Islamic finance products particularly to serve the Middle Eastern markets and then it started growing globally.”

Today alternate finance offers various sophisticated financial instruments ranging from mortgages, loans, credit cards, time deposits, hedge funds, insurance and so forth.

“It is a system that has come to stay. But how fast it can grow and how best it can be used for the development of the country is left in the hands of the industry players,” Hashim said.

While commending the theme ‘Cooperation, Consolidation and Consensus,’ the Minister stressed it was imperative to adopt and practice for the development of all sectors of the country.