KUALA LUMPUR, Nov 18 (Bernama) -- The Deputy Prime Minister, Datuk Seri Najib Tun Razak today outlined general work plans to position and re-position Islamic banking and the finance industry to enable it to fully exploit the potential market of one billion Muslims worldwide.
Currently, although the Islamic finance industry is the fastest growing segment in international financial services, it is still too small compared with the size of the potential market, he said.
"A key impediment to the growth of Islamic finance is the lack of awareness among the public on Islamic alternative modes of banking,insurance and investments.
"The industry must continuously engage and educate the general public in order to address the problem," he added.
Islamic finance, he said also needs further research and study with discourses carried out at all levels and should involve regulators, practitioners as well as academicians.
"Investment in human capital must further be improved. The lack of knowledge in Islamic finance is strongly related to the shortage of qualified experts.
"Hence, it has affected the innovation of new products and services in the country," he said in his keynote address at the Kuala Lumpur Islamic Finance Forum 2008.
"There is also an urgent need to create greater awareness on Islamic finance among market participants through research, education and training," he highlighted.
He said despite the divergence of Shariah rulings, its should not be an impediment, as long as they are backed by sound arguments and recognised legal methodologies.
"Any particular area of divergence that is of serious concern should be revisited and reviewed in order to come up with better and more acceptable solutions," said Najib, who is also the Finance Minister.
He also said that the legal and regulatory framework should be resilient and facilitative.
"Dispute resolution mechanisms should also be more accommodative to the application of Islamic legal rules and methods in order to avoid embarrassment to Islamic banking cases as a result of incoherent and anomalous legal judgements," he stated.
Najib said other related regulations and supervision should also be equally and adequately addressed so as to bring the Islamic banks and financial institutions at par with international standards.
To meet these challenges, he said new supervisory and regulatory procedures must be developed and modifications made to the existing structures or procedures.
"However, since the banking sector is highly regulated, any modification must be made with extreme care as the failure of an Islamic bank could undermine depositor and investor confidence, leading to a crisis in the whole financial system, just like what we see happening currently in the conventional market," he warned.
On the outlook, he said the Islamic banking industry is forecast to grow at a rate of at least 20 percent between now and 2012, with more than US$600 billion held or managed by Islamic institutions and the figure is expected to grow to US$1 trillion over the next couple of years.
According to Najib, growth has also been seen in the other major components of the Islamic financial system such as Islamic mutual funds estimated to be about US$300 billion, while global takaful or Shariah compliant insurance contributions are estimated to be about US$5 billion and expected to triple by the end of the decade.