Issues and Challenges in Islamic Banking Dominate Conference

Kuala Lumpur, November 16, 2005: Issues and challenges facing the global Islamic banking industry dominated discussions at the 3 rd International Islamic Banking and Finance conference organised by Monash University Malaysia.

The two-day conference, with the theme Islamic Finance: The Challenges Ahead, was opened by Deputy Finance Minister Datuk Dr Ng Yen Yen at a leading hotel in Kuala Lumpur today.

Conference Chair Professor Bala Shanmugam said prominent speakers and industry leaders took the lead in discussing pertinent issues on Islamic banking including regulation and supervision, financial innovation, human capital development, financial architecture, Islamic IT solutions and legal and syariah framework.

He said the phenomenal growth of Islamic banking in recent years underpins the need for greater regulation and supervision of the system to facilitate wider acceptance of Islamic products and services.

Professor Shanmugam, who is the Chair of Accounting and Finance at Monash University Malaysia, said future growth of Islamic banking looks promising but this will depend greatly on factors including global standardisation and improved regulation as well as the adoption of best practices in Islamic banking and finance activities.

“This conference is timely as it provides a focused platform for researchers, academics and industry leaders to brainstorm issues affecting Islamic banking.

“A major issue that needs to be looked into urgently is human capital development within the local Islamic banking institutions as the industry is now facing a shortage of qualified personnel.”

He said with the entry of foreign Islamic banks in Malaysia, it is necessary for local Islamic banking institutions to raise the professional capabilities of their bankers to enable the country to compete globally.

“Liberalisation of the Islamic banking sector to foreign players presented new challenges to the Islamic banking industry and this is expected to lead to greater competition,” Professor Shanmugam added.

RHB ISLAMIC Bank, the main sponsor of the conference, has been actively involved in the development of Islamic banking since its introduction in Malaysia. 

Chairman of RHB ISLAMIC Bank Bhd Mr Vaseehar Hassan Abdul Razack said the bank’s presence has grown steadily since the opening of its Islamic Banking window in 1993. RHB ISLAMIC Bank now offers a greater and comprehensive range of Shariah-compliant products and banking services.

RHB Group is the first conventional banking group in the country to operate a full-fledged Islamic bank beginning March this year.

“Our efforts thus far underline our commitment to play a major role in the growth and development of Islamic banking in Malaysia and the region,” Mr Vaseehar said.

“Our participation as the main sponsor in this conference reflects our resolve in promoting Islamic banking and finance, both locally and abroad,” he said.

The conference also addressed issues on exploring viable Islamic IT solutions as present solutions used by Islamic banks are mostly adaptations from conventional banking solutions. Issues of critical mass and ways on how Islamic banks can effectively make inroads into primary and secondary markets to ensure profitability were also examined at the conference.

Over 200 participants worldwide attended the conference, including prominent speakers Mr Michael Hanlon, managing director of the Islamic Bank of Britain, Dr Yahia Abdul Rahman, founder of Shariah Compliant Banking in the United States and Professor Rifaat Ahmed Abdel Karim, who is the Secretary-General of the Islamic Financial Services Board.