Malaysia takes a step closer to realizing its aim of becoming a regional Islamic financial hub next month with the launch of an international panel to set benchmarks for Islamic banking.
Central banks from eight founding members -- Malaysia, Saudi Arabia, Indonesia, Iran, Kuwait, Pakistan, Sudan and the Islamic Development Bank -- will ink a pact Nov. 3 in Kuala Lumpur to inaugurate the Islamic Financial Services Board (IFSB).
The establishment of the IFSB -- an association of central banks, monetary authorities and other institutions responsible for supervising and regulating Islamic banking -- was "in response to the growing significance of the Islamic financial services industry," officials said.
It is the culmination of two years of work by the founding members, with support of the IMF and the Accounting and Auditing Organization for Islamic Financial Institutions.
Bankers hailed the launch of the IFSB as a major boost to Islamic banking and finance globally, saying it would serve as an avenue to develop uniform interpretation of Islamic Sharia laws for processes, financing modes and regulatory standards.
"It will give Islamic banking players more credibility and firmer ground to compete against conventional banks either locally or internationally," said SBB Islamic Banking Group manager Nordin Yahaya.
The growing market share for Islamic investments estimated to be worth billions of dollars signified strong demand for Sharia compliant financial products worldwide, he said.
There was "immense potential for business opportunities" with experts estimating the wealth of Islamic nations -- home to one-fifth of world's population -- at around US$800 billion to US$1 trillion, he said.
Bank Islam Malaysia managing director Ahmad Tajudin Abdul Rahman said it would improve efficiency in the industry and enhance Malaysia's prospects of becoming a regional center for Islamic banking and finance. He said a growing number of non-Muslims were investing in Islamic products.
The government's plan to issue a new license to a foreign Islamic bank should serve as a wake-up call for local institutions to beef up their Islamic banking operations to face competition, he warned.
Islamic banking was first introduced in mainly-Muslim Malaysia in 1983, and now has an eight percent share of assets in the banking sector. The government aims to raise the level to 20 percent by 2010.
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