It’s all about credit and investment. Credit: Do your customers believe in you? Did you do your underwriting correctly? Investment: Are you investing in your people? Are you exercising enough due diligence in your business investments? Good 360 degree credit and investment policies are what it is all about.
ABDULKADER THOMAS
T I believe — based upon 10 years of work on where financial markets and the Internet converge — that the direct instantaneous connections of the Internet are capable of linking providers of credit and investment directly — “peer to peer” — with the users of such finance. Moreover, this direct connection can only be achieved within partnership frameworks instantly understood by any Muslim as being Shariah compliant in their sharing of risk and reward. A leading scholar in Qom, Iran, remarked to me that the Shariah compliance of such partnership-based enterprise models is “self evident”. I believe that a new generation of “peer to peer” partnership finance will rapidly evolve in 2010 in response to the continuing financial crisis, and will deliver the necessary changes referred to by Dr Salman Khan in a recent Islamic Finance news article. In other words, the global financial system may perhaps become sustainable by adapting to Islam, rather than Islamic finance attempting to adapt to an unsustainable — and fundamentally unIslamic — global financial system.
T In particular, the focus on emerging markets rather than historically more developed markets will create opportunities for Islamic banks, which are relatively stronger in the former. Markets in predominately Muslim countries should do well in 2010 with higher growth and increasing investment, which is encouraging for the Islamic finance segment. The challenge for the Islamic finance industry is not merely to grow in line with market developments but to increase market share. To attract more deposits, notably Mudarabah investment accounts, improved structures are needed that carry more conviction with savers. For financing, the pricing of Murabahah, Ijarah and Istisna must be competitive. More effort is required to demonstrate to clients the merits of these products for their particular needs. Islamic banking should be adaptive and personalized. Being Shariah compliant, indeed preferably Shariah-based, is of course fundamental, but clients also need to be shown how Islamic financial products are distinctive and add value.
I The Dubai near-default in November 2009 has clearly shown that concentration risk within Islamic finance tends to be high and strongly biased towards real estate. In addition, it has emerged that defaults and bankruptcy laws within Shariah are not well defined. Enhanced governance and risk management standards, a review of how the rating agencies rate Sukuk, bankruptcy laws and a fresh look at standardization will be the main themes for the Islamic financial industry in 2010 which will assist in the sustainability of Islamic finance within the global financial system.
T I believe — based upon 10 years of work on where financial markets and the Internet converge — that the direct instantaneous connections of the Internet are capable of linking providers of credit and investment directly — “peer to peer” — with the users of such finance. Moreover, this direct connection can only be achieved within partnership frameworks instantly understood by any Muslim as being Shariah compliant in their sharing of risk and reward. A leading scholar in Qom, Iran, remarked to me that the Shariah compliance of such partnership-based enterprise models is “self evident”. I believe that a new generation of “peer to peer” partnership finance will rapidly evolve in 2010 in response to the continuing financial crisis, and will deliver the necessary changes referred to by Dr Salman Khan in a recent Islamic Finance news article. In other words, the global financial system may perhaps become sustainable by adapting to Islam, rather than Islamic finance attempting to adapt to an unsustainable — and fundamentally unIslamic — global financial system. |