Islamic finance urged to broaden the scope of Islamic microfinance

KUALA LUMPUR: The Islamic finance industry should look into opportunities to broaden the scope of Islamic microfinance that currently only represents 1% of the global microfinance outreach, said Raja Nazrin Shah, the Regent of Perak. In his opening speech at the Islamic Financial Intelligence Summit (IFIS) 2013, he said that Islamic finance had a crucial role to play in bringing the financially underserved Muslims into the economic mainstream. “This is a path that can help alleviate poverty and create employment, thereby contributing towards a more equitable economic growth and sustainable development,” he said. He said that contemporary Islamic finance today had been largely disengaged from its socio-economic aspects – similar to how conventional finance is said to have moved from “main street” to “Wall Street” in the developed markets. “It can also be then said that Islamic finance is gradually moving from the realm of retail finance into the world of high finance. “I believe that Islamic finance, whose core pillar is the promotion of social justice, can and should do more to meet the needs of the poor and the marginalised,” Raja Nazrin said. He noted that in the uncertain global economic environment today, the restoration of trust and confidence was key for the sustainability and continued growth of the international financial system. “Trust and confidence will only return when financial transactions are based on sound and mutually beneficial principles. “The disillusionment and disenchantment with the world of finance in the aftermath of the global financial crisis offers Islamic finance a unique opportunity to present itself as a financial system that is more resilient,” he said. He said Asian countries were taking the lead in terms of leveraging on the sukuk market for financing large-scale projects and had accounted for 73% or US$212bil of the total global sukuk outstanding last year. He also noted in his speech that despite Islamic finance having escaped relatively unscathed from the global financial crisis, the industry was by no means insulated from the risks of excesses that wreaked havoc in the global financial system. He added that as the Islamic industry became more integrated into the global financial system, there would be risks arising from an economic slowdown that could impede growth and diminish liquidity. source: http://www.thestar.com.my/Business/Business-News/2013/11/12/New-focus-for-Islamic-finance-It-should-look-into-opportunities-to-broaden-the-scope-of-Islamic-micr.aspx