The peace dividend that is now available in Sri Lanka could be utilized to make Sri Lanka an ‘Islamic Financial Hub’ was the suggestion made by Rushdi Siddiqui, Global Head of Islamic Finance and OIC Countries, Thomson Reuters, USA at a Colombo conference this week.
Making the keynote address on ‘Islamic Finance 2.0’ at a two day conference on “Sri Lanka Islamic Banking and Finance”, he said countries like South Korea and Malaysia have done it and Sri Lanka could also do it taking the best advantage in using the peace that is now enjoyed by Sri Lanka.
He said that to achieve this goal there would be many challenges and one among them is ‘Information Search Cost’ which is very high in presenting this information and making it the global connectivity. The global connectivity could bring together stakeholders from one country to another.
He said that they have 150 Sharia based companies and among them there are powerful Islamic Leasing Companies and these companies have linkages. Mr Siddiqui said that this industry has a Sharia Index and Islamic Finance Treasury. He said that they have to think of the Central Bank policy and also they should know about the macro economic environment to have Islamic Financial System.
The Islamic Financial system is now 40 years old and it has reached a one trillion dollar figure. Their expectations are to double this figure within the course of next 5 to 7 years.
Hilmy Cader, Global CEO, MTI consulting, Bahrain, speaking on ‘Strategic Marketing of Retail Financial Services (that happens to be Islamic)’ stressed on branding and service quality and said that they have done a lot of research in the Middle East and there is no sufficient true product development going into Islamic Banks.
He said that if they have the right justification and look at the consumer needs and they should start to look at new products.
He said that branding has got into the banking system recently and now there are far too many sub-brands which confuses the consumers Therefore, he stressed that there should be simplicity in branding which is very important. He said that one good example is HSBC where they have established a very clear identity.
Mr Cader said that another aspect is that lack of awareness about branding. He said that when it comes to Islamic Banking branding would very simple. He said that in Islamic banking conventional advertising will not work. But the message should be taken across to the consumers and they should be educated. He said that advertising in the Middle East is lifestyle integrated and family integrated.
When the Business Times asked Mr Siddiqui whether Islamic Financing is an attempt to move away from the global unity that is being achieved through the global trading and financing through globalization and ICT which was divided by religion and language, he said that there is nothing of that sort involved in Islamic Financing. He said that conventional financing is interest as well as profit based, but according to Islam, charging interest is prohibited. And certain trades are also prohibited like gambling.
He said that in Islamic financing there is a board that looks into the project and would not finance on collaterals. The Board will look into the purpose of the project and it plans and compare with other projects. Once they understand they would decide to finance the project. They would also go into the aspect of experience and the marketability of the product.
He said that the community does not know what is Islamic Financing. He said that interest is prohibited for Muslims and then also one has to follow the laws of the country. He said that Islamic Banking is not transferring the risk but it is the sharing of the risk.
He said that they have spent 40 years to make Islamic Financing to reach one trillion dollars and said that compared to the world financial value they have achieved only one percent and they are expecting to expand this one trillion dollars to two trillion dollars in another 5 to 7 years.