'Islamic finance resilient'
Proven and tested: Malaysian central bank governor Zeti Akhtar Aziz (Top) says the Islamic financial system has demonstrated its resilience to turmoil in response to Bank of Japan governor Toshihiko Fukui's remark that it has yet to be fully tested by stress in the global markets. Pictures: Reuters
Sunday, February 24, 2008
THE Islamic finance industry faces challenges from international market turmoil, but Malaysia's past experience points to its resilience to stress in global markets, central bank governor Zeti Akhtar Aziz said yesterday.
"We are pleased to report that the Islamic financial system demonstrated its resilience to the stress that occurred 10 years ago during the financial crisis," Zeti said in a speech at an Islamic finance symposium in Tokyo.
"We will make every effort to ensure not only the soundness and stability of Islamic finance but also its resilience in an environment of financial stress," she added.
Malaysia is one of the world's Islamic banking hubs.
Islamic financial institutions operate in compliance with syariah, or Islamic law.
A ban on charging interest and investing in prohibited industries, such as alcohol, pornography and gambling, are among features that distinguish Islamic financing from conventional banking.
Zeti was responding to a remark by Bank of Japan Governor Toshihiko Fukui who told the same seminar that the rapidly growing modern Islamic finance industry has not been fully tested by serious stress in the international markets.
"Stress tolerance can only be acquired through the experience of riding out numerous crises in the financial market and financial system," Fukui said, adding that he would closely watch the developments in Islamic finance in this regard.
Fukui added that understanding the flow of Islamic finance capital originating from oil money has become important when considering sustainability of the global economy.
The development of Islamic finance brings diversity to financial markets and transactions, boosting business opportunities and providing a positive impact on the economy through more efficient resource allocation, he added.
Turning to Japan's role, Zeti urged more participation in Islamic finance, saying there is a "significant potential for strengthening further financial linkages" in addition to Japan's already well-established trade and investment ties in Asia.
"It is hoped the Japanese participation in the Islamic financial market would contribute towards further international financial integration," Zeti said.
There has been growing interest in Islamic finance in Japan, but the participation by Japanese financial institutions in Islamic finance business is still at an initial stage partly due to regulatory obstacles.
Among those in the forefront, Japan Bank for International Cooperation (JBIC) is set to issue the first Islamic bonds, or sukuk, in Malaysia soon and Tokio Marine Nichido forestalls in Islamic insurance, or takaful, business.
The BoJ joined the Islamic Financial Services Board, an international body setting standards for Islamic finance, as an observer member last year in a bid to learn more about Islamic finance. Reuters
"We are pleased to report that the Islamic financial system demonstrated its resilience to the stress that occurred 10 years ago during the financial crisis," Zeti said in a speech at an Islamic finance symposium in Tokyo.
"We will make every effort to ensure not only the soundness and stability of Islamic finance but also its resilience in an environment of financial stress," she added.
Malaysia is one of the world's Islamic banking hubs.
Islamic financial institutions operate in compliance with syariah, or Islamic law.
A ban on charging interest and investing in prohibited industries, such as alcohol, pornography and gambling, are among features that distinguish Islamic financing from conventional banking.
Zeti was responding to a remark by Bank of Japan Governor Toshihiko Fukui who told the same seminar that the rapidly growing modern Islamic finance industry has not been fully tested by serious stress in the international markets.
"Stress tolerance can only be acquired through the experience of riding out numerous crises in the financial market and financial system," Fukui said, adding that he would closely watch the developments in Islamic finance in this regard.
Fukui added that understanding the flow of Islamic finance capital originating from oil money has become important when considering sustainability of the global economy.
The development of Islamic finance brings diversity to financial markets and transactions, boosting business opportunities and providing a positive impact on the economy through more efficient resource allocation, he added.
Turning to Japan's role, Zeti urged more participation in Islamic finance, saying there is a "significant potential for strengthening further financial linkages" in addition to Japan's already well-established trade and investment ties in Asia.
"It is hoped the Japanese participation in the Islamic financial market would contribute towards further international financial integration," Zeti said.
There has been growing interest in Islamic finance in Japan, but the participation by Japanese financial institutions in Islamic finance business is still at an initial stage partly due to regulatory obstacles.
Among those in the forefront, Japan Bank for International Cooperation (JBIC) is set to issue the first Islamic bonds, or sukuk, in Malaysia soon and Tokio Marine Nichido forestalls in Islamic insurance, or takaful, business.
The BoJ joined the Islamic Financial Services Board, an international body setting standards for Islamic finance, as an observer member last year in a bid to learn more about Islamic finance. Reuters
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