Thursday Sep 19, 2024
Thursday Sep 19, 2024
Tuesday, 1 July 2014 00:00 - - {{hitsCtrl.values.hits}}
The conference witnessed the participation of a plethora of industry stakeholders and professionals from commercial banking, investment banking, capital markets, insurance industry et al, with an unprecedented number in attendance. The industry experts envisaged the vast opportunities for the country in becoming a hub for Islamic banking and finance in the region and discussed potential challenges involved in achieving this milestone.
Setting the stage for proceedings, the Chief Guest at the occasion, Dr. Aishath Muneeza, the Deputy Minister of Islamic Affairs in the Republic of Maldives, noted that Islamic finance has emerged in the aftermath of the global financial crisis as an alternative financial system that encourages risk-sharing, promotes entrepreneurship and discourages speculative behaviour. Whilst highlighting that certain areas in the industry need improvement, she opined that Islamic finance can make immense contribution to rural development in the SAARC region.
Delivering the key note address, Naomal Goonewardana, Senior Partner, of Nithya Partners, noted that the growth of Islamic Banking in the country during the last ten years has been substantial and conferences of this nature have imparted the important elements of knowledge and skills needed for the industry to flourish. He acknowledged that, in order to take the industry forward, there are important aspects such as boards of scholars, legal entities, accounting and taxation frameworks et al that need to be developed. “If we are aiming to be a hub for Islamic finance, the skills among investment bankers, legal and accounting professionals must reach a higher level to ensure that, as a country, we have the necessary skills to meet the industry requirements,” he said.
In a global context, Islamic finance has become a popular medium for structuring long term products, especially for the purpose of infrastructure development. Goonewardana highlighted that more long-term based products are necessary in the local Islamic banking industry and these products would serve the infrastructure development needs of the country. He also called for local market participation in large scale cross-border transactions, which he identified as a vital element to transform the local Islamic banking industry towards reaching a hub status.
Appetite for Islamic finance as the 6th hub
During the CEO Forum, the moderator, Mafaz Ishaq, Director of Calamander Group, Singapore posed the key question ‘Is there an appetite to position Islamic Finance as the 6th hub?’ The recently appointed CEO of Amana Bank Mohamed Azmeer, explained that the presence of Islamic banking and finance in the country itself as a positive factor. He also attributed the country’s post-war macroeconomic development and the proposed consolidation in the financial sector as positive strides towards this endeavour. Azmeer highlighted that developing conducive tax and regulatory framework is imperative for the development of Islamic finance in the country. He noted UK, Dubai and Malaysia have witnessed remarkable growth in Islamic finance as a result of strong leadership, governance, and favourable regulatory framework suitable to develop sophisticated Islamic financial instruments.
Krishan Thilakaratne, CEO of LOFC Al Falah, opined that Sri Lanka’s strategic location presented an ideal opportunity for the country to become 
a regional hub for Islamic banking in South Asia. According to Thilakaratne, there is further room for growth in the local Islamic finance industry, especially in sectors such as microfinance and reaching untapped geographical markets. However, Thilakaratne noted Sri Lanka has a long journey ahead to become a hub for Islamic finance and this requires the industry to achieve considerable scale and capacity. He was also of the view, the present margins of 5% - 6% in the financial sector has to be much lower if Sri Lanka was to become a competitive hub in the region.
Takaful perspective
In an Islamic insurance (takaful) perspective, Manjula De Silva, Managing Director of HNB Assurance, identified high growth potential of the industry as Muslims accounts for 8% - 9% of the population, a segment in which insurance penetrations remain very low. HNB Assurance’s Takaful Unit has been in operation for one year and hopes to target a wider geographical segment, mainly in the northern and eastern parts of the island. Manjula acknowledged the hand in glove relationship of takaful and Islamic banking and noted the dearth of long-term investments avenues are a limitation in developing “family takaful” products i.e. takaful pension plans.
Reyaz Mihular, Managing Partner of KPMG, Sri Lanka alluded the available liquidity in GCC countries in particular that is looking for investment opportunities and local Islamic financial institutions can direct these low-cost funds to various infrastructure projects taking place in the country. He noted there is room for big players to enter the local Islamic finance industry and highlighted the importance of strategic tie-ups of local players with international Islamic banks in order to tap these investments. Taking a different approach to the issue of tax and regulatory framework pertaining to the local Islamic finance industry, Mihular urged Islamic finance professionals to seek and address issues ranging from the current regulatory framework to innovation in product development.
Several other panel discussions also took place; ‘Women in IBF,’ ‘Accounting for Islamic Financial Institutions,’ ‘The IBF Window’ and ‘Legal Issues Facing the IBF Industry’, with the sessions ending with a panel discussion by the youth in the IBF industry on ‘The Future of Islamic Finance’. These interactive sessions were indicative that the future augurs well for Islamic finance industry and it is poised to play a key role in the economic development of the country.
Pix by Lasantha Kumara
