Cecilia Valente

Cecilia Valente's Profile

Bentleys, extremism and olive branches

October 15, 2009

Islamic finance may have shunned the reckless behaviour that nearly brought down the mainstream financial system last year, but it is not able to step in to the old regime’s shoes.

Some expect the industry to grow by double digits in the next three years — the secretary general of a top standard setting organisation for Islamic finance agrees and with humour:

 “We Muslim breed and breed well”, he said laying down his expectations for future demand of Islamic products. 

Jokes aside, Mohamad Alchaar , secretary general of AAOIFI, delivered a message today in London. There is “absolutely no way” that Islamic finance could replace conventional banking in spite of growth potential. Given that a financial product depends on scholars’ approval and scholars tend to disagree about what complies with Islamic law,  Dr. Alchaar may have a point.

“The fact that the system broke down does not make us better. We have plenty to offer to raise on our own rather than on the demise of others,” he said at a briefing organised by accounting company BDO.

One thing Islamic finance can do: it can fight extremism, he reckons.

By helping develop an industry that can give devout Muslims access to banking, financing and investments and a chance to improve their financial lot, the world is giving them a reason to ignore extremism.

In short, “If you help Islamic finance you help yourselves too,” he said. “The anger that we see in the Islamic (world) is also an economic issue,” he said.

“Someone driving a Bentley would not want to blow up a police station. It is easy to convince someone who has nothing,” he said.

The UK seems to have done its bit this week– at least as far as development of Islamic bonds or sukuk goes. The Financial Services Authority and the Treasury said in a statement  on Wednesday it will introduce legislation to ensure any sukuk issued in the UK would be treated as a mainstream corporate bond, rather than like a mutual fund. This would save UK companies issuing sukuk extra compliance costs.

Quite how and when the new legislation would bring about the changes remains unclear. Not for lack of trying. On my third attempt to get at the bottom of this the Treasury press office hung up — presumably to bathe the UK’s contribution to the anti-terror effort in an aura of mystery. Still it is making an effort.

It may not amount to a Bentley, or an Opel Corsa or even a Morris Minor for that matter, but frankly anything to get us moving.