Kuala Lumpur (6th October 2022): “Finance has to serve the real economy, which in turn, must serve a progressive and just society most of all, and in it, is our role and moral duty to demonstrate the power of Islamic finance in addressing the biggest challenges facing society today.”
That was the call-out to the Islamic finance sector, from Tan Sri Azman Mokhtar, the Chairman of the MIFC Leadership Council (MLC). He was speaking during a special session on the future of Islamic finance at the Global Islamic Finance Forum 2022. The MLC was announced on Wednesday, 5th October 2022 by Bank Negara Malaysia.
Azman shared 10 reflections on the future of Islamic finance, anchored on ‘Awareness’, ‘Authenticity’, and ‘Action’.
Starting with awareness, he shared that we live in financial times with symptoms that while finance has helped to drive overall global development over the last 70 years in the post war period, evidence especially over the last 25-30 years where the frequency and amplitude of financial crises have been on the rise suggests that the global financial architecture is broken or at least, quite fractured.
Among other symptoms include rising inequality, the climate crisis and runaway inflation. In this context, Islamic finance, underpinned by its Shariah principles such as the prevention of harm, circulation of wealth, needs to accelerate the process of moving from being merely halal to a higher standard and impact of being toyyib.
In talking about the pathway to authenticity or ‘headwinds’ that the industry needs to withstand in this journey, there are three main challenges to overcome: “green-washing” in ESG investing; “green-flagging” (i.e. in Islamic finance that has been prioritising form rather than the substance or spirit); and the risks associated with a financial system awash with excessive liquidity due to quantitative easing, shadow banking, derivatives and so on.
Moving on to his calls to action, Azman said, “Islamic finance must move to next phase, answering what the people out there want – the needs of society. This was one of the actions quoted alongside another two suppositions that ‘Malaysia Boleh!’ (Malaysia can do it) as we have done in coming together in our history as an independent nation with positive financial innovation and solutions including the formation of Tabung Haji (1963), the comprehensive Asian Financial Crisis recovery measures in the 1998-2000 period (Danaharta, Danamodal, banking consolidation etc), the development of Islamic finance including establishment of Bank Islam (1983) and advancing the Islamic sukuk market to fund massive infrastructure development from the 1990s onwards. The call to action was ultimately a collective one: ‘We have to do this together.’”
Azman expressed confidence that Malaysia could make a big difference as a beacon to the Ummah and the world through Islamic finance.
“The best way to transform Islamic finance and demonstrate transformations from halal to toyyib, is by working together.” He said the ultimate test is whether finance can serve the real economy and society, InsyaAllah.
About AIBIM
The Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) was established in 1995. Currently, AIBIM has 28 member banks and the association:
Media enquiries, please contact:
Tan Wai Fong (Ms)
Media Officer
Email: [email protected]
Tel: +6017 3000 032