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Islamic Banking System Must Become Strong Financial Model, Says Don

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Points of Essence:

  • Islamic finance should find its own niche model by not emulating the conventional banking concept. This will gain the trust which has apparently been shattered by the conventional financial system meltdown. The time has come for the Islamic financial system to dictate  the international financial landscape. But it must  unleash its full potential to win the confidence of the financial community. Bernama has the report.

KUALA LUMPUR, April 10 (Bernama) — The Islamic banking system must emerge as a strong financial model that need not rely on conventional banking, says University of New Orleans director Prof Dr M. Kabir Hassan.

He said many of the Islamic banks in the world did not understand thoroughly the Islamic banking concept.

“To make it a financial system supported by all communities, the authorities or bank managements must find the sources and new alternatives.
“If the system is copied from the conventional banking system, surely customers will be doubtful,” he said after delivering a public lecture entitled “Can Islamic Financial System Be An Antidote To The Global Financial Crisis” at Universiti Putra Malaysia recently.

Kabir said he believed the Islamic financial system was the best solution to revitalise the current financial system facing a global economic crisis.

Islamic financial systems such as Takaful, Sukuk and Ar-Rahnu had proven to be the best alternatives to the current banking crisis, he said.

Kabir said this phenomenon exhorts Muslims to make an evaluation and conduct a study on the approach and current practices of Islamic financial products so that its market become the best choice.

“We need to think of ways to improve the existing Islamic financial system to play the role as the centre of excellence for the world Islamic banking system,” he said.

Kabir said the Islamic banking sector needs three phases of banking system to further strengthen the industry.

“The first phase is a system akin to conventional banking where people can deposit their money in the bank and banks use the customers’ money for their requirements,” he said.

“The second phase is through the mudarabah (syariah compliant) institutions or companies in which the people keep their money and the money is used for developing many things.

“This model is very suitable to finance small-and medium-scale enterprises.

“The third phase is to create a system like the venture capital or musyarakah involving financing infrastructure projects,” he added.

Source: BERNAMA

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Written by Suapi Shaffaii

April 12, 2009 at 1:42 am

Posted in General Issue

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