The Islamic finance industry must proactively tackle challenges in the face of emerging risks such as climate change, digital disruption and geopolitical tension, experts shared at a conference in Brunei the other day.
Delegates from over 20 countries gathered at The Empire in Bandar Seri Begawan for the 16th IFSB Summit, themed “Islamic Finance and Financial Stability in an Evolving Environment: Navigating Emerging Risk”.
The two-day summit is hosted by the Brunei Darussalam Central Bank (BDCB) and organised by the Kuala Lumpur-based Islamic Financial Services Board (IFSB), an international standard-setting organisation for the Islamic finance industry.
Dr Ghiath Shabsigh, the newly-appointed secretary general of the IFSB, said the industry faces heightened risks from macroeconomic factors such as rising interest rates, persistent inflation, an uncertain growth outlook and growing geopolitical tension.
“Against this backdrop, financial stability risks are growing, including high sovereign debt and concerns over liquidity in key segments of the financial market,” he said during opening of the conference.
He added that the industry is also vulnerable in the face of structural changes such as climate change, digitalisation and financial technologies.
“Understanding the implications of climate change for the financial services industry is hugely complex… However, addressing its potential impacts will require our collective action and coordination.”
Dr Ghiath said the Islamic finance industry must address the gaps in regulatory and supervisory frameworks to ensure stability, and focus on the consistent implementation of international standards.
“The first and core mandate of the IFSB is to issue standards and guidance for the effective regulation and supervision of Islamic finance.”
“The IFSB standards have increasingly gained international recognition. However, we still have much collective work to do in enhancing the effective and consistent implementation of standards across member jurisdictions to foster a consistent regulatory environment that supports Islamic finance growth.”
In a keynote speech, Brunei’s Second Minister of Finance and Economy, Dato Dr Hj Mohd Amin Liew Abdullah, echoed the need to bolster resilience in the Islamic finance industry as a key driver of sustainable and ethical economic growth.
“The global economy and financial industry were significantly hit by the COVID-19 pandemic, which served as an important lesson for us all. Many countries experienced a prolonged recession as a result,” he said.
“The world is also facing other challenges from climate-related events, such as rising global temperatures and sea levels, extreme weather events and ocean acidification. These have posed additional threats and risks affecting the performance of global economic growth.”
Citing a study from the IMF, the minister said that the Islamic finance industry has proven more resilient than its conventional counterpart during times of crisis. —The Scoop
