Assess impact of Islamic finance

Kuala Lumpur

A framework to evaluate the impact of Islamic finance on the economy should be the next agenda in shaping its development, said former Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz. She said the proposed future finance should be both value adding and value-based, whereby value adding would reflect in the contribution in facilitating and supporting economic activity, while value-based could be seen in how it benefits the society. “The ultimate impact of Islamic finance on the economy is less clear, hence, such value adding and value-based forms of finances give purpose to the role of finance to bring benefits to the economy and the community,” she said when presenting the Royal Award Islamic Finance Lecture here yesterday. The lecture was held in conjunction with the two-day Global Islamic Finance Forum 2018. Zeti also said assessments on the resilience of the Islamic financial system and the elements that supported such resilience should be conducted based on the track record of the sector. Representing 12 jurisdictions, Islamic banking assets made up more than 15% of the total banking assets in 2017 while the global Islamic banking assets reached US$1.5 trillion and global sukuk outstanding surged to US$400bil in the same period. She also noted that the magnitude of financial crisis on the Islamic banking institutions was very much less as compared with conventional banking. “Comparing the top 10 Islamic banks with the top 10 conventional banks during the financial crisis of 2008-2009, it showed that the combined market capitalisation of Islamic banks did experience a decline by 8.5%, and it was far less than the latter, which declined 42.8% for the period from December 2006 to December 2009,” she explained.—Bernama

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