Kuala Lumpur, May 20: Malaysia Wednesday urged Muslim countries to lead the way in advocating the Islamic finance sector, saying it expects the “positive trends” for the burgeoning industry to continue.
Malaysia has been promoting Islamic finance — which follows religious laws prohibiting the payment and collection of interest — and has emerged relatively unscathed from the global financial crisis.
“The time is right for this,” Prime Minister Najib Razak said in opening the annual World Islamic Economic Forum at the Malaysian capital.
“We see positive trends prevailing for the development of Islamic finance. In some countries, growth is as much as 10-15 percent annually,” he told the forum, describing the figures as “encouraging”.
“Muslim countries must continue to play a leading role in transforming this sector from being considered niche banking into something that’s widely accepted as central to long-term economic stability around the world,” he said.
Islamic banking, a booming trillion-dollar industry, prohibits the payment and collection of interest, and bans gambling, so highly complex instruments such as derivatives and other creative accounting practices are banned.
Transactions must be backed by real assets, while the customer and the institution share the risk of any investment and also divide any profits between them.
Indonesian President Susilo Bambang Yudhoyono said Islamic finance is a fast-growing sector, and that it should strive to attract all investors including non-Muslims.
“Muslim nations have a good opportunity to achieve greater growth,” he told the forum.
Moody’s Investors Service has forecasted Islamic finance has a market potential of five trillion dollars. The sector also shuns investments in gambling, alcohol and pornography in favour of ethical investments.
—Agencies