One of the major causes of the current global financial crisis is the absence of risk sharing which dilutes market discipline in the financial system and leads to excessive lending, high leverage, speculation and unsustainable rise in asset prices, observed participants at a two-day long international seminar on ‘The Global Financial Crisis and the Strength of Islamic Banking System’ organized recently by Islamic Banks Consultative Forum (IBCF) in city, says a press release. The seminar was inaugurated by Dr. Ahmad Mohammed Ali, president of IDB and Dr. Atiur Rahman, Governor, Bangladesh Bank was present as the special guest.
In the seminar several papers were presented and discussed by internationally acclaimed scholars. According to the latter risk sharing along with the availability of credit for purchase of real goods and services that Islamic finance aims at introducing can help inject greater discipline into the system and thereby substantially reduce financial instability.
Islamic economics has inherent mechanism that enables the global financial system to perform in an orderly manner and avoid systemic collapse. The experts stated that the current global financial crisis would not come to pass if the Islamic principles of finance were in place international financial markets. Islamic Banking has an in-built motivation for allocation of resources to ensure productivity-maximisation. The Research and Development on Islamic economics and social principles is necessary to face the complex economic problem of the modern society.
On the basis of the presentations, deliberations and observations, the seminar adopted a number of recommendations. The participants stressed on the need for integrated study and research to develop a comprehensive Islamic financial system as a reliable alternative to the present world financial system that has exposed its weakness in the recent worldwide financial crisis. A uniform regulatory and legal framework supportive of an Islamic financial system has not yet been developed. Development of such framework will enhance the sustainability of Islamic Financial Institutions. The development and further growth of the Islamic Banking Industry will largely depend on innovative and creative shariah compliant structured products which should be taken into active consideration. Cooperation be enhanced among all Islamic financial institutions for economic restructuring, greater integration, and also to facilitate cross border financial flows.
Islamic Financial Institutions all around the world should exchange technologies, ideas and experiences on regular basis. The seminar finds the need for forming a focus group to work for framing and structuring different policies, products and regulations for implementation of recommendations in the context of Bangladesh. Islamic Financial institutions should build a strong alliance locally and internationally to take forward the divine concept of Islamic Banking and Finance to the western world.
Islamic money market be introduced to cover liquidity shortage or to manage excess liquidity of Shariah based financial institution. The government and regulators with the help of Islamic scholars may build up infrastructure for Islamic Capital Market. All practitioners, regulators and the government should build a resource pool of Islamic Bankers.
A separate division in the central bank should be introduced to look into the whole affairs of Islamic Banking. Conventional banking desiring to convert into Islamic Banking should be encouraged in order to help asset backed financing to grow.

News: The Independent/ Bangladesh/ Jun-12-2011