'Give Islamic finance space to develop', expert urges

Professor Wilson was taking part in the last panel discussion on the final day of the International Islamic Finance Forum in Dubai, the leading event of its type in the world which has attracted more than 50 speakers from over 20 countries.

The forum has been held under the patronage of His Highness General Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Defence Minister of the United Arab Emirates.

Professor Wilson, co-author of a new book on Islamic finance issues, raised issues concerning the extent of government and central bank support for Islamic finance which had not been discussed before at the Dubai forum.

He said: "Islamic finance flourishes where governments are supportive or simply don't interfere and it is stifled where governments are autocratic and control consumer choice. Islamic finance needs guidance, not coercion and dialogue between industry regulators and finance ministries. It is a popular movement rather than imposed from above. It extends client choice rather than restricting options."

Islamic finance is now a multi-billion dollar industry, active in more than 75 countries with an annual double-digit growth rate.

Bahrain is the most pro-active state in the region in terms of laying the groundwork for Islamic finance, according to Professor Wilson. The Bahrain Monetary Agency is highly supportive, there are 27 Islamic banks on the island with assets of $4 billion, it has six Islamic takaful insurance companies and over $1.5 billion has been raised through sovereign sukuk issues.

"Kuwait and Jordan are particularly supportive. Kuwait passed a new Islamic banking law last year while a special law has governed Jordan Islamic Bank since the 1970s. There is encouragement in the UAE and Qatar," said Professor Wilson.

In Qatar Islamic banks account for one quarter of deposits. There are three major institutions, Dubai and Abu Dhabi Islamic Banks and the national Bank of Sharjah in the UAE.

Saudi Arabia gives limited support at Government level but the Kingdom boasts many private successes.

There is an absence of Islamic banking laws in Saudi Arabia and there are no government sukuk securities. However, Al Rajhi is the largest Islamic bank in the world, over 25 per cent of bank deposits in Saudi Arabia are Islamic (including 17 per cent of conventional bank deposits) and the country has the world's largest Islamic mutual fund industry.

Professor Wilson said that Oman, Libya and Syria remaine "hesitant".

The International Islamic Finance Forum concluded last night. The next event will be in Istanbul September 26. It returns to Dubai at the same time next year.