Islamic Finance: Making a Global Splash Beyond Malaysia's Shores
Daud Vicary Abdullah, INCEIF
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INCEIF President & CEO Daud Vicary Abdullah discusses the following questions:
- INCEIF: Set up in 2005 by Bank Negara -- eight years into the gig where are you in terms of student enrolment, teaching body
- Endowment of 600 million ringgit was allocated by Bank Negara to cover operating expenses at INCEIF.
> Breakdown of spend
> Key ROI for Islamic Finance industry
> Funds remaining
- Opex today - and breaking even?
- Details of ROI
- THREE KRAS:
1. Academic excellence (international accreditation - INSEAD/ HBS etc - 2nd in MY after University Putra Malaysia - right now being evaluated)
2. Building a global reputation with stakeholders (partnerships - World Bank - Islamic Development Bank - KFH - French Bank - programs being run - World bank April = joint presentation at IMF Spring Meeting)
3. Financial sustainability (using funds wisely but also building them - Harvard has 36b in endowment funds - build credibility, attracting top-class faculty, online student boy and accreditation, strategic growth ?> to build endowments)A number of local and international FIs have sponsored classroom and given student grants - the largest has been half a million USD
4. (Operational excellence)
- M'sia is a regional leader in Islamic banking, but revenues from Islamic activities only account for a small % of their overall business.This appears to be a regulatory issue since banks are still highly profitable from conventional banking Is there a lot more to be done from a commercial framework perspective?
- The Islamic Financial Services Act - effective July 1 - prohibits general Insurance and takaful companies holding composite licences from carrying on both businesses simultaneously. But operators will have five years in which to comply Is this too long? Or appropriate?
- Attempts to diversify the product to a retail audience have suffered a lukewarm response -- for example Danainfra’s exchange traded retail bonds and sukuk - oversubscribed by just 0.61 times ..
- Will Shariah ever emerge as a major growth driver for Malaysian banks?
- Lots of global attention: Perception of availability of Gulf funds - but they have not participated as much!ISLF supports the real economy cos it is the ‘real’ economy - Harvard study
- Importance of joint development of Shariah and Conventional banking - Sudan and Pakistan tried to develop ISLF solely and failed
- KL is also not a financial centre - which is essential - needs parallel traction - thus holding Shariah back - ISSUES
- KL is making tremendous headway in cementing itself as the hub for Islamic finance? But Singapore and HK are global financial hubs - how big a problem can this be for Malaysia’s aspirations?
- Globally Shariah also needs to be prominent - it’s still in the single digits as percentage of conventional banking - what’s holding it back
- Asia and Muslims - big opportunity since this continent accounts for a great proportion of the world’s Muslim population - WHAT’S NEEDED - ISSUES
- Lessons from GFC - dangers of 2-3 global financial centres - are we on course for the same mistakes?
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