May 19 2011
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IF starts to feel the force
However it is a big ask for the industry to take the leap from what is fringe to mainstream. Fundamentally, many Islamic institutions are prudently run - whether this is a direct result of Shari'ah compliance and its inbuilt prohibition on some of the more high-octane elements of casino capitalism, or whether Islamic bankers are a cut above is a hugely moot point - but becoming a global force with greater integration into the colossus of global finance,will mean that the standards of professionalism and risk management in the Islamic banking sector will need to rise to yet another level.
And it's here that Islamic banking has one of its biggest challenges. The skills gap in the industry, when compared to the conventional industry is immense. Sure, the Islamic finance industry sidestepped the worst of the global financial crisis, but Islamic finance suffered its own credit crunch due to its over-concentration on real estate assets, with the paralysis of Dubai its most high-profile casualty. And despite what the industry thinks of itself, there is still no global Islamic titan that can slug it out toe-to-toe with the big conventional institutions like JPMorgan or Citi. Admittedly HSBC has Amanah, but this is a drop in the ocean compared to HSBC's overall assets.
Indrawati is no fresh-faced altruist. Prior to the World Bank she ran Indonesia's economy as finance minister, and oversaw the country's most rapid period of economic growth, as well as providing a steady hand on the tiller during the global financial crisis - and recognizes the challenges for the industry.
At last the industry is starting to be taken seriously, now is the time for the industry to take itself seriously too.
© The Islamic Globe 2011
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