Islamic finance ‘can boost investment in Mediterranean’
BARCELONA - Anadolu Agency
AFP photoIslamic finance is emerging as one of the main tools for further economic development in the Mediterranean region, a panel of experts said Nov. 27.
Speaking at the 3rd Mediterranean Islamic Finance Forum at the 9th Mediterranean Week of Economic Leaders in Barcelona, experts said Islamic finance provides an alternative source of funds that could help financial institutions broaden their sources of funding.
Experts in the banking sector at the forum said that though the volume of Islamic finance has grown steadily, there are many challenges for Islamic finance, including the deteriorating global economic environment, lack of product awareness in the industry, technology risk, liquidity risk and legal and tax issues.
Marcos Eguiguren, the executive director for the Global Alliance for Banking on Values that was established seven years ago by several global banks, said no economic activity makes sense if serving people and society is not its main goal.
“Islamic banking is based on values. We should build bridges between value-based and Islamic banking,” Eguiguren said.
Pablo Moreno, head of Financial Organizations and International Relations of the Spanish Central Bank, said Islamic finance has grown 5 percent since 2008, faster than normal banking.
“Islamic finance is useful for infrastructure finance and for financing SMEs [small- and medium-sized enterprises]. Spain is highly dependent on SMEs for employment and growth. We face challenges in financing them, and, despite many attempts by EU to help, it is still not enough,” Moreno said.
Moreno said there are regulatory challenges for Islamic finance. “There is a need for greater harmonization of regulations that govern Islamic finance around the world,” he added.
Experts estimate Islamic finance currently manages assets of $2 trillion globally, an amount that is projected to increase to $6.5 trillion by 2020.
However, the decline in oil prices means that governments and companies in the Middle East --which represents about 40 percent of Islamic finance in terms of assets-- will have less to invest in Islamic financial products, according to a report by credit agency Standard & Poor’s (S&P) released on Oct. 19.