World's need of hour is Islamic Finance amid global uncertainty

By Staff Writer

Mar 07, 2016 06:27 AM EST

At a time when global economy looks uncertain, Islamic Finance offers sustainable solutions to sluggish economies. Islamic Finance is gaining momentum more particularly from financial crisis in 2008. The value of Islamic finance assets globally is expected to soar to $1.8 trillion by 2020. 

The three-day global conference titled 'Efficiency and financial stability' is being held at Um Al-Qura University in Makkah, Kingdom of Saudi Arabia (KSA), during 6-8 March 2016. Ahmed Al Issa, Minister of Education, inaugurated the global conference on Islamic Finance. Fahad Al-Mubarak, Governor, Saudi Arabian Monetary Agency (SAMA), and Mahmoud Mohieldin, Senior Vice-President of World Bank (WB), would address at the conference.

Arab News reports that there's an increasing acceptance of Islamic Finance among several countries. The practices of Islamic Finance instruments are catching up very fast as they're proven tools for communal and individual economies. Several countries have established Islamic Banks or Islamic Finance-focused branches within conventional banks.  

Salih Al-Aqla, Dean Faculty of College of Economics and Islamic Finance and head of the Organizing Committee of the Conference, said the conference would explore a multiple economic issues. The Islamic Finance conference has attached special priority to Makkah in development of Islamic banking. 

Islamic Finance instruments are much in practice cross the Middle East, Africa and Europe. Islamic finance assets globally are expected to be $1.8 trillion by 2020. The issuance of Sukuk (Islamic bonds) is increasing and spreading across the continents, as reported by Gulf News. About eight years ago, Islamic Finance was mostly confined to Gulf Cooperation Council (GCC) and Malaysia. United Kingdom (UK), Hong Kong, Luxembourg and South African nations are among those non-Muslim markets adopting Islamic finance.

Not only Islamic Finance is growing among several countries, but also is forecast to be an integral component of the mainstream global financial system. The outstanding Sukuk (Islamic bonds) was $23.9 billion about a decade ago and reached $277.1 billion by end of 2014 and was outstanding at $281.8 billion by end of October 2015. Malaysia's contribution to the growth Islamic Finance grew over 50 percent during the decade. 

However, since 2012, the global economic slowdown has been affecting more particularly lower oil prices. As a result, the contribution of GCC and Malaysia to global Sukuk issuance is also slowed down. The development of innovative instruments of Islamic Finance is catering to varied requirements of banking and financial sectors, according to CPI Financial.

Islamic Finance has come a long way. Islamic banking has been through three key stages. In the first stage, Islamic banking witnessed fear of failure during the first half of 20th century. The second stage registered timid beginnings and gradual emergence of Islamic institutions. The third stage saw a major contribution of Islamic banks to national economy. Now, the fourth stage is in progress as it's paving way for revision and assessment.  

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