ADB sees prospects for Islamic finance
ISLAMABAD, Nov 2: Asia needs to invest about $8 trillion in overall national infrastructure, the use of cross-border financing and investment through Islamic finance will help to widen the investor base and lower the cost of financing for well-structured investments, the Asian Development Bank said.
“The outlook for Islamic banking in Asia is bright, given the region’s strong economic and financial fundamentals, coupled with growing middle-class affluence and increased awareness of Islamic finance as a mechanism for promoting financial inclusion”, ADB said ahead of a conference on Islamic Finance for Asia, opening in Manila on Monday.
Deputy Governor of State Bank Ashraf Mahmood Wathra will represent Pakistan at the conference accompanied by SBP’s Islamic Banking Department Director Saleemullah. Former SBP governor Dr Ishrat Hussain will also attend the conference and speak on the challenges for Islamic finance in the Asian countries.
In recent years, Islamic finance has been enjoying growth rates of 20 per cent a year, most of which comes from Asia.
“We expect to see increased activity in Thailand, China, Bangladesh and India as well as more traditional market such as Malaysia, Indonesia and Pakistan,” said Ashraf Mohammed, ADB’s assistant general counsel and practice leader for Islamic finance.
In 2009, the ADB established a $500-million Shariah-compliant equity investment fund with the help of the Islamic Development Bank. The fund was first of its kind in Asia. A year later, the ADB completed its first Shariah-compliant project financing by providing credit enhancement to two wind farm projects in Pakistan.
The ADB says that Islamic financial services industry (IFSI) has witnessed tremendous growth in the continent, with a number of countries successfully incorporating Islamic finance into their financial systems.
While some countries have sought to establish a full-fledged FSI spanning the banking, capital market, and insurance (Takaful) sectors, others have found value from developing specific niches aligned with national goals and comparative advantage.
Both approaches have contributed significantly to the deepening and widening of the financial sector through the use of innovative financial instruments that offer new ways of mobilising resources for both public and corporate sectors, ADB says.
The conference, being organised by the Islamic Financial Services Board (IFSB) and hosted by the ADB, aims to create greater awareness on the potentials and opportunities brought about by Islamic finance to the region.
The conference will examine the experiences of selected Asian countries with focus on the regulatory requirements and other pre-conditions to establish and sustain an orderly development of Islamic finance.