Abdulla Mohammed Al Awar
When we launched the “Dubai: Capital of Islamic Economy” initiative, our activities focused on establishing and promoting Islamic banking and financial services, developing the business aspect of growing the Islamic economy, and raising awareness about Islamic banks’ portfolios of ethical and alternative financial instruments.
The purpose of these instruments was to help fund sustainable development projects while factoring in the rights of investors and financers, and distributing the risks between them. In addition, they would also facilitate planning and direct funds towards genuine sectors with tangible and indisputable results.
Today, I believe it is time to review this goal. Despite the recent high uptake for Islamic banking and financial services, the fact remains that the demands on the sector currently exceed the offering provided by Islamic financial institutions.
It is no longer a challenge to convince customers about the efficiency and importance of Islamic financial institutions as was the case prior to the global financial crisis. During and after the recession, Islamic banks have shown remarkable resilience, and their offerings are geared to revive investments and restore confidence in the global economy. Moreover, Islamic banking minimises investment losses and paves the way for development that encompasses every social and economic aspect. These are all compelling reasons to persuade stakeholders that Islamic finance does provide an enabling environment for sustainable businesses.
Investors, companies and even countries worldwide may be convinced that the Islamic financial system is the best solution following the global financial crisis. However, turning this conviction into a real partnership can only be achieved through stepping up the efforts of Islamic banks by a significant degree so that they become bona fide competitors capable of excelling over traditional financial institutions.
Leveraging the opportunities that Islamic banking and finance instruments represent is now more critical than ever before. A good way to go about it is to take into account the dynamic developments in the regional and global economies when establishing the organisational base of Islamic banks and create tools that meet the market demands.
I believe we need to agree on certain basic steps and concepts pertaining to Islamic economy so that this alternative economic system and its biggest pillar — Islamic finance — can respond effectively to regional and international developments. At DIEDC, we have identified a five-pronged approach to achieving this priority:
1. We need to treat Islamic financial institutions and the wider Islamic economy as one organic ecosystem that transcends borders and special interests, and consistently delivers excellence. Only through presenting a united front governed by unified standards, goals and reference framework can Islamic financial institutions demonstrate a quantitative difference over their traditional counterparts, and not only meet but surpass expectations.
2. Seeking a complete replacement of traditional economy by Islamic economy has never been our objective. However, we are keen to demonstrate the increasing competitiveness of Islamic financial institutions that enables us to promote them as successful role models. We have to build a partnership between Islamic and traditional finance to develop real projects in which both can work as stakeholders. Another pressing need is creating new job opportunities and shaping synergies that comply with Islamic economy, which are by no means in conflict with the demands of the traditional sector.
3. We need to look for new strategic partners and develop fresh markets for the Islamic economy, not excluding countries that are experiencing internal conflicts. Such partnerships should be a true reflection of mutual interests. Past experience of traditional financing in developing countries did not factor in sustainable development. Leading foreign organisations tended to achieve far greater benefits than local communities. However, when the global financial crisis occurred, those organisations abandoned their host countries and left behind marginalised sectors and social segments that could not resume their role in the production cycle. Therefore, Islamic financial institutions have to factor in inclusive development and social impact as key priorities and prerequisites for reviving the global economy and shaping sustainable businesses.
Abdulla Mohammed Al Awar, CEO of Dubai Islamic Economy Development Centre