ARMED with its pand new motto "Shaping Islamic Finance Together," the Malaysian Islamic Finance Center (MIFC) took to the road recently to urge countries that the best way to promote the global Islamic finance industry was through cooperation and greater collaboration, particularly in the areas of innovation and liquidity management.

The six-day visit of the 80-strong MIFC delegation to Qatar and Bahrain last month led by Deputy Governor of Bank Negara Malaysia, Mohd Razif Abd Kadir, under the patronage of Raja Nazrin Shah, financial ambassador of the MIFC and Crown prince of perak State in Malaysia, was the latest manifestation of this initiative. At the same time Malaysia is trying to position the MIFC as the ideal financial intermediary for trade and investment particularly for the regional growth areas in Malaysia, and as a gateway to ASEAN (Association of South East Asian Nations).

Over the past three decades, said Raja Nazrin at the two business forums in Doha and Manama, financial activities conducted under the banner of 'Islamic finance' have grown significantly in volume and scope, attracting significant attention worldwide. It has also gained credibility and respect in international financial circles, and is now one of the fastest-growing industries, recording double-digit annual growth rates for almost thirty years. Its financial assets have reached hundreds of billions of dollars.

Malaysia believes there is tremendous potential for Islamic finance especially in the current financial turmoil which provides an opportunity for Islamic finance to position itself as a complement, if not alternative, to conventional finance by providing investors with other asset classes and markets that provide stability.

"The Shariah principles which underlie Islamic finance," explained Raja Nazrin, "have contributed to stability and resilience. These principles have made Islamic financial institutions less vulnerable to instability and less prone to frequent financial crises. For example, the Shariah injunctions that prohibit excessive leverage and speculative financial activities have limited the exposure of Islamic funds to the meltdown of the financial system in the United States and Europe. It therefore comes as no surprise that Islamic financial institutions have weathered the global economic downturn better than their conventional counterparts."

Over the last five years, there has been increasing interest among Middle Eastern investors in the Asian market, especially Malaysia, Singapore, Indonesia, China and Korea. Several GCC institutions have entered Malaysia, led by the Qatar Islamic Bank Group which has established Asian Finance House, a fully authorized Islamic bank, in Kuala Lumpur. Similarly Al-Rajhi Bank and Kuwait Finance house have also launched Islamic banks in Malaysia. Bahrain-based Unicorn Investment Bank and the Solidarity Group have also launched an Islamic investment bank and a Takaful company in Malaysia respectively. Likewise, Malaysia's Maybank has been operating in Bahrain since 2001, and the CIMB Group has been in partnership with Bahrain's Kanoo Group since 2006 and has launched CIMB Islamic Investment Bank in Manama. Malaysia is confident that all these activities will enhance financial and economic linkages between the two regions.

By Mushtak parker

© Arab News 2009