Raja Teh: The West could learn a lot from the principles of Islamic financial practice

Malaysia boasts women in chief executive posts; the target for women in the workforce is set at 55%

The recent banking crisis in the West has thrust Islamic finance into the limelight as we seek alternative models that will be robust in the face of further credit onslaughts. Much has been written about how Islamic banks withstood the financial assault when compared to their conventional counterparts. If that is true, shouldn’t the world embrace the principles of Islamic finance? Wouldn’t it make the world a safer and better place?

Without trying to oversimplify the issues surrounding the 2008 financial crisis, I would say that had the world adopted the wisdom and philosophy of sharia (Islamic laws) governing finance, which promotes equity and justice, it is unlikely we would be experiencing same troubles today. Islamic finance disallows interest-based activities, gambling and speculation. Financing (or lending in the conventional term) is allowed only to fund real economic activity. An example would be the trading of derivatives. While Islamic finance recognises the use of derivates for hedging purposes (capital preservation/risk mitigation), it disallows naked trades of those instruments, as that is deemed a speculative act. Had we all known how the 2008 crisis would start, we would have been able to appreciate the wisdom guiding Islamic banks in such dealings. It is interesting to note that estimates have placed the face value of all derivatives at more than 14 times the entire world’s annual GDP.

As a proponent of the industry, I hope that we will be able to showcase at this week’s World Islamic Economic Forum in London, the importance and relevance of Islamic finance in enhancing trade, cutting across borders, race and religious beliefs. According to an Ernst & Young report, 10 of the world’s 25 fastest growing markets are in Muslim majority countries. The use of Islamic financial tools can only boost trade between the Muslim and non-Muslim world. To date, global Islamic finance assets stand at $1.2trn and are expected to reach $2.6trn by 2017, according to PwC.

Malaysia has proved that Islamic finance can flourish alongside conventional financial markets. The sukuk (Islamic bond) market was key in the development of Malaysia’s infrastructure and economy over the past two decades, constituting more than 65 per cent of its private debt securities. Islamic banking assets now make up 24.1 per cent of Malaysia’s total banking system, double the amount a decade ago. The systems work in parallel.

London is no stranger to Islamic finance. The UK is Europe’s premier centre for Islamic finance, with $19bn (£12bn) of reported assets. It has the highest number of Islamic financial institutions in a Western country and has undertaken reformation of its tax laws to facilitate Islamic finance. And it can play a role in promoting the use of Islamic finance worldwide. In addition, opportunities in terms of employment in the industry are also plentiful. And they are gender neutral.

A few years ago a journalist came to Kuala Lumpur from New York to do a story on Islamic finance: she ended up writing a piece on women who were serving in senior positions in the Islamic financial industry in Malaysia instead. It was a revelation to many.

The Malaysian Central Bank governor is a woman (who has been accorded “Grade A” among the heads of central banks for the 10th time by Global Finance magazine) and is the country’s foremost supporter of Islamic finance. The former head of the Securities Commission is a woman, who also is strong advocate of the industry. Malaysia also boasts female sharia scholars (a rarity, if not unique). Engku Rabiah Adawiah Engku Ali is a professor of law at International Islamic University Malaysia, who has inspired a whole generation of female sharia scholars. And Malaysia also boasts women in chief executive posts at Islamic banks.

The development of the role of women in the workforce sits high on the government’s agenda. Under the 10th Malaysia Plan, a target to raise women’s participation in the workforce has been set at 55 per cent.This may seem surprising to many who often view Islamic countries as not being supportive of female emancipation, a view which is not entirely baseless.

Malaysian women are fortunate that gender diversity and inclusion is embraced enthusiastically in the country (perhaps too enthusiastically, quipped the elders, as the proportion of female students entering public universities hit 65 per cent).

This bodes well for the development of the Islamic finance industry, as it is often said that diversity is a key driver of innovation and a critical component of globalisation. I hope Malaysia’s story will inspire others to promote the development of the industry for the greater good.

Raja Teh is chief executive of Malaysia’s Hong Leong Islamic Bank. She will be speaking at the World Islamic Economic Forum in London, 29 to 31 October www.9thwief.org

Start your day with The Independent, sign up for daily news emails
News
news
Arts and Entertainment
tvPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders