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IIFM has made valuable contribution towards standardizing money

IIFM has made valuable contribution towards standardizing money

His Excellency Rasheed Mohammed Al Maraj, Governor, Central Bank of Bahrain,

His Excellency Rasheed Mohammed Al Maraj, Governor, Central Bank of Bahrain,

Global financial experts converged at the landmark 25th anniversary edition of the World Islamic Banking Conference that spearheaded a host of discussions focusing on “Islamic Finance & Sustainable Economic Growth in the Age of Disruption”.

Manama, Kingdom of Bahrain: Under the patronage of HRH Prince Khalifa Bin Salman Al Khalifa, The Prime Minister of the Kingdom of Bahrain, the 25th anniversary edition of The World Islamic Banking Conference (WIBC), the largest and most prestigious gathering of Islamic banking and finance leaders in the world, kicked off today at the ART Rotana Hotel, Amwaj Islands, in the Kingdom of Bahrain.

Convened by Middle East Global Advisors – a leading financial intelligence platform facilitating the development of knowledge-based economies in the MENASEA markets and in strategic partnership with the Central Bank of Bahrain, the forum is spurring a series of discussions focusing on “Islamic Finance & Sustainable Economic Growth in the Age of Disruption”, a theme that resonates with the conference’s steady vision to serve as a definitive check point for the global Islamic finance and banking industry.

Showcasing his support for Islamic finance entities to thrive and grow globally and stressing on the way forward for the industry, His Excellency Rasheed Mohammed Al Maraj, Governor, Central Bank of Bahrain, in his address mentioned, “Islamic finance has followed a fragmented growth pattern since the start with various countries in the Middle East and South East Asia taking the lead. These country specific models have achieved reasonable success as measured by the share of Islamic finance in the respective markets. I would like to argue, however, that the reduced pace of growth suggests that we cannot hope for a new growth paradigm while maintaining the status quo. If the developments in the conventional finance industry are any indicator, it is reasonable to expect that regional and global cooperation can open new doors for the Islamic finance sector. The magic of such global cooperation works when some pre-requisites are in place, namely, leadership, standardization, good governance and risk management & compliance.”

“Shari’ah standards, accounting standards, prudential standards and best market practices, all need to be developed for the Islamic finance industry with the global audience in mind. AAOIFI has been doing excellent work on Shari’ah and accounting standards while Islamic Financial Services Board (IFSB) has developed risk management and capital adequacy standards which conform to global best practices. International Islamic Financial Market (IIFM) has made valuable contribution towards standardizing money and capital market contracts as well as financing contracts. The recent endorsement by the IMF of the IFSB’s proposed core principles for Islamic finance regulation and their assessment methodology for financial sector assessments is a great news for the global acceptance of Islamic finance. What we need now is to convince regulators and market players to adopt AAOIFI, IFSB and IIFM standards in their respective markets”, added Mr. Maraj stressing on the need for standardization to enable global growth.

Commenting on the changing face of financial services due to the advent of digitization, Dr. Sami Al-Suwailem, Head of Financial Product Development Centre, Islamic Research & Training Institute, Islamic Development Bank in his keynote address stated, “The size of e-commerce is about three times the size of the Islamic financial industry. This means that there is an ample room for the industry to invest and to participate in the digital revolution. Moreover, e-commerce will be a very good channel to manage the liquidity of Islamic banks. This is a challenge that has long been waiting for a solution. E-commerce seems to be a promising sphere. With the fintech revolution, online sales can seamlessly meet the requirement of Islamic finance. If Islamic banks invest in this area, they will be able potentially to reap lucrative returns from a growing large sector, manage their liquidly efficiently, and participate in real economic growth and development.”

The conference also played host to an exclusive interview of H.E. Khalid Al Rumaihi, Chief Executive, Bahrain Economic Development Board, which focused on emerging projects and financing, the value added tax which will be implemented in the Kingdom in addition to the benefits and risks of digitization.

H.E. Khalid Al Rumaihi discussed the Government’s integral role in supporting the continuous development of the local economy; encouraging constant collaboration between the public and private sectors, as well as creating an ecosystem that is conductive to the success of startups and entrepreneurs, in order to ensure the Kingdom maintains its lead at the forefront of its competitors in digital transformation across industries. Mr. Al Rumaihi also mentioned the key milestones achieved by the GCC countries during the past three decades, and how they have employed the bilateral cooperation as a factor to promote brotherly countries and unite efforts to succeed in the initiatives and plans set in this regard.

Ahead of the panel session on economic growth & sustainable finance, Adnan Ahmed Yousif, President & Chief Executive, Al Baraka Banking Group, said, “The World Islamic Banking Conference, has, over the last 25 years, established itself as a key global forum for in-depth discussions on the facets of the continued global growth in Islamic finance. The Islamic Financial Services industry has shown tremendous progress as one of the fastest growing asset classes in the world. The industry continues to expand in many emerging and advanced markets and introduce new standards that should further help develop products and attract investors. The industry’s global appeal continues to grow and attract remarkable attention, including from the UK, Europe, Asia, Africa and North America. In order to for Islamic banks to expand their geographical footprints further over the coming years, they must be able to compete more effectively and tackle a number of key challenges facing the industry, including delivering cost efficiencies, building greater talent pools, enhancing corporate governance; leveraging digitization, delivering innovative products that meet genuine market needs; and ensuring risk management systems are up to par. For the Islamic finance industry to build a solid foundation for the next phase of international growth, the industry must undergo transformation in a number of key areas. The 25th Anniversary World Islamic Banking Conference (WIBC 2018) is a key platform for industry leaders to put a spotlight on the challenges, innovations, latest developments and technological solutions essential for further growth of the global Islamic banking and finance sector.”

The conference also saw a Keynote Address by Aziz Elkhyari, Head of Business Development, Casablanca Finance City Authority who spoke about Fostering the development of Islamic finance in Africa and the role of financial centers. This was followed by the joint launch of Casablanca Finance City (CFC)-Thomson Reuters Report – Islamic Finance in Africa: The upcoming frontier that provides an industry landscape of Islamic finance in African countries with an overview of the industry development in 5 African countries including Morocco.

The conference proved to be the ideal launchpad for a number of key financial intelligence reports and also saw the launch of The Global Report on Islamic Finance – 2018: The role of Islamic finance in financing long-term investments by Islamic Development Bank that highlights how Islamic finance could help mobilize long-term funding for development programs.

Other key highlights from the day include the panel discussions focusing on economic growth and sustainable finance, the Fintech Panel on the Digitization Journey of a Global Bank and the Region Round Table focusing on Africa. Leading industry experts analyzed the challenges at hand and focused on coming up with effective suggestions with the ultimate aim of developing a convergence roadmap for the Islamic Finance industry at large.

Key highlights to look forward to tomorrow include: One-on-one Exclusive Interview with H.E. Shaikh Mohamed bin Khalifa bin Ahmed Al-Khalifa, Minister of Oil, Kingdom of Bahrain focusing on investment plans in light of Bahrain’s Mega Discovery of Shale Oil & Gas reserves; Key Panels focusing on Global Economic Outlook & Impact on Regional Economy; Cross-Jurisdictional Issues in Shari’ah Standards & Practices; Launch of the Global Islamic Finance Development Outlook 2018: Building Momentum by Refinitiv; The Country Round Table focusing on Russia & more.

Partners at The 25th WIBC include: Casablanca Finance City Authority, Kuwait Finance House (KFH), Ithmaar Bank, Khaleeji Commercial Bank (KHCB), World Gold Council, Bank ABC Islamic, Bank of Khartoum-International, First Energy Bank, Bahrain Islamic Bank (BisB), DWF, Al Baraka Banking Group, Thomson Reuters, SEDCO Capital, Path Solutions, Moody’s Investor Service, Emerico, The Perth Mint, WTS Dhruva Consultants, Baker McKenzie, Euro Motors, Eiger Trading, ORACLE, Department for International Trade – British Embassy Bahrain, DDCAP, Fitch Ratings, Sadad, GPS, Teamwill Consulting, ERI Bancaire SA, Tejoury, Bahrain Institute of Banking & Finance (BIBF) and International Islamic Financial Market (IIFM).

“SAARCFINANCE Good policy has been essential to our stability”

“SAARCFINANCE Good policy has been essential to our stability”

Raghuram Rajan, Governor, Reserve Bank of India delivering inaugural speech at the SAARCFINANCE Governors' Symposium in Mumbai

Raghuram Rajan, Governor, Reserve Bank of India delivering inaugural speech at the SAARCFINANCE Governors’ Symposium in Mumbai

“Good policy has been essential to our stability”, said Dr. Raghuram Rajan, Governor, Reserve Bank of India in his inaugural speech at the SAARCFINANCE Governors’ Symposium held today in Mumbai. For India, undertaking a variety of structural reforms to enhance growth; outlining and adhering to a path of fiscal consolidation to reduce the fiscal deficit; containing inflation through a combination of better food management, a new inflation framework and calibrated monetary policies; and embarking on a cleanup of bad debts in the banking system so as to free bank balance sheets to support growth are elements of what India has practised in the wake of global uncertainties.

The government has also undertaken structural reforms to revive growth, including significant efforts in the agricultural sector to boost productivity through irrigation, insurance, access to markets, a strong push to deregulate business, especially for start-ups, resolve distress in power distribution companies, and an immense effort to expand financial services to the excluded through the provision of bank accounts and direct benefit transfers. Leaving aside the much anticipated Goods and Services Tax reform, a number of other significant reforms had also taken place, including the recent passage of the new Bankruptcy bill, which was likely to speed the resolution of distress tremendously. Moreover, the cleaning up of the process of allocating public resources like spectrum and mines, as well as the process of appointing critical personnel, such as, public sector bank chiefs was one of the most effective reforms undertaken by the government. “This is significantly increasing transparency in our system”, the Governor pointed out.

The Governor also talked of four elements of defence against the external imbalances namely, good policies; prudent capital flow management and swap arrangements; preventing extreme forex volatility; and building reasonable forex reserves.

While speaking of good policies in the context of the challenges SAARC countries faced in a globally interconnected world, and lauding the performance of SAARC economies, the Governor said that the region had shown continued resilience in the face of turbulent international markets, maintaining its spot as the fastest-growing region in the world. However, the region was now facing newer challenges arising from uncertainties in other parts of the world. Possible moves by the US Fed, a potential rebound of oil prices, possible Brexit, geopolitical risks in the Middle East and volatility in financial markets due to risk-on or risk-off sentiment were some of the possibilities, he pointed out. Sharp slowdown of the Chinese economy, according to him though still remained a significant risk for the global economy and the SAARC region. The sharp contraction in China’s imports over the past year, for instance, had already led to spillovers through the trade, confidence, tourism and remittance channels and SAARC nations had not been able to avert its impact. More negative externalities could follow as Chinese economy adjusted to a more sustainable path.

Further, China already suffered from the twin-ailment of overcapacity and high leverage. Bad loans in the banking system were likely to grow over current levels and in addition there might be serious weaknesses in the shadow banking system, which could feed back to banks. Both could be significant downside risks as they could have second round effects for SAARC economies. Chinese growth would depend not just on its policies, but also on growth elsewhere in the world.

As second level defences, India has taken measures, such as, being careful about foreign borrowing, especially at the very short term. In addition, government’s liberalisation of FDI regulations have resulted in record FDI inflows last financial year. Further, RBI has been moderating periods of extreme volatility in the currency through exchange intervention, though only when the movement is excessive, and increasing access to foreign exchange reserves, including pooling of reserves. India’s SAARC swap arrangement with a number of SAARC countries had been drawn on by some to alleviate short term foreign exchange needs, and had hopefully been helpful, the Governor averred.

In conclusion, the Governor said that being conscious of the role the Indian economy plays in influencing growth in other SAARC economies, India has kept the objective of securing and preserving macro-stability at the top of her agenda to avoid any negative externalities and hoped that together the SAARC countries could hopefully be an island of relative stability and co-operation in the turbulent world.

Note for editors:

SAARC1, as a regional bloc was set up in 1985 with the aim of promoting the welfare of the people of South Asia, to accelerate regional economic growth, strengthen collective self-reliance and contribute to mutual trust, understanding and appreciation of one another’s problems in the region. SAARC nations share a common goal of sustainable economic development, and face several similar developmental challenges. In terms of GDP based on purchasing power parity (PPP), SAARC’s share in the globe has increased rapidly from 4.0 per cent in 1980 to 9.0 per cent in 2016.

Hopes of rate cut, more rainy days to support equity markets

Hopes of rate cut, more rainy days to support equity markets

bull market

By Rohit Vaid

Mumbai(IANS) A positive bias is expected to rule the Indian equity markets in the coming week, with investors hoping for a rate cut by the apex bank, passage of key bills in parliament and more rainy days ahead, experts said on Sunday.

“The most important trigger for the markets is the Reserve Bank of India’s (RBI) monetary policy review. A cut in interest rates will restore investors’ confidence and open the flood gates of funds,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“Even if there is no rate cut, the knee-jerk reaction will neither be that disappointing nor long-lasting, as it has also been factored in by the markets.”

According to Nevgi, markets will closely go through the language used by the RBI Governor in his assessment of the economy to give further cues on the future of rate cuts.

“The language on the Indian economy, oil prices, monsoon, inflation and the US rate hike will be closely monitored as it will give the guidance to future RBI moves,” Nevgi predicted.

The RBI’s monetary policy review is scheduled for August 4.

India Inc. expects a rate cut by the RBI during this review. Indian industry feels that the upcoming review might be the last chance to cut rates in this calendar year before inflation spirals up and the US Fed decides on its own rates in September.

Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS that the RBI’s views on the government’s draft financial code which proposes to clip its autonomy will also be closely watched.

The code, if implemented, will undermine RBI’s ability to rein-in inflation. This will also discourage investors in taking risks in the future as RBI has been viewed by many as an anchor for financial stability in the country.

Another major trigger, cited James, will be the government’s ability to pass key bills during the monsoon session.

“Parliament’s logjam has cast a shadow over the government’s future ability to pass economic reforms. It has also put a question mark over the fate of key legislation like the GST (goods and services tax) and the land bill,” James told IANS.

“Thus, it is very important for Parliament to get back into business and end this political logjam.”

Dipen Shah, head of private client group research with Kotak Securities, pointed out that the markets expect the government to be in a position to pass the GST bill soon, as the union cabinet has approved a revised version of the legislation.

“Passage of the bill will be a positive for the market. Government is making all efforts to pass the GST Bill in the current session,” Shah told IANS.

Meanwhile, analysts warned that the enormous erosion of investors’ wealth in the Chinese markets, weakening of the rupee, oil and global commodities’ prices might have a negative impact on the markets here.

The continuous slide in the Chinese markets in the last two months has eroded nearly 40 percent of the stock value and caused panic. More importantly, the inability of the Chinese government, fund houses and brokerage firms to arrest the fall led to global sell-offs.

Investors will be eagerly looking out for more rainy days ahead.

“Markets will follow the progress of monsoon closely as it would be a key consideration for the RBI in its rate decision in the upcoming monetary policy review,” Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.

“Monsoon has progressed well and the overall performance might even be above expectations. This will give a clear indication of a healthy rural demand scenario, crop output and better rate cut hopes as inflation would be contained due to good rainfall activity,” Agarwal added.

(Rohit Vaid can be contacted at rohit.v@ians.in)