The rapid expansion of Islamic finance reflects its ability to meet the diverse demands of consumers and businesses, thereby fostering growth.
Once an impenetrable industry, the market for various Islamic financial products is becoming more and more global. Studies show that the worldwide assets of the Islamic financial industry are more than $1.87 trillion, which is a huge growth from having merely $150 billion during the mid-90s.
Key Issues and Themes
According to Dr. Mohammad Al-Hashel, the Governor of the Central Bank of Kuwait, the first theme is about the concerns on increasing financial inclusion through access to finance. This is important for economic stimulation and welfare improvement for the underprivileged individuals. The Islamic Finance will do this by promoting Islamic micro-financing to small and medium-sized enterprises.
Another theme that was discussed is how they could strengthen their regulations and supervision in order to encourage financial stability. They need more efforts to improve the regulatory frameworks of the Islamic financial industry, while making sure that there is consistency in its application.
The third theme discussed was the development of Islamic bonds, Sukuk, and other long-term Islamic financial instruments aimed for financing infrastructure and sustaining development. In order to do so, they have to improve their legal, regulatory, and disclosure terms, as well as market infrastructure.
Challenges in Facing Islamic Finance
Dr. Al-Hashel noted that there are two key challenges in facing Islamic Finance; and that is: market development, and the establishment of robust supervisory and regulatory frameworks.
According to him, stakeholders are well aware of these challenges and the need to address them. But, they also know that improving market development and regulatory frameworks are a continuous process in terms of changing the needs of the industry, as well as demographic and macroeconomic environments.