INCEIF Inaugural Intellectual Discourse, held on 23 February 2007 at Bank Negara Malaysia , kicked off to a good start with an intellectually stimulating debate between Islamic finance scholars, practitioners and industry players.

The Discourse, themed “Issues and Challenges of the Co-existence of Islamic Finance in an Entrenched Conventional System”, was officiated by Tan Sri Dr. Zeti Akhtar Aziz, Governor of Bank Negara. She is also the Chairman of INCEIF Board of Directors.

In her welcoming remarks, Tan Sri Dr. Zeti Akhtar said the topic was most relevant in the currently highly competitive financial services industry where new challenges and opportunities were continuously emerging in this era of globalisation and of rapid change. (The full text is available http://www.bnm.gov.my)

“Today's initiative brings together Islamic finance experts and scholars to deliberate the issues confronting Islamic finance in an environment where the conventional finance is dominant and highly entrenched.

She added that the primary objective of the Inaugural Intellectual Discourse was to explore the prospects for Islamic finance which has now reached a stage of development in which it is now no longer regarded as a niche product serving a specialised market.

“The discourse among the expertise in the field will not only provide us with further insights into the issues and challenges of coexistence not only in our domestic systems but also in the international financial system. This will contribute to the awareness and understanding of the journey for the sustainable development of Islamic finance,” said Tan Sri Dr. Zeti Akhtar.

The Discourse was started off by Prof Dr. Munawar Iqbal, Dean of the School of Islamic Banking, International Islamic University, Islamabad,), who presented a paper titled “Challenges and Issues for Islamic Banking under an Entrenched Interest Rate regime.”

Prof. Dr. Munawar is also a member of INCEIF Professional Development Board (PDP).

In his paper, he spoke on the macro and micro level implications for Islamic banking in an entrenched interest rate regime. The implications included increased competition, budgetary issues, and the need to remove misconceptions post 9-11 that Islamic banks are involved in financing terrorist activities.

“Islamic banks are like any other banks, in that they are profit-seeking banks and are under the same supervision, usually the respective central banks, as the conventional banks. There is no clash of civilisations. In fact Islamic and conventional banks complement each other. Both are set up to meet the market demand and cater to the needs of the banks’ customers,” he added.

Another speaker at the Discourse, Mr Rafe Haneef said as an Islamic finance practitioner, the biggest challenge was to convince the customers of a bank to convert to Shariah-based products and services.

“While I appreciate the theoretical explanations and presentations from the scholars, please give me something that will make my shareholders happy,” said Mr Rafe who is the Head of Islamic Banking for Citigroup Asia.

Based on his experience, Mr Rafe said Islamic finance today was purely about dollars and cents rather than religious obligations.

While he has seen increased requests, of late, from wealthy and usually older Muslim businessmen to convert to Islamic finance for religion sake, the younger generation who usually runs the day-to-day operation of the business, wants to know the financial benefits.

“This is where the scholars can come in. We have many academicians in the Islamic world. The big challenge is to ensure that the efficiency of the Islamic finance services industry is based on the dominant benchmark in the market. For instance, how do we formulate alternative capital management tools, how do we deploy the funds based on Shariah requirements?,” he added.

Using a McDonald’s burger analogy, Mr Rafe said: “Are we satisfied with the fact that we are eating a halal McD as opposed to a non-halal McD? If that is the case, we are missing the point.

“I think we should ask whether that halal McD is a healthier and better option to the non-halal McD,” said Mr Rafe.

Prof. Dr. Murat Cizakca, another speaker, said scholars and practitioners should also focus on venture capital, and come out with the Shariah-based tools. After all, venture capital is based on the concept of musyarakah, which is a partnership based on profit-and-loss sharing.  

“We have to study the existing law and then, try to come up with one that is Shariah-based. We need to brainstorm,” said Prof. Dr. Murat, who is a Professor of Comparative History of Civilisations and Economic History at Bahcesehir University in Istanbul, Turkey .

 Two other speakers at the Discourse were Dato’ Ismail Shahudin, Chairman of Bank Mualamalat Malaysia Bhd and Prof. Dr. Mohamed Ariff,  Professor of Finance and Head of Finance in Monash University in Australia.

The Discourse, which was attended by 250 participants, was moderated by Prof. Dr. Malik Muhammad Mahmud al-Awan, Chief Academic Officer and Dean of Faculty at INCEIF.