‘Financial Policy and Stability: Recent Crisis and Lessons for Islamic Finance’

ANKARA: INCEIF, The Global University of Islamic Finance, in collaboration with the office of the Economic Counsellor at the Embassy of the Republic of Turkey and the Central Bank of Republic of Turkey, today held a public lecture in Ankara. This is the second INCEIF joint public lecture to be held abroad. The first one was in Jakarta, Indonesia, in April.
The Embassy’s Economic Counsellor Mr Muhammed Islami Onal said: “We look forward to increasing these collaboration opportunities in order to enhance the bilateral relations between two brother countries and increase the awareness of Islamic finance in Turkey.”

The lecture, “Financial Policy and Stability: Recent Crisis and Lessons for Islamic Finance” was delivered by Prof Dr Abbas Mirakhor, First Holder of INCEIF Chair of Islamic Finance. Central Bank of Republic of Turkey Board Member, Mr Necdet Sensoy, delivered the welcoming remarks at the lecture held at the Bank.

Over 150 people from the local financial services fraternity, universities and CBRT attended the lecture which focused on conventional and non-conventional perspectives on the causes of the recent financial crises.

During his lecture, Prof Abbas highlighted the principles of an ideal model for Islamic Finance. These included exchange-based transactions, risk sharing and the emphasis on the liability side.

He listed the vulnerabilities of the present configuration of Islamic finance as asset-liability mismatch, “short-termism”, and dependency on petrodollars. Moving forward, in order to induce the existing system to converge to the ideal model, there is a need for long-term instruments for hedging and liquidity management and new fiqh to allow development of multilateral and multi-counterparty finance.

Prof Abbas said an ideal Islamic finance system should also have:

  • non-interest rate-based macro-economic policy
  • a uniform and universal regulatory standards for risk sharing finance
  • development of legal standards for shariah-compliant contracts compatible with al standards prevailing in major international financial centers
  • increased financial awareness and literacy among the public

To achieve an ideal model Islamic financial institutions (IFIs) should return to their role, as true financial intermediaries and create educational and incentive framework for employees, management and shareholders, to understand that the spirit of Islamic finance is risk sharing.

IFIs should also be fully transparent in all aspects of their transactions, and consider allowing a cooling-off period for their customers before final commitment is made. Customers should be provided with financial guidance as to alternative modes of financing. And for their own safety, these institutions should have a strong capital base.

Please click here for a feature on this event by Yeni Safak, a local newspaper in Ankara.

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