AIFC - World interested in Islamic finance
Kazakhstan’s and foreign organizations are interested in opening of Islamic finance windows.
Islamic finance - another way of world finance or a new cure for global financial diseases?
The collapse in 2008 of the investment giant Lehman Brothers, whose debts by various estimates amounted to more than half a trillion dollars, plunged the world into a shock. LB "Explosion" is considered to be the starting point of the global financial crisis, the influence of which was experienced to a greater or lesser extent by all countries of the world.
Herewith, as is often the case is the crisis discovered problematic issues but pointed out a way to decide them as well. That moment when Europe tried to save financial institutions, the attention of investors switched to Islamic banks: their portfolios lacked risky and "toxic" assets, as a result, none of them went bankrupt.
As, the Secretary-General of the Council for Islamic Banks And Financial Institutions (CIBAFI) and a member of the International Expert Council for Islamic Finance (MESIF) under the AIFC Abdellah Belatik stressed Islamic financial institutions, which originated about 40 years ago, showed much greater stability and stability compared to conventional banks in the hardest crisis period.
What is the reason for the phenomenal stability?
The basic requirement of Islamic finance is to invest only and exclusively in existing tangible assets.
Moreover, Sharia law prohibits all forms of usury, including the issuance of loans at interest. Also, Islamic financing ignores potentially profitable industries prohibited by the Shariah - the production and trade in tobacco products and alcohol, gambling.
Does Islamic finance work at a loss? Certainly no. The Islamic Bank, like any other bank, goals making the profit. But at the same time, financing of certain projects is also regulated by ethical principles: Islamic financial institutions, taking into account a strict ban on interest-bearing loans, become equity participants in projects. This, in the first place, implies a division of risks, that is, not only the potential profit from the funded project but also potential losses.
Expert of the Council of Muftis of Russia on financial issues, Ph.D. Madina Kalimullina compares Islamic banks to trading investment management companies: clients who bring their money to an Islamic bank enter into a trust management agreement with it, and the bank invests them in business and in trade.
At the same time, according to Mrs. Kalimullina, the average yield of Islamic banks today is 2-3 percent higher than the yield of ordinary banks.
In the light of all that has been said, there is a growing interest in Islamic finance around the world. In words of the director of the Department of Islamic Finance of the International Financial Center "Astana" Alibek Nurbekov, Kazakhstani and foreign organizations show interest in the opening of "Islamic financial windows."
Due to the negative experience of the crisis, it is obvious the world urgently needs simple, understandable and transparent rules of the game in the financial market. Islamic financing can’t be a panacea, but ignoring its benefits, as well as growing popularity, is fraught with the omission of new opportunities and associated profits, experts say.