Kerala could become a role model of tapping Islamic finance market to raise badly needed funds for infrastructure development, according to experts.
Mr H. Abdur Raqeeb, Convener, National Committee on Islamic Banking at the New Delhi-based Indian Centre for Islamic Finance (ICIF), made a strong pitch for these funds at the Infrastructure Conference-2011 that began here on Wednesday.
Speaking to Business Line, the State Minister for Public Works, Mr V.K. Ibrahim Kunju, and the Secretary, PWD, Mr Manoj Joshi, said that the State Government wholeheartedly welcomed Islamic funding agencies in the space of infrastructure development.
Infrastructure development is as Shariah-compliant a cause as they come, Mr Joshi said. There is nothing that prevents these funds being channelised into the State’s developmental scheme of things, he added.
The PWD Minister concurred, but observed that the State’s own efforts to set up an Islamic financing institution were ‘still in a fluid stage’’.
The Minister for Industries, Urban Development and IT, Mr P.K. Kunhalikkutty, too underscored the importance of tapping the Islamic finance model at a time when traditional sources of funds are becoming increasingly inaccessible or cost-prohibitive.
Meanwhile, Mr Raqeeb quoted a Kerala High Court observation that no specific prohibition was contained in any statute that made it impermissible to carry out Islamic banking in the country.
Simple regulatory changes could transform India into a regional hub for Shariah-compliant finance and clear the way for a much-needed wave of investment into its infrastructure, he added quoting international experts and consultants.
“When London, Tokyo, Hong Kong, Singapore and Paris have become Islamic banking hubs why can Kerala not become one and lead the country to become a developed economy in the near future?,” he wondered.
Asset-backed Islamic bonds, known as ‘Sukuks’, provide funds for long-term investment. This tool is used in a number of developing and developed countries. India too should seek to make use of these resources, Mr Raqeeb said.
The fact is Islamic finance can do wonders. Post 9/11, petro-dollars have been actively eyeing for a safe investment destination. And this is the opportunity that India should avail of, given that it is not just a safe but vibrant investment destination.
An estimated $1.5 billion in funds is sloshing around the Middle East as of now. The region will have $8 trillion to invest by the year 2020.
Ms Muliani Indrawati, Managing Director, World Bank, has confirmed that the World Bank Group has “formally recognised Islamic finance and has designated it a priority area in their financial sector programme’’.
The World Bank has always closely cooperated with the Islamic financial services sector. This demonstrates its commitment to help strengthen the institutional development of the industry.
In Sudan, in the Islamic microfinance space, we have a full programme which we hope to see develop to cover other countries and sectors. The World Bank will play a positive role in industrial development and economic growth, as such.
Islamic banking focuses on transparency, cooperative ventures, shared risk and ethical investing attracts a wide range of both Muslims and non-Muslims alike.
In Malaysian Islamic banks, more than 40 per cent of investors and 60 per cent of borrowers are non-Muslims, mostly Chinese. One in five applicants for some of the Islamic products is a non-Muslim in the Islamic Bank of Britain.