Malaysia boasts women in chief executive posts; the target for women in the workforce is set at 55%.
The recent banking crisis in the West has thrust Islamic finance into the limelight as we seek alternative models that will be robust in the face of further credit onslaughts. Much has been written about how Islamic banks withstood the financial assault when compared to their conventional counterparts. If that is true, shouldn’t the world embrace the principles of Islamic finance? Wouldn’t it make the world a safer and better place?
Without trying to oversimplify the issues surrounding the 2008 financial crisis, I would say that had the world adopted the wisdom and philosophy of sharia (Islamic laws) governing finance, which promotes equity and justice, it is unlikely we would be experiencing same troubles today. Islamic finance disallows interest-based activities, gambling and speculation. Financing (or lending in the conventional term) is allowed only to fund real economic activity.
An example would be the trading of derivatives. While Islamic finance recognizes the use of derivatives for hedging purposes (capital preservation/risk mitigation), it disallows naked trades of those instruments, as that is deemed a speculative act. Had we all known how the 2008 crisis would start, we would have been able to appreciate the wisdom guiding Islamic banks in such dealings. It is interesting to note that estimates have placed the face value of all derivatives at more than 14 times the entire world’s annual GDP.
As a proponent of the industry, I hope that we will be able to showcase at this week’s World Islamic Economic Forum in London, the importance and relevance of Islamic finance in enhancing trade, cutting across borders, race and religious beliefs. According to an Ernst & Young report, 10 of the world’s 25 fastest growing markets are in Muslim majority countries. The use of Islamic financial tools can only boost trade between the Muslim and non-Muslim world. To date, global Islamic finance assets stand at $1.2trn and are expected to reach $2.6trn by 2017, according to PwC.
Malaysia has proved that Islamic finance can flourish alongside conventional financial markets. The sukuk (Islamic bond) market was key in the development of Malaysia’s infrastructure and economy over the past two decades, constituting more than 65 per cent of its private debt securities. Islamic banking assets now make up 24.1 per cent of Malaysia’s total banking system, double the amount a decade ago. The systems work in parallel.
London is no stranger to Islamic finance. The UK is Europe’s premier centre for Islamic finance, with $19bn (£12bn) of reported assets. It has the highest number of Islamic financial institutions in a Western country and has undertaken reformation of its tax laws to facilitate Islamic finance. And it can play a role in promoting the use of Islamic finance worldwide. In addition, opportunities in terms of employment in the industry are also plentiful. And they are gender neutral.
A few years ago a journalist came to Kuala Lumpur from New York to do a story on Islamic finance: she ended up writing a piece on women who were serving in senior positions in the Islamic financial industry in Malaysia instead. It was a revelation to many.
The Malaysian Central Bank governor is a woman (who has been accorded “Grade A” among the heads of central banks for the 10th time by Global Finance magazine) and is the country’s foremost supporter of Islamic finance. The former head of the Securities Commission is a woman, who also is strong advocate of the industry. Malaysia also boasts female sharia scholars (a rarity, if not unique). Engku Rabiah Adawiah Engku Ali is a professor of law at International Islamic University Malaysia, who has inspired a whole generation of female sharia scholars. And Malaysia also boasts women in chief executive posts at Islamic banks.
The development of the role of women in the workforce sits high on the government’s agenda. Under the 10th Malaysia Plan, a target to raise women’s participation in the workforce has been set at 55 per cent.This may seem surprising to many who often view Islamic countries as not being supportive of female emancipation, a view which is not entirely baseless.
Malaysian women are fortunate that gender diversity and inclusion is embraced enthusiastically in the country (perhaps too enthusiastically, quipped the elders, as the proportion of female students entering public universities hit 65 per cent).
This bodes well for the development of the Islamic finance industry, as it is often said that diversity is a key driver of innovation and a critical component of globalisation. I hope Malaysia’s story will inspire others to promote the development of the industry for the greater good.
Raja Teh is chief executive of Malaysia’s Hong Leong Islamic Bank. She will be speaking at the World Islamic Economic Forum in London, 29 to 31 October www.9thwief.org