Islamic Finance in the Post-Oil Economic Scenario will be the theme of this year's conference, one of the world’s top annual forums on Islamic finance and related topics, which is being held in collaboration with the World Bank and under the auspices of the Central Bank of Bahrain.
“The idea of setting up this year’s theme is to identify the economic scenario and its indicators and evaluate their impact on Islamic finance industry,” Hamed Merah, secretary general of AAOIFI, told Gulf News Journal. “We will also discuss new opportunities and explore untapped areas for creating new strategies. You will see that this conference will be key initiative toward new and revised strategies for the industry.”
The conference will have several sessions on the main theme and include discussions on the macro and micro aspects of strategy as well as a session on agricultural finance. Also, the conference will honor a pioneer in Islamic banking and finance, Dr Ahmed Muhammad Ali, ex-president of the Islamic Development Bank Group, on his achievements for the industry over a period of five decades.
“The special session with Dr. Ahmed Muhammad Ali would be a great opportunity to hear from one of the industry’s greatest pioneers about his experience as well as his future vision of Islamic finance,” Merah said. “Moreover, the changing economic scenarios will be discussed in a manner that the Islamic banks and financial institutions can identify the future path and the key pointers for developing their strategies.”
Islamic finance’s major presence is in the countries where the economies are primarily depending on the oil revenues, Merah said. But if we say that this is the only reason Islamic finance is dependent on oil revenues, it would be an understatement. Islamic finance got all its major growth through the use of funds available through surpluses and reserves created from oil revenues. So it can also be identified that many Islamic financial institutions in less developed markets are actually a result of deployment of extra funds by the oil-rich economies.
It is important to note that if the pipeline of oil revenues dries up, then the economies of the oil dependent economies will have a significant impact on the government spending. The indicators are already there so that these governments are putting cuts on spending and development budgets, reducing or eliminating subsidies and introducing taxes, particularly value-added taxes.
“There is a big risk that the liquidity available to Islamic banking in the region will reduce significantly,” Merah said. “The major asset concentration of Islamic banking and finance in the region is in the real estate market, and they need to reconsider the same in the changing environment.”
At a micro level, he added, with increasing unemployment and reduced opportunities in the real estate sector, banks and Islamic finance institutons need to focus more on micro, small and medium enterprises and the ignored sectors like agricultural financing. At a macro level, they need to support the respective government through financing the development work and infrastructure and bridging the budgetary deficits through sukuk and similar instruments.
“The conference aims to discuss all these issues in detail and their impact on the strategies of Islamic banking and finance moving forward.” Merah said. “At this moment, we would like to thank Bahrain and the Bahraini people, Bahrain’s Islamic financal industry and above all the Central Bank of Bahrain for their great support in organizing this prestigious conference on Islamic Banking and Finance industry.”