UK-Bahrain Islamic Finance Summit in London
Dr. Mozammel Haque
The
UK-Bahrain Islamic Summit was held at the
Foreign & Commonwealth Office (FCO), London on Tuesday, 8th of
April, 2014. The Summit forges partnership to uncover new trade and investment
opportunities in both countries. UK and Bahrain also agreed a joint framework
to enhance collaboration on Islamic finance at the Summit held in London and
also working together to promote Islamic Finance.
A
Memorandum of Understanding (MoU), signed by Senior Foreign Office Minister
Baroness Warsi and His Excellency the Governor of the Central Bank of Bahrain
Mr. Rasheed Mohammed Al Maraj, set out plans to boost cooperation through an
education and skills programme and the establishment of a working group devoted
to the development of Islamic finance-driven trade and investment between the
two countries, the Foreign & Commonwealth Office press release said.
Islamic
finance is currently growing 50% faster than conventional banking and is worth
£1.3 trillion globally reaching an expanding market of over 2 billion people.
It accounts for over 25% of banking in the Gulf.
Over
the last six months, the UK has successfully hosted two major Islamic finance
events; the World Islamic Economic Forum and the Global Islamic Finance and
Investment Conference.
Baroness Sayeeda Warsi
In
her UK keynote speech, Baroness Sayeeda Warsi, the senior Foreign Minister, welcomed
the Baroness Morris of Bolton, Baroness Symons and ambassadors to the Foreign
& Commonwealth Office while hosting the UK-Bahrain Islamic Finance Summit
here in London. She said, “I am delighted to host today’s UK-Bahrain Islamic
Finance Summit. It is an honour to welcome so many prominent experts from both
countries at this first bilateral Islamic Finance sovereign summit of its kind
in the UK.”
While
referring to the deep-rooted relationship between the two countries going back
nearly 200 years, Baroness Warsi mentioned, “This year we celebrate the 200th
anniversary of UK-Bahrain relations. As well as the close and longstanding
relationship enjoyed by our two countries, Bahrain is considered an established
innovator in Islamic Finance. It issued the first international Sovereign Sukuk
in 2001, which drove the Gulf Corporation Council Islamic capital market. And
with the largest concentration of Islamic finance institutions in the region,
Bahrain is one of the pre-eminent Islamic Finance centres in the Gulf.”
.
Baroness
Warsi raised the question: “Why is this Islamic Finance important?” and
immediately said, “Every minister in this government is a trade minister; we
are constantly finding ways out to set up business.”
“Islamic
Finance is growing at a remarkable pace; 50% faster than traditional banking. It
is estimated that the global Islamic finance investment would be worth about
1.8 trillion and it is expected to grow at 10-15% per annum reaching at an
expanding market of over 2 billion people. 5% of Bahrain,” she mentioned.
The Senior
Foreign Minister also said, “Bahrain is a natural partner for the UK on Islamic
Finance and as you will hear today, Bahrain is an established innovator having
issued the first international Sukuk in which drove the Gulf Corporation
Council Islamic capital market. Bahrain has also the biggest and one of the pre
eminent Islamic finance centre in the Gulf.”
Mentioning
about Islamic finance in the UK, Baroness Warsi said, “As a leading global
financial centre, the UK has a great track record on Islamic Finance. We have
more than twenty institutions offering Islamic finance and six wholly Shari’ah-
compliant banks. We also have over twelve Universities offering related
specialist courses and qualifications. It is not just in words; it is in the
vein of that ambition that the Prime Minister announced at the World Islamic
Economic Forum.”
South
Africa and Luxemburg are already there. “So therefore the race is on. And for
that reason, I am proud to say that less then this financial year. It is
anticipated that this will be an Ijara structure backed by government property
and growing an open competition up already appointed on this project,” said
Baroness Warsi.
Baroness
Warsi also mentioned, “Since the World Islamic Economic Forum we introduced Shari’ah-compliant
Sukuk. Why? Because the Prime Minister fundamentally belief that religion
should never be a barrier. I would add in a Shari’ah-compliant model which are
very successful; part of long scheme loan more your entrepreneur are able to
settle. Why we will introduce Shari’ah-compliant finance? This February we
extended our scheme providers of home mortgages which are consisted of Islamic
Finance. And just last month the UK regulatory body, the Bank of England and
the PRA published a operating in the United Kingdom.”
Baroness
Warsi expressed her ambition, “My ambition is to go further and to go a bigger
role in developing Islamic finance. My vision is to create Islamic finance
global club; why we will establish the global Islamic Finance and investment
group which recognise the Bank of England from around the world.”
In
addition to the trade relationship between UK and Bahrain, Baroness Warsi was
delighted to welcome “a new agreement and a new collaboration which will be
held” and “will continue following the success of the global Islamic financing
investment group.”
Baroness
Warsi also expressed her hope that this meeting will “develop new partnership
between the private sector and the academia world”.
“We
have much to share about how to grow the industry successfully. To underscore
this ambition, a Memorandum of Understanding was signed at the Summit, which
gives the UK and Bahrain a strong framework on which to develop our ongoing
collaboration,” mentioned Baroness Warsi.
His Excellency the Governor of the Central Bank of
Bahrain
Mr. Rasheed Mohammed Al-Maraj
Earlier,
the Governor of the Central Bank of Bahrain, His Excellency Mr. Rasheed
Mohammed Al-Maraj, addressed the delegation and said in his Bahrain keynote
speech, “I would like first to express my appreciation to Baroness Symons, Baroness
Warsi, for her pro-active initiative for Islamic Finance and taking the lead in
organising this Summit. I would also like to thank His Excellency the UK
Ambassador to Bahrain and his team for their hard work in co-organising Islamic
Finance Summit. Last but not least I also like to thank the members of both the
UK-and Bahrain delegation for their support and being here today.”
Speaking
about Islamic Finance, Mr. Rasheed Mohammed Al-Miraj mentioned, “The Islamic Finance
industry is currently valued at US$1.6 trillion dollars. It is growing at 15%
per annum, and is active in almost all of the major financial centres. More than 500 institutions worldwide practice
Islamic finance in banking, insurance and asset management or private equity. It
is active in 75 countries. Tailored counting standards have been implemented, and
a tailored risk management framework is in place to reflect the risks arising
out of the unique product structure which forms heart of the industry.”
Tracing
the origin of the modern Islamic Finance, Mr. Al-Maraj said, “The modern
Islamic finance industry was born some forty years ago, primarily to fulfil the
needs of those customers who wanted to conduct their financial affairs in
accordance with the requirements of their faith. However, Islamic finance is
available to all, no one is excluded from benefitting from it. The ethical
foundation of Islamic finance and its emphasis on fairness for both parties dovetails
nicely with contemporary thinking in relation to corporate social
responsibility (CSR) and socially responsible investing (SRI). Moreover, the
overriding principle of Islamic finance; namely the prohibition of debt trading,
trade speculations and the selling of what you don’t own have all proven during
the financial crisis that the Islamic finance business model is more resilient
than its conventional counterpart.”
Mr.
Al-Maraj gave a brief overview of the Islamic Finance industry today. He
said, “There is a paradigm shift happening before our eyes. In a number of
countries Islamic banking, for the first time, has crossed the 25% threshold.
This means that a quarter or more of total banking assets in many countries
undertaken within the Islamic banking framework is at or close to the critical
mass required to provide the impetus for the next phase of growth - to achieve
a majority market share - which could be attained more quickly than the time it
took to achieve the first 25%. This is because the initial hiccups of an evolving
industry have been overcome, including the implementation of robust necessary regulatory
frameworks, and an exponential increase in public awareness about Islamic finance.
Future growth will be more a function of supply side issues than demand side
ones.”
“On
the other side of the spectrum, a number of countries are opening up to Islamic
finance for the first time - in Africa, Europe, Asia Pacific and Central Asia.
Islamic Development Bank, a multilateral institution, dedicated to promote
Islamic finance worldwide, has approved technical assistance grant requests
from 8 countries to enable changes in their legal and regulatory frameworks
over the next two years. Uganda, Tunisia, Mozambique, Kazakhstan, Tajikistan
and Azerbaijan are included among them. Islamic finance is resurging in major economies
such as Turkey and Indonesia where the current market share of Islamic finance assets
is less than 5%, but with renewed government commitment the pace of growth is likely
to accelerate in the near future. China, India, Russia and other emerging
countries have not opened up to Islamic finance formally as yet, but they are
watching with keen interest and may enter the market in the foreseeable future,”
mentioned the Governor of the Central Bank of Bahrain.
Mr.
Al-Maraj also said, “The recent inclusion of South Korea as a member of the Islamic
Financial Services Board and the change of regulations in Hong Kong to enable Sukuk
issuance are very healthy indicators of the progress of Islamic finance, and they are important indicators which are likely
to uniform the decision-making process in these markets. I believe we are in
the critical stage of the evolution of the Islamic finance industry based on
the paradigm shift in Muslim majority markets and in new markets opening up to
Islamic finance.”
Speaking
about the advantage of London offering, Mr. Al-Maraj said, “Clearly, the UK Government
understands the significant opportunity Islamic finance offers. Its decision to
make London the leading western hub for Islamic finance reflects this. London
already enjoys the reputation as the global financial centre; the addition of
Islamic finance will help it attract issuers and investors from the Middle
East, Far East and elsewhere to take advantage of London’s offerings.”
Mr.
Al-Maraj then turned to recent events in his homeland Bahrain. He mentioned,
“Bahrain was voted top in several of the international development initiatives
in Islamic finance; a recognition that it remains proactive and creative in identifying
and implementing initiatives”. By way of example, he said, “We recently
introduced an innovative approach to the measurement of solvency for Takaful business,
we are re-engineering the current market practice of Sharia-compliance, and we
are currently working with a first class consultant and AAOIFI to significantly
enhance the Certified Islamic Professional Accountant qualification which will
make it equivalent to the conventional counterpart accreditations.”
Speaking
about the future prospect of Islamic Finance, Mr. Al-Maraj said, “Let me share
with you the perspective we have of what needs to be done to secure a sound and
prosperous future for the Islamic finance industry globally. The excellent
track- records of, and the promising opportunity in, Islamic finance provide a solid
and robust foundation for this industry to advance further as a mainstream
global industry.”
“I
wish therefore to utilize this Summit, and our cooperative efforts thereafter,
to implant the seeds of cooperation with the City of London to achieve this
objective. More specifically, the City of London can play a role in the
globalisation of standards issued by AAOIFI, IFSB and IIFM,” said Mr. Al-Maraj
and added, “The industry needs more accomplished leadership at all levels;
people who are committed to Islamic finance, understand its principles and
differentiated structures and who are also good professional bankers, insurance
specialists, asset managers, etc.”
Speaking about the challenges and
opportunities, Mr. Al-Maraj said, “It is perhaps the biggest challenge for all
of us but also the biggest opportunity if we can do it right. In addition to
our joint efforts in the development of financial services and its regulation, both
countries benefitted from our longstanding relationship in training and
education. This partnership can be further enhanced to achieve world leading qualifications,
linked with a cross-offering of vocational training and academic programme in
Islamic finance. Both Bahrain and the UK have some outstanding educational and
vocational institutions which are doing a great job in this space, and
significant progress can be achieved through increased cooperation in this area.”
The
Governor of the Central Bank of Bahrain also said, “As the financial sector is
a highly regulated industry, a key component for the acceptance of Islamic
finance at the regulatory and the government level. The experience of the last forty
years suggests a strong correlation between regulatory clarity and the rate of
growth of Islamic finance in a market. Recognising the unique aspects of
Islamic finance and making necessary adjustment to the legal and regulatory
frameworks is the correct approach to adopt. We are ready, able and willing to
assist the City of London in its efforts in this domain.”
The
FCO press release said, “Today marks an important day in the long history of
Bahrain-UK relations as the two countries will be extending significant
cooperation to each other to promote Islamic banking and finance. A joint
committee has been formed for this purpose and a MoU has been signed. Both the
UK and Bahrain have their strengths in Islamic finance education, training and
practice, and their cooperation will open new opportunities for the Islamic
finance industry.”
Welcome address by
Mr. Edward Oakden
Earlier,
Mr. Edward Oakden, Director, Middle East and North Africa, Foreign &
Commonwealth Office, gave a very warm welcome particularly to the Guest of
Honour Governor of the Central Bank of Bahrain Mr. Rasheed Mohammad Al-Maraj,
to the Bahraini Ambassador to the City of London, Baroness Symons and to the others
distinguished guests who attended the Summit.
This
is the first bilateral Islamic Finance Summit and the UK and Bahrain have had
for nearly 200 years now a very strong relationship, Mr. Oakden said.
Mr.
Oakden said, “Islamic finance is growing at a remarkable pace, 50% faster than
traditional banking; growing 10% to /15% a year. Given the base rate is lower
nonetheless it already comprises 25% of the banking in the Gulf.”
He
also said, Britain is a natural partner for you in that area and even Bahrain
is already an established innovatory in the field. “You have the biggest
concentration of Islamic financial institutions in the region,” he said. .
As
regards, UK, Mr. Oakden mentioned, “In London, here in UK, we are first nation
outside the Islamic world to issue a Sovereign Sukuk; we are working hard to
develop our own Islamic financial standard; already we have more than 20
institutions; wholly Shari’ah-compliant and banks. Well we have 12 Universities
offering specialised courses and qualifications in Islamic finance. We tried to
adjust our financial legislation to bring advantages to those who wanted to take
Islamic Finance free; so we remove the double taxation from Islamic mortgages;
extended tax relief on Islamic mortgages to companies and individuals.”
Programme
Besides
the welcome address, the Bahrain keynote speech and the UK keynote speech,
there were three sessions; the session 1 was on Investment opportunities in the
UK and Bahrain, the role of Islamic finance and new innovation in investing,
chaired by Sir Michael Bear, CEO, Regeneration Investment Organisation. The session
2 was on Co-operating to build excellence in Islamic finance education and
training, chaired by the Baroness Morris of Bolton, OBE DL. The session 3 was
on Getting the regulatory and legal environment right, chaired by Mel Beaman,
Head Overseas Banks Department, Bank of England.
