Take Islamic finance to greater heights, says PM

Datuk Seri Ahmad Zahid Hamidi and Tan Sri Zetti Akhtar

NSTONLINE: A new breed of financially-savvy syariah scholars are being sought to beef up the country's Islamic finance capabilities.

The International Syariah Research Academy (Isra), which was launched yesterday, aims to develop local talent with degrees in syariah and finance by offering scholarships to students keen on the two areas of study.

It is hoped that this would address the current weakness where syariah specialists know little about finance.

The aim is for this new breed of scholars to take the Islamic financial industry to new heights within the next five to 10 years.

Prime Minister Datuk Seri Abdullah Ahmad Badawi, in a speech at the launching ceremony, called on financial institutions, as well as institutes of higher learning where the bulk of researchers reside, to support Isra and other like institutions.

"Islamic finance is an important national initiative, as well as an important component in the development of the Muslim world in general.

"As such, I would expect that all necessary support be rendered to Isra to ensure its success," he said in his speech, read by Minister in the Prime Minister's Department Datuk Seri Ahmad Zahid Hamidi.

Abdullah said observers today were looking at the Islamic financial system with envy and respect as it prohibited the kind of speculative excesses in conventional banking which almost brought the global financial system to its knees.

He did not mince his words when criticising the origins of the meltdown.

"This crisis has its origins in the innovation of securitising sub-prime mortgage loans, where pools of sub-prime loans were repackaged and then sold as tradable securities.

"Very soon, financiers were actively trading bundles of sub-prime loans, most of which had risk profiles that nobody truly understood.

"In reality, these repackaged loans were nothing more than artful works of deception that fed the speculative excesses and hubris in financial markets."

On the other hand, he said, Islamic banks manage concrete assets that were tied to real economic activities rather than buying trade debt.

He said Islamic banking's prohibitions against high levels of debt, unsecured debt and speculation provide for a high level of financial prudence.

"These ethical and moral safeguards are missing in the conventional financial system."

However, Abdullah warned practitioners not to rest on their laurels but keep asking themselves whether their system was truly an alternative to conventional banking or if they were still merely aping the established system. He urged them to use the opportunity provided by the ongoing financial crisis wisely to demonstrate the uniqueness of Islamic finance.

Equally important was the need to resolve and clarify issues such as differences in the interpretation of syariah and the development and pricing of new financial products through knowledge creation.

Earlier, Abdullah, speaking to the Defence Ministry's staff at their monthly assembly, said the integrity of an individual was paramount to the integrity of an organisation, and that integrity should be inculcated not only in the ministry but as part of the national culture or budaya bangsa.

He said the high standards of integrity, efficiency and credibility displayed by soldiers on duty overseas, especially in Bosnia, had earned praise for the country.

While this was something to be proud of, the government and the nation hoped that the military's exemplary attitude would not just be limited to specific teams stationed overseas, Abdullah said.