Dr Mahathir Mohamad, the former Malaysian prime minister and architect of the country's Islamic banking policy, is calling for improvements to sector's wealth management capabilities.
Speaking at the Malaysia Showcase Dinner at the 7th Islamic Financial Services Board Annual Summit in Bahrain, Dr Mahathir noted that Muslims and Muslim countries do not value or manage their wealth properly, which has created a culture of dependency and a lack of capacity building.
"This has been taken advantage of by others. We may have
unlimited sources of wealth but we can never assume that the
resources will always yield wealth forever," he said in his
speech titled Islamic Finance - New Hope for the Future of
the Muslim World.
"Depending on others to extract and market our resources in dangerous. Whether the Muslims get their fair share of the wealth of their countries depends on their ability to extract it themselves."
Dr Mahathir moved on to say that if only Islamic financial institutions are aware of the full extent of the role they can play and they are will to look beyond merely making money available to those who need it, will they be able to represent hope for a better future for the Muslim world.
It has taken a while for Muslims and Muslim nations to appreciate the role of banks in wealth creation, the ex-premier added, attributing the lag to the injunction against usury and their hesitation to adopt Western banking systems.
Islamic finance has grown tremendously over the years, with total assets worldwide going over $1 trillion, all of which are enjoying a total growth rate of 15 to 20 per cent per year. However, this has not materialised in their respective countries' economic status as they have in the case of conventional banks in industrialised economies.
A greater connect between Islamic finance and the real economy is necessary, Dr Mahathir proceeded to say. "We cannot ensure there are no rogues in the Islamic financial market. We hope that Islamic injunctions will restrain them. But we cannot be sure. When opportunities appear for making quick money the rogues would not be deterred by mere religious prohibition."
The IFSB Summit attracted senior participants from many countries, all looking to discover the extent the global financial crisis has been an influence to Islamic and conventional finance. It can be recalled that at the height of the 2008 crisis, Islamic institutions had emerged relatively unscathed, leading a greater number of investors and advisors to look into the wealth management potential of the demographic. In Asia, Malaysia is turning out to be an Islamic finance hub.
The summit's theme Global Financial Architecture: Challenges for Islamic Finance focused on three key areas: liquidity management, the adoption of legal and shariah frameworks, and the implementation of prudential standards in Islamic finance.