Since World War II, the world has experienced economic growth at a scale unparalleled in human history. Emerging markets steeped in primitive ways of working, often entrenched in poverty, experienced a remarkable change in life and work. What took the Western world centuries to achieve is taking emerging markets decades.
Of course poverty still afflicts these markets far more starkly than developed countries, but the rapid changes along with global solidarity and activism against poverty and its ancillary effects suggest that poverty can and will be
tackled far more resolutely than we would care to think. Indeed, following the fall of the Berlin Wall and the end of communism, the scholar Francis Fukuyama declared that capitalism and liberal democracy are the only means to curing the world’s ills.
Then came the financial crisis and suddenly heads were being scratched. If the financial crisis has taught us anything, it is that euphoria can often be met with an unexpected cataclysm. Questions arose as to whether we were standing on the precipice of destruction caused by the oblique financial system. It was slightly premature, and I doubt the majority of those sitting in the comfort of their home were truly worried about chaos and turmoil, at least not in the Syrian sense.
Nevertheless, we should always be mindful of heedlessness in the orgy of success and conscious of impeding dangers. Success is brittle, much a product of its moment. To sustain success is to address the factors that could destroy it. Like Icarus flying towards the sun, overconfidence and a failure to listen to the wise and prescient can merit a fall. Instead, we should be cautious though ambitious, prudential but adventurous, calculating
yet intrepid, and critical while remaining praiseworthy. This quarter’s ISFIRE is a mixture of praising the praiseworthy and highlighting potential worries.
We dedicate a large section of this ISFIRE to Malaysia, a leading light in Islamic finance, and to the individuals that are contributing to the success of the industry in the country. I was fortunate to have sat with the Prime Minister of Malaysia, Dato’ Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, a wonderful down to earth man who is overseeing a country that is remarkable in every sense. Malaysia’s success owes itself to the vision and careful planning of leaders who, following independence in 1957, laid the foundations and created the infrastructure upon which its citizens have managed to thrive; citizens like Raja Teh Maimunah, CEO of Hong Leong Islamic Bank. She provides a comment on Malaysia’s achievements identifying its values and the ambitions of its people as key factors. Her position at the helm of a leading Islamic bank reflects both the growth of Islamic finance and the growth opportunities afforded to women, something that is limited in other Muslim countries. Shabana Hasan, researcher at ISRA, is an example of the growing talent in the industry. We interviewed her along with Tan Sri Ahmad Fuzi Bin Abdul Razak, Secretary General of WIEF Foundation. The World Islamic Economic Forum (WIEF) has emerged as the most influential gathering of Muslim leaders from around the world. Nine have been held thus far with the 10th to be in Dubai. These forums reflect the state of Islamic finance, and following the most recent in the UK, it is safe to say the future looks bright.
Islamic finance has flourished and is an integral part of the financial system in Malaysia.
Dato Najib oversaw the enactment of the groundbreaking Islamic Financial Services Act 2013, a milestone in the global Islamic financial industry. Dr Zulkifli Hasan elaborates on this legislation, along with activity in the Indonesia. Dr Hasan is a budding intellectual and we are sure he will offer much insight and suggestions to improve the industry as his career progresses.
Then we turn to the dangers. ISFIRE insight takes a quite abstract approach first focusing on the brewing turmoil in Egypt in part caused by religious fervour before turning to the application of the law. Both issues have significant ramifications on the industry.
Islamist movements and the reaction to them can negatively affect the Islamic finance industry. Fortunately, more people in the world see no connection. But in the Middle East, a hotbed for both Islamic finance and Islamist movements, any clampdowns on the latter could affect the former. As for the law, the spirit v form debate still rages on. It should not be ignored because the real worry is that Islamic finance in a bid to stay within the parameters of the law could imbue within the worst aspects of capitalism.
I am an optimist always, and I look at Malaysia as a shining light. Malaysia is engaged with all aspects of the industry and their approach has been commendable and illuminating. Other countries in the Islamic finance industry should take note of how Malaysia has built its Islamic financial industry. They have undoubtedly been prudential but ambitious, and this is the right approach going forward.
