Speaking at the start of the second day of DIFCweek, Al-Shaali said that the industry is growing at 15 percent a year and is worth up to $ 1.3 trillion. While acknowledging that today this is “a drop in the global financial ocean”, the industry’s potential is enormous.
This is not only because many of the world’s 1.6 billion Muslim are looking to use these products, but also because non-Muslims see Shariah-compliant products as offering an alternative ethical investment that is clean, environmentally friendly and socially responsible, as well as a way to diversify investor portfolios.
But he cautioned that several issues constraining Islamic finance’s growth must be addressed, including the issues of transparency, an underdeveloped infrastructure, insufficient human capital and a lack of globally accepted standards.
He said the industry needs to build structured insights into the decision-making, information processes and grading systems behind Islamic products. People need to understand that Islamic finance “is a way to conduct business that is Shariah-compliant. It has nothing to do with politics. If we do not demystify the industry, it won’t be able to develop into a major alternative.”
Al-Shaali noted that while qualified personnel in the regional finance industry is in short supply, this is even more a challenge for Islamic finance. He noted that DIFC is looking to address this by launching the world’s first executive MBA in Islamic finance.
He said there are two major gaps in infrastructure.
“The secondary market is underdeveloped and needs to change to sustain growth, and second, the issue of money markets needs to be addressed and needs a creative solution.”
Finally, he noted that there is not a minimal set of globally applied standards. “Innovation is taking place all over the world and in global financial centres. We need to standardize this to make it more attractive to investors.”
He suggested that once the industry receives a critical mass, it will achieve these global standards.
This event, hosted by DIFC in association with The Wall Street Journal, forms part of a series of week-long conferences, summits and boutique events being held in the DIFC until Friday.
