The
executive directors of the International Monetary Fund have adopted a proposal
to promote Islamic Banking (IB) due to its popularity in the global financial
system.
The board,
at the end of its first formal discussion on IB, adopted a set of proposals on
the role the fund should play in this area.
The
proposals, according to the bank, and the case for adopting them, are contained
in the staff paper titled “Ensuring Financial Stability in Countries with
Islamic Banking” and the accompanying country case studies paper.
A statement
from the IMF said the board noted that the growth of Islamic Banking and its
complexities posed new challenges and unique risks for regulatory and
supervisory authorities.
“Against
this background, the directors called for stronger efforts to establish a
policy framework and environment that promote financial stability and sound
development of Islamic Banking, particularly for countries in which Islamic
Banking has become systemically important,” IMF said.
The fund
said, while accounting for a small share of global financial assets, IB has
established a presence in more than 60 countries and has become systemically
important in 14 jurisdictions. IB involves operations, balance sheet
structures, and risks that differ from their conventional banking counterparts.
The
directors expressed support for staff’s proposed approach to developing and
providing policy advice on Islamic Banking-related issues in the context of the
fund’s surveillance, programme design, and capacity development activities.
They also
called for staff’s continued support to the work of the relevant international
standard setters and other international bodies to help address current gaps in
the international regulatory framework for Islamic Banking.
The
directors saw merit in considering a proposal to formally recognise the “Core
Principles for Islamic Finance Regulation for Banking,” prepared by the Islamic
Financial Services Board, as a standard under the Fund/Bank Standards and Codes
Initiative.
They looked
forward to receiving a formal proposal for the board’s endorsement in the
context of a paper before end-April 2018.
The
directors welcomed the progress that has been made in developing legal and
governance frameworks, and regulatory and supervisory standards for Islamic
Banking.
Reacting to
the report, Prof Binta Tijjani Jibril, Director, International Institute
of Islamic Banking and Finance, Bayero University Kano, said the
recognition and endorsement by IMF and the World Bank is a testimony to the
robustness of the system and its viability as a potent tool for economic
development through financial inclusion and poverty reduction.
“It also
underscores the fact that though the system is Islamic, its fruits can be
enjoyed by both Muslims and non-Muslims alike. Islamic Finance is simply an
alternative system of finance with global appeal that has proved its relevance
and resilience over the years.
“Our hope
is that the Nigerian government will seize this opportunity and tap into the
potential of Islamic Finance to help it address the challenges of economic
development as compounded by the current recession,” she added.
Comments