LONDON: Another sign of the UK’s intention of becoming an international hub for Islamic finance is the signing on Wednesday of a memorandum of understanding (MoU) between Bank Negara Malaysia (central bank of Malaysia) and the UK Trade and Investment (UKTI), to establish a collaborative framework to promote mutual cooperation in the area of Islamic finance.
At the signing in London by Zeti Akhtar Aziz, governor of Bank Negara, and Sir Andrew Cahn, the chief executive officer of UKTI, there was some surprise that the MoU was between the Malaysian regulator and the UK trade promotion entity, and not with the equivalent UK financial services regulator, the Financial Services Authority (FSA). This ambivalence in the UK Islamic finance policy and the reluctance of the FSA to be seen to be encouraging the facilitation of Islamic finance in the UK is puzzling to many market players in the sector especially from the Middle East and Southeast Asia.
The agreement, according to Bank Negara, will pave the way for Malaysia and the UK to strengthen cooperation in the development of talent and expertise, business linkages and infrastructure support in Islamic finance. It will also facilitate the exchange of resources in the development of human capital and promote mutual recognition of common standards in Islamic finance transactions.
“The MoU,” explained Gov. Zeti, “signifies the establishment of a collaborative partnership between the two countries in the area of Islamic finance and provides the potential to strengthen the inter-linkages amongst key financial centers in Islamic finance in the international financial system.”
Zeti is a strong believer in the integration of the Islamic finance industry into the global financial system. As such she sees this initiative contributing to elevating the understanding and appreciation of Islamic finance in Europe and the West, and reflecting the commitment to further develop the industry in the UK and Malaysia.
“Over the last three decades, Islamic banking has been tested, and it has successfully lived through the Asian financial crisis in 1998. Now it is being asked whether it can withstand the test of the current global financial crisis. We have worked hard to strengthen the resilience of the Islamic finance system,” she added.
Cahn highlighted that “as conventional liquidity becomes difficult to come by, companies are looking for alternative financial options, thus helping Islamic finance become part of the mainstream international finance market. Despite its origins overseas, Islamic finance has found a natural home in the UK, and working in partnership with Malaysia helps cement our position as the leading Western center for Islamic finance.”
Cahn is confident there are many areas for collaboration especially liquidity management; producing talent and harmonizing expertise and standards. The UK’s Islamic finance credentials are increasingly impressive. According to Cahn there are currently 20 banks in Britain that offer Islamic financial products; one insurance company that is offering Islamic insurance (Takaful) services; 18 Sukuk (Islamic bonds) worth an outstanding amount of $10 billion are listed on the London Stock Exchange; 18 law firms offering Islamic finance advice, structuring and documentation services; and a staggering 55 educational and training institutions offering a motley of courses in Islamic finance.
Under the MoU, a joint council has been set up which will be further segmented into specialized working groups. The council had its first session after the signing ceremony. Both parties reject any notion that the council and the working groups will turn out to be mere talking shops. Zeti told Arab News that there would be a two-way flow of ideas and exchanges. “We will learn from each other and there will be a network of joint projects and exchanges of students — all conducted under best practice. We will have cooperation in advancement of knowledge through links and educational exchanges; product innovation, cross listing of Islamic financial products such as Sukuk, mutual recognition of standards, and joint research products,” she stressed.
Indeed, yesterday, Zeti visited Reading University, with which a Malaysian university has an exchange program. The first batch of reading students will attend courses in Islamic finance in the summer term under the exchange program. Malaysia’s Islamic Business School, INCEIF, has already cooperation agreements with Cass Business School and Cardiff Business School in Wales.