Yakcop was speaking at the KLIFF Islamic Finance Awards
dinner which was held recently in Kuala Lumpur. While he may have been speaking
in a Malaysian context, his words apply to the Islamic banking industry in
general.
Yakcop is no ordinary observer of the Islamic finance
industry. He together with others is the architect of the Malaysian Islamic
financial system when he was adviser to Jafaar Hussein, the then governor of
Bank Negara Malaysia, the central bank, and effectively helped the governor to
implement his dream of developing a dual banking system in the country - an
Islamic banking system operating side-by-side a conventional one, cooperating
but not interacting.
He was also the pioneer of Malaysia's bilateral payments arrangement
of settling accounts between central banks rather than using expensive
correspondent banking services in London, New York and Frankfurt; a prime mover
behind the concept of an Islamic dinar to settle trading accounts between
Muslim countries.
However, Yakcop warned that while in Islamic finance,
innovation has been significantly pervasive, the industry needs to further
accelerate the innovation momentum to ensure that it achieves its objectives
and aspirations. The challenge to innovate and adapt at the same time must be
based on the core principles and values as well as the ethics of Islam.
"For innovation to become an important driver of
growth, a critical area that needs attention is addressing the shortage of
skilled and experienced professionals in the industry. WE need to build a
pipeline of talents who have the ability and creativity to develop new ideas
and the capacity to run ideas into achievable results," added Yakcop.
The greater awareness of the inbuilt strength of Islamic
finance has contributed toward the increased international participation in
Islamic financial markets. Indeed Malaysia has benefited from the
internationalization of Islamic finance.
The minister highlighted Malaysia's leadership in the
Islamic financial industry. For instance, in the issuance of sukuk, out of the
Top 10 biggest sukuk issued globally in 2010, five originated from Malaysia.
For this year to date, global sukuk issuances totaled $54.5 billion and Malaysia
accounted for about 67 percent of the issuances.
The country had also attracted continued presence and
interest of foreign issuers and investors, which has seen several successful
issuances of foreign currency and ringgit denominated sukuk by issuers
including the Islamic Development Bank ($500 million), Gulf Investment
Corporation (RM600 million), Nomura and National Bank of Abu Dhabi (RM500
million).
Yakcop also stressed that to facilitate greater
internationalization of the Islamic capital market, the capacity to structure
multi-currency and cross border transactions and to build greater scale needs
to be further strengthened. This would allow intermediaries to make greater
inroads into the international market. "The transition into the mainstream
of the global financial system will provide opportunities for market
intermediaries to seek new frontiers and expand new markets, as well as
contribute toward further widening the diversity of products and
services."
In Malaysia specifically, the country's march toward
developed nation status by 2020 has required a shift toward new and competitive
growth sectors characterized by higher value added and knowledge intensive
activities. As identified by Prime Minister Mohd Najib Abdul Razak's Economic
Transformation Program, these policy shifts also provide good opportunities for
Islamic finance to also develop products which meet the needs of these growth
areas.
Indeed in last week's budget 2012, Najib, who is also
Malaysia's finance minister, outlined several opportunities for the Islamic
finance industry including further incentives for certain types of sukuk
origination, support for SMEs, for venture capital and the housing industry.
