islamic finance

BBC NEWS BBC Sport >> Graphics version >> Change to UK edition >>
News Front Page Africa Americas Asia-Pacific Europe Middle East South Asia UK Business Entertainment Science/Nature Technology Health Talking Point
Business Contents: E-Commerce Economy Market Data
Sunday, 3 November, 2002, 12:39 GMT
Muslim countries agree bank watchdogJonathan Kent BBC News reporter in Kuala Lumpur
The heads of the central banks of eight Muslim countries have launched a new body to regulate Islamic financial institutions.
Malaysia, Indonesia, Iran, Saudi Arabia, Pakistan, Sudan, Bahrain and Kuwait are all represented at the Islamic Financial Services Board.
The new body will set common standards which member countries will be encouraged to adopt and promote financial services that respect Muslim beliefs.
It will not specifically address concerns that Islamic banks have been used to channel money to militant groups.
But analysts say it will set tougher rules for accounting and transparency and that will make money laundering more difficult.
Fast growth
The inauguration is being hailed as marking the coming of age of international Islamic banking.
Around a fifth of the world's population is Muslim, but investments in financial services that meet with Islamic Shari'ah law are estimated at less than $200bn.
Private wealth in the Middle East alone is put at four times that figure.
Launching the new board, the Malaysian Prime Minister Dr Mahathir Mohamad said the Islamic finance sector has great potential.
"Although the size of the international Islamic finance is still small, it has expanded significantly at 15% per annum," he said.
"The potential for growth is enormous, given not only the huge wealth of the global Muslim community but also the interest shown in the international financial markers in this form of financial intermediation."
Strict rules
Central to the concept of Islamic banking is Islam's prohibition of Usury.
In effect this means that charging interest, or making loans with the promise of a fixed return is forbidden.
So is making excess profit.
Banks must instead take a share of the profit or loss made by those they lend to.
Supporters say this makes them less prone to lend rashly and less ready to demand their money back when times get tough for borrowers.
Nor can Islamic funds invest in products that would be considered unethical by Muslims; alcohol, gambling, pornography, tobacco or weapons.
Those behind the launch of the IFSB hope that by promoting good practice and stability in the sector it will give Muslims the confidence to invest their wealth in a way that reflects Islamic values.
Related to this story:Gulf investors target European property (01 Nov 02 Business) Muslims tackle mortgage hurdles (16 Oct 02 Business) Bahrain starts Islamic financial market (12 Aug 02 Business) UK to encourage Islamic mortgages (18 Feb 02 Business)
Internet links: Islamic Financial Services Board The BBC is not responsible for the content of external internet sites
News Front Page Africa Americas Asia-Pacific Europe Middle East South Asia UK Business Entertainment Science/Nature Technology Health Talking Point
Business Contents: E-Commerce Economy Market Data
^^ Back to top BBC News Home BBC Homepage Feedback ©
var si = document.location+"";
var tsi = si.replace(".stm","").substr(si.length-11, si.length);
if (!tsi.match(/\d\d\d\d\d\d\d/)) {tsi = 0;}
document.write('');