MANAMA: The global financial crisis has given the Islamic finance industry a great opportunity. The obvious flaws in conventional finance have created great interest in the Islamic financial model, Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj told delegates at the opening session of the 18th World Islamic Banking Conference (WIBC) at the Gulf Hotel yesterday.
"This should provide the basis for the industry to sustain a period of strong growth for the rest of this decade," he said.
The growth opportunities are especially strong as Islamic finance has its largest presence in rapidly growing economies that have been least affected by the global financial crisis.
"They should continue to register high rates of growth in the years ahead.
"If Islamic finance is to make the most of these opportunities, it still needs to learn from the mistakes of interest-based finance.
"As Islamic financial institutions expand, they need to make sure that their management and control functions keep pace with their growth," he said.
"As the global financial crisis shows, there is a need for firms, especially those that become internationally active, to make sure that risk management, control systems and information technology are capable of providing an accurate picture of a financial institution's overall risk profile.
"Boards of directors and senior managers also need to ensure that they have the knowledge, expertise, and professional skills to manage businesses that are growing in complexity," he said.
"Building high-quality human capital is an essential building block for the expansion of the Islamic finance industry," he added.
"The regulatory framework needs to keep pace with an expanding industry," he said.
"The Islamic financial industry is fortunate in that it has several well-established standard setting bodies, including the Islamic Financial Services Board, the International Islamic Financial Market and the Accounting and Auditing Organisation for Islamic Financial Institutions.
"Over the years, these standard-setting bodies have demonstrated their ability to adapt international standards to the needs of the Islamic finance industry," he added.
"These bodies now need to take the lead in adapting new international standards, including Basel III, to the specific circumstances of Islamic finance.
"Ensuring that firms have strong capital and liquidity buffers should not be seen as an optional extra for the industry, but as an essential foundation for its next stage of growth," he said.
"The industry will be stronger if it strengthens its foundations, just as the foundations of interest-based finance are now being strengthened," he added.