Islamic Finance Set To Expand In Arab Countries

In a strategic move set to bolster the Islamic banking and finance sector across the Arab world, the Jeddah-based Islamic Research & Training Institute (IRTI) has forged a pivotal partnership with the Alexandria-based Arab Academy for Science and Technology. This collaboration, heralded by IRTI Director General Mohd Azmi Omar, is poised to make significant strides in enriching the industry’s knowledge base by translating key literature in Islamic banking and finance into Arabic—a response to the current predominance of English in the field’s foundational texts.

In an interview with Arab News, Omar underscored the accelerating popularity of Islamic banking, particularly in the aftermath of the global financial crisis. Islamic banking’s value-based, production-oriented approach is credited for its ethical stance, favoring investments in productive projects that stimulate real economic growth over speculative ventures. However, Omar identified a critical barrier to wider adoption: a pervasive lack of understanding about Islamic banking’s principles, benefits, and operational mechanisms.

Addressing this knowledge gap, the IDB and IRTI have taken proactive steps, spearheading a comprehensive campaign to demystify Islamic banking through international conferences, seminars, research initiatives, and publications. Their efforts coincide with a period of remarkable growth for the industry. Citing the World Islamic Banking Competitiveness Report 2013 by Ernst & Young, global Islamic banking assets have surged from $1.3 trillion in 2011 to $1.8 trillion, with the leading 20 Islamic banks witnessing a 16% growth over the past three years.

The recent agreement, inked by IRTI chief Omar and Arab Academy President Ismail Abdul Ghaffar Faraj in the presence of Islamic Development Bank Group President Ahmed Mohamed Ali, builds on a memorandum of understanding between the IDB and the academy from July 2012. This partnership is set to launch joint training programs in Islamic economics, finance, and banking, with IRTI curating the expert trainers in coordination with the academy.

Faraj expressed optimism about the agreement’s potential to solidify the relationship between the two institutions, enhancing their collective capacity to advance Islamic banking and finance. This sentiment was echoed by IDB’s chief, who emphasized the initiative’s role in promoting Islamic banking among the Arab League’s member countries, all of which are also IDB members. The Arab Academy, an Arab League affiliate specializing in maritime transport since 1972, stands as a testament to the collaborative spirit and shared vision driving this initiative forward.

This strategic partnership marks a significant milestone in the journey towards a more informed, accessible, and ethical Islamic banking sector across the Arab world, reflecting a concerted effort to blend tradition with modern financial practices for sustainable economic development.