Riyadh, Asharq Al-Awsat-Before the international financial crisis, Islamic banking was marginalized and disregarded by international institutions. International institutions, such as the Basel Committee on Banking Supervision [BCBS] and the International Accounting Standards Board [IASB] that are concerned with financial regulation did not take into account the differences between Islamic banking, and traditional banking, in the setting of these regulations. In addition to this, many Western financial institutions considered the Islamic banking system to be simple and rudimentary, and not attuned to the [modern] times and new [financial] developments such as the innovative and complex financial tools that have dazzled the world. These financial apparatus are based upon mathematical equations and theories formulated by the fore-most mathematicians in the world, some of whom are Nobel laureates hired by large financial institutions to help boost their performance.

The Islamic banking system was looked upon as something that hindered the growth and development of the financial markets of the countries which adopted it. In addition to this, many Western countries viewed it as an ideological financial system based upon religious tenets rather than scientific fact, and therefore deriving its strength and popularity from the faith of those that believe in it, making it inconsistent with contemporary thinking that is based upon empirical knowledge and evidence, thus making it a threat to the principles of Secularism.

However the financial crisis has revealed to the world the invalidity in many of the assets and theories and mathematic equations upon which much of the modern financial system is based. Revealing also that these were the main factors behind the creation, spreading, and impact of the international financial crisis, the likes of which the world has not seen before. This financial crisis caused the collapse and bankruptcy of many firmly established financial institutions, and in the blink of an eye a dozen financial institutions that were internationally regarded as examples of professionalism such as “Lehman Brothers” and “Merrill Lynch” vanished. This crisis not only affected the financial institutions, for its effects expanded to burden many of the economic and industrial institutions as well, such as the pride of the American manufacturing industry “General Motors” which is well on its way to declaring bankruptcy, as well as “Toyota” which has declared losses for the first time in the company’s history.

As the financial crisis worsened observers began to notice the stability and resilience of Islamic financial institutions in the face of this, and no Islamic financial institute has yet to declare losses in the financial securities and bonds that were a major cause of the crisis. On the contrary, many Islamic institutions have announced an increase in profits, which resulted in many commending the principles upon which the Islamic banking system is based, and the Shariaa Islamic Laws that regulate it, calling for its introduction to rectify the global financial system. Perhaps the most recent and strongest of these calls was reported in the Bloomberg Agency’s report which revealed that the Vatican had stated that Western banks should carefully examine Islamic financial regulations in order to restore confidence amongst their clients at a time of international economic crisis.

This [global financial] crisis that has brought Islamic banking into the spotlight and presented it with a golden opportunity to introduce its fundamental methods and principles and present a practical [financial] model to the world. Islamic banking should capitalize on this opportunity and work quickly in order to expand, and gain a good position itself in the markets that were previously closed to it and which have now become open due to the financial crisis. Islamic banking must therefore seek to exploit the international recognition of its principles and regulatory system by gaining the recognition of international regulatory institutions with regards to its principles and uniqueness by enacting laws to institute [unified] regulatory body such as the BSBS and the IASB.

Unfortunately I am forced to say that Islamic financial institutions are not taking advantage of this opportunity, allowing it to pass by in the same way that they have passed up many opportunities in the past because they are unwilling to work together and set aside their excessive greed and narrow interests. And so today the Islamic banking industry has no single [unified] model that it can present to the world, as a standardized auditory and legislative criterion is yet to be instituted. There are juristic differences between the [various] Islamic Shariaa bodies which refuse to work together, and this has come close to negating the achievements made by Islamic banking. Many members of these Islamic Shariaa bodies refuse to endorse the idea of a Higher Legislative Authority which will help reduce the disputes arising as a result of having multiple authorities.

There have been endeavors by some of those within the industry to unify efforts with regards to the creation of professional institutions such as the General Council for Islamic Banks and Financial Institutions [CIBAFI], the Accounting and Auditing Organization for Islamic Financial Institutions [AAOIFI], and the Islamic Financial Service Board [IFSB]. However these institutions suffer from a lack of funds, as they depend entirely upon donations, in addition to a lack of moral support as many Islamic financial institutions do not recognize their decisions which ultimately undermines their effectiveness.

In spite of this, I still believe that the opportunity is still open to the Islamic financial industry to consolidate its efforts and place the general interest of the industry ahead of private interests in order to profit from the financial crisis, propagate its principles and gain recognition from international institutions. In addition to expanding and developing [its position] in the various markets available to it today, before the international financial crisis is solved, and attention on the Islamic financial system dwindles.