MEETING OF FORUM FOR GROUP DISCUSSION ON ECONOMIC ISSUES
A meeting under the banner Forum for Group Discussion on Economic Issues (FGDEI) commenced on 24th March 2013 in Dawat Nagar, Okhla, New Delhi. This forum has been formed by Sahulat Microfinance Society in association with Radiance Viewsweekly in order to deliberate upon issues relating to Islamic economics, finance and banking. The meeting started on a welcome note delivered by Mr. Arshad Ajmal, Vice President, Sahulat Microfinance Society.
Mr. Kashif Hassan Khan, research scholar, Jamia Milia Islamia, delivered a presentation on the topic of "Issues and Challenges of Risk Management in Islamic Financial Industry- A Case Study of Bahrain" which is the part of his thesis for award of Ph. D degree from Jamia Millia. He has covered the most common risks faced by the Islamic bank all over the world highlighting risks faced by the Islamic Banks of Bahrain, Iran, Turkey and UAE. He then provided the views on the mitigation techniques for those risks. The major risks he elaborated are as follows:
- Islamic modes based on profit and loss sharing perceive more risks than markup based modes. This is mainly related to the risk management problems.
- Major risk faced by Islamic banks, are credit risk and operational risks.
- Presently, the use of securitizations, guarantees, is at highest rate where as other techniques like derivatives are less applied due to being controversial.
- Since there is a shortage of Sharia scholars and no uniformity among them, there is a high degree of Sharia risk.
Mr. Kashif said that Murabaha and Ijara has become the largest portion of Islamic Finance because it has minimum risk. Mudaraba and Musharakah which are pure Islamic financing product are left behind due to the high risk involved. He also stated that the industry is suffering with the lack of experts and this situation is generating Sharia risk for the Islamic Finance industry.
For the mitigation of the risks faced by Islamic Banks, Mr. Kashif has given a suggestion that the Islamic Banks should be governed by a central bank for monitoring and standard modus operandi.
He also suggested for an International Sharia Board to resolve Sharia related issues all over the industry.
A live and healthy discussion followed the presentation. Mr. Arshad Ajmal, Dr. Javed Khan, Dr. Waquar Anwar, Mr. Shahid Jamal Ahmad and Mr. Sikandar Azam shared their views on issues raised the speaker. The participants included Mr. Rafeek Ahmad, Mr. Khan Yasir and Mohd. Naushad Khan. "Equity financing is the route for any country' proper economic growth when one analyses the pattern of growth of such countries in the past, we may consider to take up research how industries in Indian context are deriving benefits by concentrating on equity financing and the various challenges it has been tackling in the process in positive way" – a general observation was derived from the discussants in the meeting.