12 April 2013 INCEIF Public Lecture, Indonesia

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FOR IMMEDIATE RELEASE
Title: Bank Indonesia and INCEIF Public Lecture on Islamic Finance new realities,
challenges and opportunities
12 April 2013
INCEIF today partnered with Bank Indonesia (Indonesia’s central bank) to jointly hold a
public lecture in Jakarta, the first in INCEIF’s series of public lecture to be held abroad.
The lecture, “Islamic Finance: New realities, challenges and opportunities” was delivered by
INCEIF’s Chief Academic Officer Datuk Prof Dr Syed Othman Alhabshi. Bank Indonesia
Group Head of Research, Development and Regulation for Islamic Banking, Nasirwan
(Deputi Direktur, Kepala Divisi, Divisi Penelitian, Departemen Perbankan Syariah, Bank
Indonesia) delivered the welcoming remarks at the lecture which was held at Bank
Indonesia.
Over 60 people from the local financial services fraternity, universities and staff of Bank
Indonesia attended the lecture. INCEIF online students and alumni who are based in Jakarta
and neighbouring city of Bandung also attended. They took the opportunity to catch up on
INCEIF news with Datuk Syed Othman and each other.
In his lecture, Datuk Syed Othman said despite the unprecedented successes of Islamic
finance globally, in reality there are numerous challenges that it still faces.
According to him the, the biggest challenge for Islamic finance is the competition it faces
from the huge asset size, efficient and continuous innovations that have come with
increasing product varieties and complexities of the dominant conventional finance.
Conventional interest-based finance has centuries-old history compared to Islamic finance
which only received global acceptance in the1990s. Until now the Islamic financial assets
constitute not more than two per cent of the total assets of the conventional sector.
Yet, Datuk Syed Othman pointed out that as a relatively young sector of the financial
industry, Islamic finance has consistently demonstrated that it can face the challenges of
the volatility of the conventional financial sector.
Lorong Universiti A, 59100, Kuala Lumpur, Malaysia. (718736-K)
t: +603 7651 4000
f : +603 7651 4094
w: www.inceif.org
“This is very true in the light of various financial and economic meltdowns that have
plagued different parts of the world in the last couple of decades or so. We know that
Islamic finance has been in practice for more than three decades. It simply shows how
resilient Islamic Finance is. Whilst huge corporations such as Enron Corporation, WorldCom
Corporation, Arthur Anderson, Lehman Brothers and ninety others have been taken to
court for some misconduct or other.,” he added.
The second important challenge is the strict application of Shariah and its ramifications
that govern and define the philosophy, concept and operations of Islamic banking and
finance which call for a more exact match between the real and monetary sectors of the
economy. The debate on risk sharing versus risk transfer, financial inclusion and poverty
alleviation are some of the emerging interests among scholars who are motivated by the
need to bring Islamic finance to the next level.
“Shariah principles should be applied in full. It is not only the form of the contract that must
be fulfilled, more importantly all the Shariah requirements including the implications must
be considered so that all the specificities of the principle or contract are being met,” said
Datuk Syed Othman.
He added that there has been growing concern among both scholars and economists that
the present practices of Islamic financial institutions do not seem to answer the
requirements of the true objectives of Shariah or the maqasid.
“The usual question raised is whether Islamic financial institutions provide the needs of
everyone in society. What has been argued is that the objectives of Shariah are to provide
benefits to society (masalih) and protect society from harm (mafsadah). Whatever is good
and beneficial to society is considered as masalih and whatever is bad and harmful is
considered as mafsadah. This is a very broad objective and clearly requires gigantic tasks to
fulfil for all members of society,” said Datuk Syed Othman.
Following the lecture, a Q&A session was held where members of the audience discussed
the topic, from the Indonesian perspective, as well as the Malaysian experience as one of
the pioneers in successful implementation of the Islamic financial services industry.
Ends.
Lorong Universiti A, 59100, Kuala Lumpur, Malaysia. (718736-K)
t: +603 7651 4000
f : +603 7651 4094
w: www.inceif.org
Lorong Universiti A, 59100, Kuala Lumpur, Malaysia. (718736-K)
t: +603 7651 4000
f : +603 7651 4094
w: www.inceif.org
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