Growth of Islamic finance within conventional systems


The role of regulatory authorities in growing Islamic finance within conventional finance systems will come under examination at the International Islamic Finance Forum Europe, which takes place at the World Trade Center, Zurich, Switzerland, 29 October-1 November 2007.

While some countries such as Iran and Sudan have chosen to make their entire financial systems Islamic, most parts of the world encourage conventional and Islamic finance to co-exist to mutual benefit.

Dual systems have provided a substantial competitive edge to well-diversified international financial hubs, appealing to both Islamic and conventional investors, the International Monetary Fund said in a recent working paper.

“The cross-fertilisation between the two systems has led institutions…to pioneer several groundbreaking initiatives in different fields of Islamic finance," the paper noted.

But for many policy-makers outside of Islamic regions, Islamic finance is “uncharted territory” and the key to the sector's continued development is the formation of a comprehensive regulatory framework, said conference manager Swati Taneja of forum organisers IIR Middle East.

There are a number of authorities that play an important role in leading multilateral initiatives in developing the sector. Among them are: the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the International Islamic Rating Agency, the International Islamic Financial Market (IIFM) and the Islamic Liquidity Management Centre.

Among those taking part in the Islamic Finance Forum Europe debate on regulatory authorities at the will be Jamie Orchard, Chief Operating Officer and Managing Director Legal and Regulatory for the Qatar Regulatory Authority; Ijlal A Alvi, Chief Executive Officer of the IIFM, Bahrain; Hari Bhambra, Independent Consultant, Dubai International Financial Centre, United Arab Emirates; Dr Natalie Schoon, Head of Product Development, Bank of London and the Middle East, UK; and Khairul Nizam, Director – Technical Development, AAOIFI, Bahrain.

With growing demand from the Muslim population of Western countries and the continuing trend of Arabian Gulf investors to look overseas to diversify portfolios, conventional banks are showing more interest than ever in Islamic finance.

However, sometimes the supervisory agencies overseeing them are not entirely familiar with all the principles governing Islamic banking. Additionally, because in each country supervisory boards rely on their own Shariah scholars, financial products that are permissible in some countries can be deemed non-Islamic in others. However, such conflicts can be reduced if new Islamic finance markets familiarise themselves with AAOIFI guidelines and apply them.

“The degree of success to which Islamic banking continues to emerge in conventional systems will hinge on whether Islamic banking is perceived as a transparent and well-regulated activity,” said Taneja.

The International Islamic Finance Forum will also be exploring the expansion of Islamic finance in Europe; the pressing issue of Islamic finance and rating agencies; new strategies in wealth management and private banking; and sustainability in Islamic financial products.

With more than 40 speakers, over 20 sessions and two interactive workshops the Europe forum maintains its importance as the Islamic finance industry’s premier networking event. The Zurich event takes place in association with Dow Jones Indexes and with ILIC as diamond sponsor, International Turnkey Systems as platinum sponsor, Path Solutions as gold sponsor, Tradenet and Reuters as silver sponsors and Vinson & Elkins as law firm partner.

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