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Islamic banking not growing as expected: CBB Governor

Islamic banking industry has experienced a fragmented growth pattern in recent times and has failed to live up to the expectation from the Central Bank of Bahrain, its Governor said yesterday. Describing the industry’s progress towards ‘Maqasid-eShari’ah (objectives of Shariah) as being ‘painfully slow’, CBB governor Rasheed Al Maraj, said that the Islamic finance sector needs to take steps to ensure a thriving industry.

He was speaking to an audience present at the World Islamic Banking Conference held at Art Rotana yesterday. Hundreds of delegates people from around the world attended the conference. “Islamic finance is no longer an infant industry. Next year will be the 40th anniversary of the establishment of the first Islamic bank in Bahrain. Islamic finance has achieved size, scale, market share and customer attention in many markets around the world including Bahrain.

“But success is always a function of what you have achieved as compared to your expectations. And here, I have to concede that my expectations from the Islamic finance industry have not been met fully. “The progress towards Maqasid-e-Shari’ah remains painfully slow, which in my opinion should have been the single most important indicator of real success,” he said.

“With this backdrop, the economic slowdown as a result of lower oil prices since 2015 provides us an opportune time to do two things. One, consolidate and plug any gaps that we may have overlooked during the rapid growth period. “Two, reflect on what is needed next to usher in a new era of fast-paced growth. I will focus on the latter during my speech today,” he added. “Islamic finance has followed a fragmented growth pattern since the start with various countries in the Middle East and South East Asia taking the lead.

These country-specific models have achieved reasonable success as measured by the share of Islamic finance in the respective markets. “I would like to argue, however, that the reduced pace of growth suggests that we cannot hope for a new growth paradigm while maintaining the status quo. If the developments in the conventional finance industry are any indicator, it is reasonable to expect that regional and global cooperation can open new doors for the Islamic finance sector.