(MENAFN- The Peninsula) Qatar, a big player in global Islamic finance, has called for a global regulatory framework for the industry, saying it is needed to ensure the sector's stability.
"We need a regulatory and monitoring authority for the growing world Islamic banking and financial industry," said the head of Qatar's banking regulator.
An important task of the authority would, naturally, be to collect data on credit risks of Islamic financial institutions so that those risks could be identified, said the Governor of Qatar Central Bank (QCB).
There are certain high-risk areas in the Islamic banking and financial sector and they, for example, include real estate and consumer lending to certain categories of people, H E Abdullah bin Sauod Al Thani said.
Islamic financial institutions may face problems in attracting liquidity due to a lack of product diversification, he warned. "Risks increase considerably in the absence of adequate product diversification."
Efforts have indeed been made to diversify Islamic financial products, but they are not enough. Diversification is the need of the hour particularly as the needs of big-time global investors must be met. "What is needed is innovation and that Islamic financial institutions stick to the basic tenets that are their guiding principles. They must not digress," Sheikh Abdullah said.
He was speaking at the Institute of International Finance Conference - a two-day event - which concluded here yesterday.
The assets of world Islamic banks are estimated at a staggering $1.8 trillion, said the Governor. In Qatar four Islamic banks control over 25 percent of the country's banking assets.
He said that aside from the four Islamic banks (the first, Qatar Islamic Bank, having been set up in 1982), there were Islamic financial services institutions as well that were Shariah-compliant.
About Islamic bonds (sukuks), the QCB chief said that they grew at an annual rate of 40 percent between 2005 and 2012 but the pace was slowing down now due to slackening demand.
Islamic banks must use their strong liquidity positions to look and expand to areas such as Africa where they can provide a financial alternative and help sustainable economic development efforts.
Investment gaps in the African continent are about $41 billion a year, the Governor said.
Falling oil prices did not bode well for the world economy, he said. And as the dollar has been firming up the demand for crude has been going down. Shale petrol has affected supplies.
About the world economy, the QCB boss said that it continued to suffer from a slowdown in growth. Last year the average growth was 2.7 percent.
Despite the improving US economy, the fall in jobless rate to 5.5 percent there did not bode well and the world economic slowdown may eventually affect the US economy as well.
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