Islamic social banking instruments need a bigger global stage

Instruments such as waqaf, zakat, charity and qard hasan have made a great impact in poverty alleviation

THE Islamic social banking instruments need to be expanded globally as they have the potential to build a strong and sustainable financial architecture in the future.

Deputy Finance Minister Datuk Amiruddin Hamzah said instruments such as waqaf (endowments), zakat, charity and qard hasan (non-interest loan) have made a great impact in poverty alleviation and the enhancement of social and economic development.

“The present state of human lives in today’s world realises the enormity of hardships facing individuals at all levels. In fact, about 29 countries in the world cannot afford even half the investment needed in health, education and social protection.

“This reflects the importance of invigorating social banking, especially in terms of Islamic social banking and finance.

“The main objective of banking and financial services is to contribute to the development and prosperity of the people and planet today and in the future,” he said at the International Shariah Scholars Forum (ISSF2019) in Kuala Lumpur (KL) yesterday.

Amiruddin added that while social banking has flourished in some jurisdictions, the next phase of development requires bringing it into the global mainstream.

“The need for social banking is deeply desired throughout the world. Its historical development of social banking and finance has been traced back to the 16th century.

“So, it is time for Islamic finance stakeholders to take charge of the challenge and incorporate Shariah principles and its moral directives in the conduct of business into banking and finance services.

“I believe its salient features encompass universality, comprehensiveness and ease for the entire humanity,” he said.

Amiruddin stated that the central bank has issued guidance documents on value-based intermediation which aim at supporting Islamic banks to contribute to social banking.

Meanwhile, the forum also witnessed the signing of a collaboration agreement between FWD Takaful Bhd and ISRA Consultancy Sdn Bhd (ICSB).

The agreement will pave the way for an investment of RM1 million in research, feasibility studies and development of a user-friendly booklet to explain takaful in simpler terms.

It also includes an in-depth feasibility study with the aim of establishing Shariah-compliant Micro Family Takaful plans for individuals in the low-to middlelevel income category in Malaysia.

FWD Takaful CEO Salim Majid Zain said he wants to improve takaful protection for Malaysians especially for those in the B40 (bottom 40%) income group as they require it the most.

“The investment towards this collaboration shows our commitment to the development of the takaful industry including activities to introduce more innovative and inclusive products, as well as growing talent.

“The booklet will be published in multiple languages to educate the public on the various aspects and importance of having takaful coverage from the perspectives of Shariah, risk coverage, as well as market conduct and obligations,” he said.

All FWD Takaful staff will also benefit from the collaboration through a series of tailor-made training sessions conducted by ICSB that cover various aspects pertaining to Islamic finance and Shariah.

As a leader in Islamic finance, ICSB said this is an opportunity to bring research into application with a win-win solution for the benefit of all stakeholders.

Source: The Malaysian Reserve (1 Nov 2019)