Bismillahirrahmanirrahim. In the name of God, the most Merciful and Beneficient.
Excellencies, distinguished guests, ladies and gentlemen.
Assalamualaikum warahmatullahi wabarakatuh.
May peace be upon you.
- Let me start by extending my appreciation to the Securities Commission Malaysia and the Oxford Centre for Islamic Studies for inviting me to this SC-OCIS dinner in conjunction with the 6th SC-OCIS Roundtable on Islamic Finance.
- As the annual SC-OCIS Roundtables and dinners are held alternately in the United Kingdom and Malaysia, this is in fact the third dinner that is being held in London. But I am sure no one is complaining about this as this city that was founded as a communication centre by the Romans shortly after they invaded Britain and then known as Londinium, has not ceased to charm and attract all types of people from all corners of the globe, the tourists, the students, the artists, the professionals, the intellectuals, the ambitious and the wealthy. It is thus difficult to disagree with Samuel Johnson who says that when a man is tired of London, he is tired of living, for there is in London all that life has to offer.
- When I spoke at this dinner which was held at Lancaster House two years ago, I had said that the successful collaboration between SC Malaysia and OCIS which continued to grow from strength to strength was symbolic of the long-standing and excellent social, business and governmental relations between the United Kingdom and Malaysia.
- I am pleased to note that over the two years since, not only has the SC-OCIS collaboration been further strengthened but so has the relationship between the UK and Malaysia at the social, business and governmental levels. Tangible proof of this can be seen at many levels.
- When Mayor Boris Johnson visited Kuala Lumpur in December last year, he spoke at the Khazanah Global Lectures to a hall full of Malaysians and I was among those present. The Mayor remarked that many in the audience probably owned properties in London and were his taxpayers and he, their Mayor. I think he was probably right.
- A fortnight ago the Right Honourable Hugo Swire MP, the Minister of State, Foreign and Commonwealth Office was in Kuala Lumpur and he noted that Malaysia is the United Kingdom’s biggest market for transnational education and takes more United Kingdom qualification than any other country. Malaysia also has more United Kingdom Universities (Nottingham, Southampton, Heriot-Watt, Newcastle and Reading) than any other country. Epsom College Malaysia opened its doors last year bringing to Malaysia an institution with 150 years of United Kingdom heritage.
- Further it will be remiss of me as a spouse and father not to highlight the two very well-known London stores that are now in Malaysia – Harrods and Hamleys!
- Meanwhile the special place that London in particular and the United Kingdom in general, has in the hearts of Malaysians can be seen in the acquisition by a Malaysian consortium comprising two Malaysian public listed companies and our Employees Provident Fund, of London’s iconic Battersea Power Station for a re-development project worth in excess of 8 billion GBP.
- Malaysia’s government-linked investment companies, over the past couple of years, have also invested substantial amounts in properties in London and other parts of the United Kingdom. Since 2013, it is estimated that over 2.0 billion GBP has been invested. These are but a just a few examples of the ever strengthening ties between the people and governments of the two countries.
- In the Islamic finance space it is noteworthy that the Battersea Power Station Development project has secured a Shariah-compliant syndicated financing of 467 million GBP; one of the largest Islamic finance transactions ever conducted in the British market. I am particularly pleased to note the involvement of Malaysian Islamic banks in the transaction.
- Reflecting the close collaboration between Kuala Lumpur and London, the second meeting of the Global Islamic Finance Investment Group which was established by the United Kingdom Government, was held in Kuala Lumpur a fortnight ago jointly co-hosted by the Right Honourable Hugo Swire MP and the Governor of Malaysia’s Central Bank.
- Notwithstanding the flurry of activities and transactions in many parts of the world, in my view the defining event in the development of Islamic finance globally was the maiden issuance last year by the United Kingdom government of 200 million GBP sovereign sukuk. The issuance underscores London’s ability as an international financial centre, to successfully market a product that hitherto has only been offered by Muslim countries. It also reaffirms the United Kingdom government’s commitment to developing Islamic finance, and its ability to play a leadership role in this regard. It is noteworthy that the sovereign issuance by the United Kingdom was followed in quick succession by other non-Muslim countries – Hong Kong, South Africa and Luxembourg. That the United Kingdom sukuk was twelve times oversubscribed reflects the high level of acceptance and confidence among international investors of sovereign sukuk from non-Muslim countries.
- To me, the greatest satisfaction that can be derived from this successful sovereign sukuk issuance is the fact that it took place in an environment perceived to be increasingly hostile and suspicious of anything associated with Islam. It is heartening to note that global issuers, intermediaries and investors are able to see Islamic finance for what it really is and what it stands for. It is about ethics, integrity and accountability; it is about promoting risk sharing, encouraging entrepreneurship, promoting sustainable growth, and funding poverty eradication programmes, to name a few. Islamic finance is as much about micro-finance as it is about high finance. It is neither about terrorism financing, nor about money laundering. It is, according to Moody’s, a USD2 trillion market, set to grow to USD4 trillion by 2020 – growing annually at 15 to 20 percent.
- Tomorrow some of us will head to Ditchley in Oxfordshire where over two days we will deliberate on a topic that is relevant not only to Islamic finance but also to modern finance generally, that is Seeking Sustainability and the Role of Islamic Finance in Transformational Changes.
- It is not my intention to pre-empt the weekend’s Roundtable. However I wish to share with you my view that Islamic finance can effectively complement conventional finance to bring about a more equitable, inclusive and sustainable global financial system.
- At the very foundation of Islamic finance are its basic tenets namely the prohibition of speculation, the prohibition of uncertainty in contractual relation and the prohibition of usury. Additionally the concept of Islamic finance itself is based on the objectives of justice, fairness, cooperation, transparency and shared responsibility, ultimately to achieve rahmatan lil ‘aalamin or mercy for the whole world or universe – encompassing the whole eco-system of the present and the future. These basic tenets and objectives serve as both a compass and a clear boundary that prevents Islamic finance from growing a trajectory of its own that is not linked to the real economy. This has to some extent contributed to the industry’s resilience in an increasingly challenging environment.
- Second, Islamic finance is essentially based on profit and risk sharing. Islamic finance fosters sound, stable, sustainable and socially useful transactions which are closely linked to the real economy. This is achieved through participatory-based financing structures that incorporate both risk-sharing considerations and ethics. The principle of risk-sharing within Islamic finance promotes greater efficiency as it strongly encourages all parties involved not just to achieve the best possible returns but also better governance in order to ensure sustainability. Maximisation of profits must be accompanied by efforts directed towards achieving al-falah or ultimate happiness through ensuring that the public good is not sacrificed. The principle of risk-sharing, which underlies the preference for equity over debt in Islamic finance, also promotes greater sustainability. Many economists agree that a debt-based system is more vulnerable than a system based on equity and risk sharing.
- Third, Islamic finance is inherently inclusive. It is a fact that despite the pace of development of conventional finance, a significant portion of the world’s population remains excluded from or at the periphery of modern banking and finance. Without an inclusive financial system, sustainable and equitable economic growth cannot be attained. In this regard Islamic finance can serve as a catalyst to achieving financial inclusion. From the perspective of faith, Islamic finance – given especially the prohibition of usury – provides Muslims greater access to financing, savings and investment products and services. From a broader perspective, its underlying principles of fairness, equitable distribution and risk sharing promote a more facilitative avenue for individuals and institutions of varying capacity and size to participate in and have access to the financial and capital markets. This is further supported by other redistributive concepts including zakat, sadaqah and waqaf which facilitate the distribution and sharing of wealth to a wider segment of the population to help raise their financial capacity.
- Policymakers for the global financial system are now at a crossroads. It is widely acknowledged that the current system which has been proven to possess serious deficiencies will require material reinforcements to mitigate the risk of another major financial crisis in the future. The specificities of such reinforcements however are less clear. I wish to offer my view that the core principles and values underlying Islamic finance can and should be seriously considered by the policymakers as a viable complement or reinforcement to the still fragile global financial system that we are operating within currently. These principles and values are universally desirable and should therefore be acceptable. However, we must also recognise that strong commitment and coordination among the policymakers and other relevant stakeholders is required for this approach to achieve a positive outcome.
- I look forward to even more developments in relationship building between parties in the United Kingdom and Malaysia in the coming years. In particular I would welcome closer collaboration in the various areas of Islamic finance to create greater business opportunities, strengthen industry skill sets and enhance industry profiling. Given London’s position as a global financial centre, wider acceptance and adoption of Islamic finance here would contribute significantly towards the vibrancy and reach of Islamic finance not only in this part of the world but also globally. With that, I wish all of you a wonderful weekend ahead.