THE OFFICIAL OPENING OF THE 7TH EXPERT-LEVEL MEETING ON ISLAMIC BANKING JULY 27, 1992

We are indeed honoured to host this 7th Expert-Level Meeting on Islamic Banking organized by the International Association of Islamic Banks. This meeting acquires special significance amid the frantic changes in the international financial scene. While we are gratified by the increasing acceptance of Islamic banking among Muslims and non-Muslims alike, we must brace ourselves in the face of the manifold challenges in the world economy. The changes, some of them unprecedented, in the world of international finance since the mid-1980s have been swift and sweeping. Conventional banking itself is taking new shape with the mushrooming of new financial instruments related to securitization. We cannot remain oblivious to these changes.

Islamic Banking, if to become truly viable, must be able to compete in the financial market place. Granted we have our own agenda to comply with the requirements of the Shariah; this must not become an excuse for inefficiency, rigidity and conservatism. If at all we are to demonstrate the dynamism of the Shariah, then this Shariah-guided banking practices must be able to respond positively to the hectic pace of change within the sector. Islamic Banking must be able to compete in providing financial services to their customers and carve its own niche in the market place.

We are justifiably proud of the success of Islamic banking. There are now more than 70 Islamic financial institutions operating in some 45 countries. In Malaysia, not only is Bank Islam an established and flourishing entity, but we have also been receiving persistent requests from conventional banks to operate Islamic counters. The introduction of an Islamic bank gives Muslims the choice in fulfilling their banking and financing needs and in transacting their businesses in the manner they deem fit according to the requirements of the Shariah.

This success, and other factors, including pious sentiments, have encouraged the call for further implementation of the Shariah and for the establishment of institutions carrying Islamic labels. This issue has given rise to much confusion and must be addressed rationally. Surely mere labels are not the criteria for Islamicity. Justice, fairness, transparency, efficiency are fundamental questions to be addressed. Unfortunately, these values have never been given sufficient emphasis in the discourse on the subject. But they do not deserve the opprobrium merely because they do not carry names that sound Islamic. What is important in evaluating these institutions is whether they serve the interests and needs of the ummah -- to eradicate poverty, to provide education and employment, and generally to improve the quality of their life and their well-being.

There are those among us who charge, in the frenzy of enthusiasm, that those who differ with them in this issue, are turning their backs on Islam. Against these people we do not have to be apologetic. Indeed it requires tremendous moral courage and intellectual honesty to make a giant leap from slogan mongering to a rational discourse on substantive issues.

This confusion is but an extension of the general malaise of the ummah. Thus, it is time for us to reflect in all honesty on the problems of Muslim society. I think, we have not even begun to address seriously the most urgent issues confronting the ummah. We have yet to focus our attention on efforts to create wealth and promote economic development in some of the most underdeveloped Muslim countries. Muslims in Sub-Saharan Africa and some parts of Asia are the worst afflicted by famine, disease and extreme poverty. We have not been able to mobilize savings from the richer Muslim countries to be effectively channeled to provide the much needed capital to finance economic development in poorer countries.

The desperate plight of the hard core poor among the Muslims cannot but prick our conscience. In many parts of the Islamic world, grinding poverty is still a condition of life, where more than a billion people live on less than US$1 a day. Life expectancy for the poorest 10 per cent of the population is 20 years shorter than the richest 10 per cent. It will be a grave moral indictment of the leadership, be it political or intellectual, of the contemporary ummah if it cannot lift a finger to alleviate their suffering. What could be more urgent than to formulate strategies that could build the momentum for economic take off in the poor Muslim countries? It is the process of wealth creation that will provide some hope to liberate millions of Muslims from the vicious cycle of poverty. The enormity and gravity of the situation requires that our minds be constantly focused on these real and urgent issues.

Developmental experience has taught us that poverty is a very complex phenomenon. Apart from the objective factors contributing to poverty, such as scarcity of capital and expertise for development, the presence of subjective factors, such as negative values and attitudes, and rigid social practices, compounds the problem. Thus, unless we are prepared and determined to confront these factors, both objective and subjective, the enormous distance separating the desperately poor sector of the ummah and the global community at large will further widen. This is certainly a deplorable situation in view of the immense natural wealth in the hands of the Muslims as a whole.

Human resource development in most Muslim societies is far from satisfactory. More than 100 million children lack access even to primary education. In some countries, the education of women is totally neglected. Much of the failure to adequately develop the human potential is attributable to insufficient investment in education and training. Even if we had adequate capital we would not be able to initiate the development process without the accompanying human capital. It is also true that the development of human capital can even compensate for the scarcity of physical capital.

This meeting, I believe, in order to be truly meaningful and relevant to the ummah, must transcend technicalities. In implementing Islamic principles in banking and finance, we must address substantive issues rather than be kept pre-occupied by terminology and semantics. Muslim bankers must devise strategies and coordinate plans to mobilize the resources of the ummah. In this regard, we would like to see greater collaboration and exchanges among the existing Islamic financial institutions. This will not only facilitate the movement of capital but also expertise. With the growing acceptance of Islamic banking and, in the case of Malaysia, the requests for operating Islamic counters, we need to train more competent professionals for the Islamic banking industry. On that note, I have the great pleasure to declare this meeting open.

Thank you.