PETALING JAYA: Islamic finance offers compelling reasons why it should be made a good part of the global financial industry, said the Sultan of Perak.
Sultan Dr Nazrin Shah said Islamic finance could drive economic growth while ensuring sustainability as it takes into consideration the well-being of society, prosperity as well as the environment.
“Islamic finance is also able to meet international prudential standards and investor protection expectations,” the Sultan said in a Special Address on Saturday at the Sixth Securities Commission – Oxford Centre for Islamic Studies (SC-OCIS) Roundtable.
The roundtable was held at Ditchley Park in Oxfordshire, Britain, with the theme “Seeking Sustainability: Role of Islamic Finance in the Transformational Change”.
In his address, the Sultan, who is the Royal Patron for Malaysia’s Islamic Finance Initiative, highlighted three current practices in the financial system that act as a serious hindrance in achieving sustainability: over-reliance on debt, dominance of self-interest and lack of values-based leadership.
With regard to over-reliance on debt, the Sultan said Islam strongly discouraged debt and preferred an equity-based model or contract, which can be applied to the broader financial system.
“Furthermore, the risk-sharing element of an equity-based contract promotes a more equitable relationship between the contracting parties that collectively becomes a more sustainable arrangement,” he said.
On the dominance of self-interest, the Sultan said it had become a key driver of economic behaviour, with profit being the primary consideration of most decisions.
“Islam views the management of the economy to be subservient to humankind and should be administered responsibly and prudently under the concept of stewardship.
“Greed and exploitation could thus be avoided, and decisions would be guided by values that could reap rewards even into the distant future,” he said.
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