KUALA LUMPUR: Malaysia, as a leader and innovator in Islamic finance, can do more in exploring the Islamic principles to create a more cohesive financial system, says Dr Armen V Papazian, fellow of the Judge Business School, University of Cambridge, England.
“At present, across the Islamic world, not even a single of them is printing money based on Islamic principles,” said Papazian, who is also chief executive officer of Keipr, a boutique consultancy firm in the United Arab Emirates, during his presentation.
“Money is still created based on the conventional system,” he added, explaining that money at present was not only created out of nothing, but the instrument was backed by debts which bore interest rates – a violation of the syariah principles.
“But money does not have to be created out of nothing. It has to be backed by real activities, focusing on capability and real value creation by real people,” he said, proposing the use of Islamic principles in creating money.
“The alternative investments opportunities in the future are ones that engage real people and involve real activities,” Papazian said, arguing that that was what Islamic principles had been contending all the while.
“Fundamentally, it is based on people creating value through employment, which then pushes up aggregate demand in an economy, and then the stock market, which then makes the options work,” he said.
“We have to decide: Is our practice of Islamic finance merely for the product industry, or are we allowing it to evolve into a system,” Papazian told a press conference.
“If Islamic finance were to merely exist as a product system (such as sukuk), then it has to survive in a system that is not,” he added.
Papazian argued that Islam finance was now at a crossroad. It’s about going to the core of finance – money creation – and applying syariah principles on it, he pointed out, urging Malaysia to take the lead in applying Islamic principles to back the creation of ringgit.