A top UAE banker said on Sunday Islamic finance can be an ethical and sustainable business model in the global financial landscape in order to avoid a repetition of the financial crisis’ shocks.
Speaking on Bloomberg Television’s inaugural episode named ” Faith in Finance”, Tirad Al Mahmoud, CEO of Abu Dhabi Islamic Bank (ADIB), said conventional banks shall endorse the principles of Islamic finance as a non-interest, non-conventional and ethical style of investing.
According to global auditing and consultancy firm Ernst and Young, there are 390 Islamic financial institutions worldwide, based in 75 countries. Ernst and Young has estimated that Islamic investments will reach $1.2 trillion mark this year.
“There is enormous demand for ethical banking all over the world, especially in the aftermath of the global financial crisis. Global consumers do not want any more to lose their savings and sometimes even their pensions,” said Mahmoud.
The global financial crisis, which started with the downfall of US investment bank Lehman Brothers in September 2008, was mainly triggered by excessive high-yield lending, uncontrolled speculation and exploiting retail bank customers by putting their savings into risky investment vehicles.
ADIB, which is primarily active in retail and corporate banking, reported on 16 October that a group net profit for the nine-month period of AED958.5 million ($261.38 million), representing an increase of 21% year-on-year.
Based on Islamic law or Shari’ah, Islamic banks are not allowed to lend money against interest, nor are Islamic funds allowed to speculate with money by buying and selling shares on the same day. Investing into firms which produce un-Islamic goods like alcohol, pork meat, entertainment products or weapons are also banned under Shari’ah.
The top banker also noted that consistency of performance and not excessive outperformance shall be the ethical guidelines for global finance in the coming years.
“Shari’ah-inspired finance has brought discipline and high- ethical standards to banking,” Mahmoud said, adding that “we make money in a way that is transparent and far from being excessive… We make money when the client is able to perform and honor his contracts.”
“We don’t have a monopoly over these values, but we see a real value to promote them in the best interest of the banking industry all over the world,” Mahmoud said.