KUALA LUMPUR: Islamic finance is set for a turnaround post COVID-19, spurred by several factors including digitalisation, said an industry expert.
Islamic Corporation for the Development of the Private Sector (ICD) chief executive officer Ayman Sejiny said the pandemic has accelerated the development of digitalisation across Islamic banks as well as Islamic financial technology (fintech).
"With most countries experiencing lockdowns, banks and financial institutions that still heavily relied on branches to operate were forced to embrace digital tools and innovation solutions. Indeed, digitalisation will continue to play a significant role in the coming years by improving access to financial services and transforming the industry.
"Digitalisation can increase utilisation, streamline processes, reduce costs and increase transparency for Islamic financial institutions more competitively than conventional forms," he said in his presentation, 'Islamic Finance Challenges and Opportunities Amid COVID-19 Pandemic', at the 16th Kuala Lumpur Islamic Finance Forum (KLIFF) held virtually, today.
He added that despite some setbacks, the COVID-19 outbreak has led to growth in the Islamic finance industry in some areas by accelerating trends such as socially responsible investing and a stronger focus on social sustainability.
"For example, the impact of COVID-19 presented a window of opportunity for the Islamic capital market sector, particularly regarding the issuance of sovereign sukuk as a part of the government's strategy to diversify its funding for financing fiscal deficit and to meet the fiscal requirements for combating COVID-19.
"This will thereby provide a basis for liquidity and an active market. These instruments are suitable in some cases for meeting the requirement for Shariah compliance and high quality liquid assets," he said.
Ayman pointed out that countries like Malaysia and Pakistan issued sukuk to mitigate the economic impact of the pandemic.
"As a note to suitable and sustainable green development, Indonesia also issued a US$2.5 billion Wakala global sukuk, one of which was US$750 million green sukuk, earmarked for sustainable development projects.
"The Islamic Development Bank raised US$1.5 billion with its first ever sustainable sukuk to help in the recovery from COVID-19 of its member countries," he said.
He said instruments such as social sukuk could help support the education and health care system, as well as attract environmental, social and governance investing.
Ayman added that there were also opportunities for the re-emergence of certain tranches of Islamic instruments such as waqf and zakat which could play a role in reducing the impact of Covid on the most vulnerable segments of the population in poor countries.
-- BERNAMA
Bernama
Wed Mar 10 2021
Ayman Sejiny said the pandemic has accelerated the development of digitalisation across Islamic banks as well as Islamic financial technology. Unsplashpic
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