Islamic finance is emerging as one of the main tools for further economic development in the Mediterranean region, a panel of experts said on Friday.
Speaking at the 3rd Mediterranean Islamic Finance Forum which took place at the 9th Mediterranean Week of Economic Leaders in Barcelona, experts said that Islamic finance provides an alternative source of funds that could help financial institutions broaden their sources of funding.
Experts in the banking sector at the forum said that, although the volume of Islamic finance has grown steadily, there are many challenges for Islamic finance, including the deteriorating global economic environment, lack of product awareness in the industry, technology risk, liquidity risk and legal and tax issues.
Marcos Eguiguren, Executive Director, Global Alliance for Banking on Values which was established 7 years ago by several global banks, said no economic activity including banking make sense if it does not have serving people and society as its main goal.
"Islamic banking is based on values. We should build bridges between value-based and Islamic banking," Eguiguren said.
Pablo Moreno, head of Financial Organizations and International Relations of the Spanish Central Bank, said Islamic finance has grown 5 percent since 2008, faster than normal banking.
"Islamic Finance is useful for infrastructure finance and for financing small- and medium-sized enterprises (SMEs). Spain is highly dependent on SMEs for employment and growth. We face challenges in financing them, and, despite many attempts by EU to help, it is still not enough," Moreno said.
Moreno said there are regulatory challenges for Islamic finance. "There is need for greater harmonization of regulations that govern Islamic finance around the world," he added.
Sheikh Bilal Khan, founder of Dome Advisory, said that the ethical values of Islam are universal values. "Today we should have values in our finance as does Islamic finance. "Today's banking has suffered from its concentration on debt-based banking. Islamic finance is based on equity," he said.
Experts estimate Islamic finance currently manages assets of $2 trillion globally, and that amount is projected to increase to $6.5 trillion by 2020.
However, the decline in oil prices means that governments and companies in the Middle East -- which represents about 40 percent of Islamic finance in terms of assets -- will have less to invest in Islamic financial products, according to a report by credit agency Standard & Poor's (S&P) released on Oct. 19.