
The Islamic Finance Conference (IFC) 2019 themed as ‘Emerging Trends in Islamic Finance’ was held on 9th December 2019 in IBA auditorium Karachi in collaboration with the Islamic Finance Society and Academic Partners ,ISRA,INCEIF and LUMS.Mr Ahmed Ali and Ms Irum Saba were the main proponents 0f the conference.
S&P Global Ratings Views on Islamic Finance in 2019-2020
S&P Global Ratings believes the global Islamic finance industry will continue to expand slowly in 2019-2020. However, inclusive standardization, financial technology (fintech), and opportunities related to the industry’s social role can help to accelerate growth in the next few years. What this social role means? They are to make it conform to macro objectives of the countries i.e to play its dominant role in growth of country and to alleviate poverty through creating job opportunities, enhancing effective role of education and health facilities.
- In particular, standard Sharia interpretation and legal documentation can simplify sukuk issuance and increase its appeal for issuers, while leaving some room for innovation.
- Fintech could stimulate growth by making transactions quicker, more secure, and easier to implement.
- The social role of Islamic finance can unlock new growth opportunities as core markets would implement the U.N. Sustainable Development Goals, and issuers and investors become more sensitive to environmental, social and governance (ESG) issues.
S &P strongly believe that the Islamic finance industry will continue to grow slowly in 2019-2020. It expanded by about 2% in 2018 compared with 10% the previous year,, with strong support from the sukuk market. In 2017, most of the growth stemmed from jumbo sukuk issuances in some Gulf Cooperation Council (GCC) countries, but this was followed by an about 5% reduction in issuances in 2018.
In 2019, we do not expect the market to fare much better given the significant volatility in key parameters such as oil prices and geopolitical risk. The growth of banking assets has also slowed down in almost all core Islamic finance markets. Of specific note, Turkey and Iran lead the decline under a trend that we expect will continue in the next 12-24 months. Malaysia, Indonesia, and the GCC countries are among the few sources of industry growth. As the economic cycle might turn at some stage, we believe a low-single-digit growth rate over the next two years and that is a fair assumption.
For faster growth standardization comes on top. We define this as the standardization of Sharia interpretation and legal documentation that factors in the requirements of all the stakeholders. For issuers, inclusive standardization would mean less complexity and time needed to put together their sukuk and tap the market. Ideally, an issuer would be able to take a set of standard legal documents, plug-in its underlying asset, and go to the market. The process should be equivalent from a time, effort, and price perspective to issuing a conventional bond. For investors, inclusive standardization means the capacity to understand the risks related to their instruments and avoid situations where they lose money because they, or any other stakeholders, have interpreted the legal provisions of sukuk contracts in a specific way. For Sharia scholars, inclusive standardization means factoring the requirements of the market and creating some room for innovation. The different standard setters of the industry–the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Islamic Financial Service Board (IFSB) and the International Islamic Financial Market (IIFM)–are working together to advance this agenda. We believe that regulators, sukuk issuers, and investors should also have their say, and a more inclusive consultative process can help the market move forward more quickly. This process would ultimately lead to the standardization of the full spectrum of sukuk–from fixed-income to equity-like instruments.
Market participants typically see fintech as a risk for the financial industry, but we think fintech could also help unlock new growth opportunities through the faster execution and better traceability of transactions. We believe that fintech could help the industry in four ways: Ease and speed of transactions. This is particularly true for payment services and money transfers. Islamic finance industry players can benefit from the possibilities fintech and other innovations offer to enhance their services and attractiveness. Technology could also reduce costs, allowing the redeployment of staff to higher added-value operations. Using blockchain could help reduce the industry’s exposure to risks related to transaction security or identity theft. It could also disrupt the way sukuk are issued and managed. Block chain could resolve three challenges related to sukuk issuance and management: The traceability of underlying assets, which would help investors to better understand the risks related to sukuk in their portfolios. The traceability of cash flows, which would help issuers to implement prompt corrective actions if one of the underlying assets under performs. The traceability of investors, which together with smart-contract protocols could create faster and even out-of court, resolutions for sukuk disputes. Fintech can also help the industry broaden its reach and tap new customer segments currently excluded from the banking system. For example, mobile banking for clients in remote areas, or the provision of products such as crowd funding for affordable housing or small and midsize enterprises (SMEs), could provide new growth prospects. However, this assumes access to a minimum amount of physical and nonphysical infrastructure. Regulatory technology can help the Islamic finance industry with more robust tools to achieve compliance with regulations and Sharia requirements, assuming agreed Sharia standards are in place. It could also minimize the reputation risk related to a potential breach of Sharia requirements, and free up Sharia scholars to focus on innovation.
On the governance side, Islamic banks and instruments are typically subject to an additional layer of governance compared with their conventional counterparts. This typically comes in the form of approval by Sharia boards, which ensure the conformity of these products with Sharia at any point during their life cycle. However, for now, this additional layer of governance has not enhanced market discipline vis-à-vis Islamic financial institutions and instruments. This is because there is currently very limited recourse to external Sharia audits and the publishing of the audit results. We believe the social aspect has been cast somewhat to the back seat. The underlying principles are socially focused and a number of instruments already exist, but they have not been leveraged in modern Islamic finance in a transparent, systematic manner. This may be because Islamic banks, as issuers themselves, do not appear to focus on their own social performance. From the perspective of financing activities, the lack of visibility of the ‘S’ factor is underpinned by Islamic banks’ commercial interests, including financial performance, and is not because of a lack of instruments or products. Indeed, socially responsible products do exist in Islamic finance and their size is reportedly substantial. These products could make a difference when it comes to socially responsible financing. We think a proper governance framework for their use will be required to reach this objective. Because the amounts are high, users can be tempted to divert these instruments from their original purpose. How Will These Factors Affect
Our Ratings in Islamic Finance- We believe fintech will have only a marginal influence on our Islamic bank and sukuk ratings over the next two years. We consider that Islamic banks will be able to adapt to their changing operating environment through a combination of collaboration with fintech companies and cost-reduction measures. We also believe that regulators across the wider Islamic finance landscape will continue to protect the financial stability of their banking systems. Furthermore, we think that blockchain could help the operational management of sukuk but will not induce any changes in the legal substance of the transactions. We incorporate ESG considerations into our ratings and analytics of Islamic financial institutions and sukuk, in a similar manner as for conventional issuers and issues. For sukuk ratings, the ESG considerations would generally be reflected in the sponsor rating. For sovereign sukuk, for example, institutional quality and governance effectiveness is a key factor for the rating of the sovereign sponsor. Similarly, for banks, we do take into consideration deficiencies in the overall quality of a banking system’s governance and transparency in our Banking Industry Country Risk Assessment. The positive or negative effect could also be reflected in the individual assessment of a bank’s management and strategy quality, or through its potential exposure to losses on its financing or investment portfolios because of ESG-related considerations, such as climate change.
For Takaful companies, risks inherent to the insurance markets in which the company operates, or specific risks undertaken by the insurance company (such as exposure to climate change), are factored in the macro assessment of the insurance company.
Aparatos de balanceo: fundamental para el rendimiento fluido y eficiente de las maquinarias.
En el entorno de la innovación contemporánea, donde la eficiencia y la confiabilidad del sistema son de máxima importancia, los aparatos de equilibrado cumplen un tarea esencial. Estos equipos dedicados están concebidos para calibrar y fijar componentes rotativas, ya sea en equipamiento productiva, automóviles de desplazamiento o incluso en aparatos caseros.
Para los especialistas en soporte de equipos y los técnicos, manejar con dispositivos de calibración es crucial para proteger el operación fluido y estable de cualquier dispositivo giratorio. Gracias a estas herramientas modernas modernas, es posible reducir sustancialmente las sacudidas, el zumbido y la tensión sobre los soportes, mejorando la duración de componentes valiosos.
También importante es el papel que juegan los aparatos de ajuste en la servicio al usuario. El soporte experto y el conservación permanente aplicando estos aparatos habilitan ofrecer soluciones de gran nivel, aumentando la agrado de los consumidores.
Para los dueños de emprendimientos, la inversión en unidades de balanceo y dispositivos puede ser esencial para optimizar la rendimiento y productividad de sus sistemas. Esto es particularmente significativo para los emprendedores que administran pequeñas y medianas organizaciones, donde cada punto cuenta.
Por otro lado, los sistemas de ajuste tienen una vasta utilización en el ámbito de la prevención y el gestión de excelencia. Posibilitan localizar potenciales errores, previniendo mantenimientos caras y problemas a los aparatos. Además, los resultados recopilados de estos equipos pueden utilizarse para optimizar procedimientos y incrementar la exposición en plataformas de consulta.
Las áreas de uso de los sistemas de equilibrado cubren diversas ramas, desde la elaboración de transporte personal hasta el supervisión de la naturaleza. No influye si se habla de importantes manufacturas de fábrica o reducidos establecimientos de uso personal, los equipos de ajuste son esenciales para proteger un operación productivo y sin detenciones.
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