THE OFFICIAL NEWSLETTER OF THE WORLD CONGRESS OF ACCOUNTANTS 2010
SEPTEMBER 2010
GOLD SPONSORS
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Growing significance of Islamic Finance The announcement by Thomson Reuters that it plans to launch an Islamic Finance (IF) internet portal in 2010 is a clear affirmation of the commercial significance to the global economy of the growing interest in IF and banking. It confirms the attraction of a market estimated at between 1.5 billion and 1.8 billion Muslims globally. Financially, the market is valued at £800 billion while forecasts of annual growth are between 15% and 20%. But the establishment of Islamic financial products by big Western banks and financial institutions also offers a strong ethical dimension to non-Muslim participants seeking a possible alternative to a financial system. Suggestions that the sub-prime crisis could not have taken place under the Islamic system resonate strongly with some commentators and it is not too difficult to understand why. IF is characterised by an ethical system, under which both an overriding ethical fairness, and sharing of risk must be present. Profit is a vital element of Islamic business dealing but it must be derived from trading activity. Profits derived from uncertainty are off limits. Therefore, it can be argued that toxic debt of the kind that triggered the global credit crunch simply could not occur within the Islamic system. But there is a drawback for both customers and providers. Few individuals have the skills necessary to understand the requirements for Shariah compliance, the complexities of Islamic commercial law and the technical Arabic terminology, which is unique to this financial sector.
Establishing Islamic financial products requires ratification from Muslim scholars at the highest level and the ultimate issue of a fatwa to that effect. Outside Kuala Lumpur, the Malaysian capital, London is regarded as an innovative global hub of Islamic financial expertise, with a number of institutions, including HSBC Amanah and Islamic Bank of Britain, involved and with professional firms such as Linklaters, Lovells, PricewaterhouseCoopers and BDO providing advice. Eddie George, the former governor of the Bank of England and the Government have been pioneers of IF in Britain, offering significant support but demand for professional skills is almost certain to outstrip their availability as the market grows. Products available include home loans, takaful (insurance), current accounts and commercial investment structures. For example, investment loans for residential property. Soon, it is expected that Britain’s will be the first Western government to provide sukuk (bonds). But the market challenges remain very real. There is widespread unfamiliarity with the market, coupled with little expert media coverage. Add to this a limited product range and the lack of skilled IF specialists and the issues are clear. As the market continues to grow, there is a real opportunity for London and the UK to restore its reputation as a financial centre of excellence in the area of ethical IF. But there is an equally urgent need for greater understanding and more finance professionals with the necessary specialist skills. • The above article is by John Willsdon, a leadership and development specialist at the Chartered Institute of Management Accountants.
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CONGRESS THEME: ACCOUNTANTS: SUSTAINING VALUE CREATION
The WCOA is held under the auspices of the International Federation of Accountants (IFAC). Since its inception in 1904, the World Congress has been held every five years since 1977 and every four years since 2002. It is the foremost international event for the accountancy profession. This is a highly respected and well-attended global forum attracting influential communities to share and debate important issues affecting the accountancy profession now and into the future.
Professional accountants operate in all facets of the global economy creating value and upholding business integrity in both the private and public sectors. In a world demanding short term solutions, professional accountants are challenged to sustain long term growth. Accountants lead strategic teams and are charged with creating value and safeguarding assets. They are an important part of organisational governance, and provide regulators and society with assurance that business has operated to the highest standards. This World Congress will explore issues related to key areas that directly and indirectly affect the continued relevance of the professional accountant in the coming years.