Islamic finance and banking must be developed as an alternative to the discredited Wall Street model of doing business, the World Islamic Economic Forum resolved as it wrapped up Wednesday in Indonesia. More than 1,550 delegates including prime ministers, presidents, princes and sheikhs from 38 countries issued a declaration calling on the Islamic Development Bank (IDB) to take the lead in promoting Islamic finance.
They also called for "effective regulations" in the conventional global financial industry to "mitigate risk and failure" in the aftermath of the Wall Street collapse triggered by a credit crunch in the US housing sector. The declaration expressed support for the IDB Task Force for Islamic Finance and Global Financial Stability to "promote Islamic finance and banking as a viable alternative to the conventional financial system."
It also called on "governments and Islamic banks to expand sharia (Islamic) compliant micro-credits" to small businesses in the developing world. "The declaration has a host of policy recommendations that, if implemented widely, would enact real change within the Muslim and non-Muslim world," World Islamic Economic Forum Foundation chairman Tun Musa Hitam said.
The fifth Islamic economic forum opened in Indonesia, the most populous Muslim country and the largest economy in Southeast Asia, on Monday. Other items on the agenda included the "global food crisis" triggered by last year''s price spikes and falling production, alternative energy and the future of fossil fuels.
The delegates included corporate leaders from 87 companies as well as governmental and non-governmental organisations. More than three billion dollars worth of agreements were signed on Monday, organisers said. The final declaration also contained a call to maintain the momentum for free trade in the face of protectionist tendencies triggered by rising unemployment and the global economic turmoil.
It urged the "reduction of regulatory barriers including food subsidies hindering sustainable food production and trade" and stressed the need for a "proper balance" between food production and crops used for biofuels. "The worst thing that anyone can do is become protectionist and thus invite protectionist retaliation in a trade war in which everyone will emerge a pitiable loser," Indonesian President Susilo Bambang Yudhoyono told the forum in an opening address on Monday.
Malaysian Prime Minister Abdullah Ahmad Badawi blamed "unbridled greed" for the global financial meltdown and called for a new financial system to replace the Wall Street model. "We have inherited a system where people can trade what they do not own and the resulting inflationary pressure in the global market has caused immense damage to the economic well-being of the world''s poor," he told the forum.
"Such is the impact of unbridled greed in the financial system where there is no accountability on money lending.... The world is beginning to appreciate the need for alternative financial arrangements." He said Islamic finance - which shuns interest and avoids profiting from industries such as alcohol and gambling - was "gaining credibility as an alternative." The forum will next meet in Kuala Lumpur, Malaysia, on May 18-20 next year.
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