World Congress of Accountants views Islamic Economic Model more Sustainable

Most accountant professionals from different parts of the world at the World Congress of Accountants (WCOA 2010) held at Kuala Lumpur has concluded that the Islamic financial system was more resilient to the meltdown registering growth. During the second plenary session on “Islamic Finance: Strengthen the Global Financial Market” many speakers favoured the Islamic economic model over the Western one.

Bernama reported about 6,000 delegates from 124 countries was understood to have turned up for the WCOA meet which was held between Nov 8 and 11. The four-day event is organised by the International Federation of Accountants and the Malaysian Institute of Accountants.

Gatehouse Bank chief executive officer Richard Thomas said the world financial system generally favoured debt-related products to equity products, and this would promote financial instability. “The Islamic economic model has more balance as it has more equity products and should be a safer economic model for the world,” he told in a media briefing at the side-lines of the conference.

Thomas pointed out the Islamic financial market also needed regulators to give equity-related products the same tax advantages as the debt-related ones. The market recorded faster growth compared to any other financial system although it still lacked instruments and infrastructure, he added.

While Paul Wouters, counsel of Bener Law Office Istanbul (Turkey), stated the Islamic finance would serve as an alternative economic model as it had fewer bubbles and burst, unlike the Western-style economic model. “The conventional market deals with financial debt trading. It creates financial instrument securitisation debts. It also creates several layers of finance that were built of nothing but just re-packaging,” he said.

Besides Wouters apprised Islamic finance allowed securitisation of debt and asset but not the layering. He summed up - that was why balloons would normally never happen in Islamic finance.

Etsuaki Yoshida, deputy head, Africa and the Middle East, at Japan Bank for International Co-operation, however expressed the Islamic finance in the market still lacked liquidity as well as hedging tools.

The global Islamic financial market is estimated to be worth $230bn, with an annual growth rate of 12 to 15 per cent. Islamic funds in global financial institutions are said to be worth $1.3tn.

By Jose Roy