Islamic Banks Consider their Role in 21st Century
As the dominant financial service center in the Middle East, Bahrain is home to a large community of on-shore and off-shore banking institutions, and insurance and investment houses. It also boasts the largest single concentration Islamic financial institutions—banks that manage their operation according to the tenets of Islamic law.
The development of Bahrain’s banking and finance complex took place over a period of 25 years, during which the island state was transformed from an economic backwater into a financial powerhouse, with offices of more 200 financial institutions from around the world. The rise to prominence of the Islamic banks took place against that backdrop, and can be attributed in part to the joint efforts of the Islamic Development Bank and the Fiqh Academy.
But now Bahrain—and in particular its Islamic banking sector—is faced with the challenges of the 21st century, where globalization, e-commerce, and low cost communications such as the Internet will be the key players. It is inevitable that the banking and financial sectors will undergo significant metamorphoses, instigated in part by rapid communication and data transfers between international institutions, and extended and modernized customer services.
The Islamic financial institutions will be faced with increasing global competition in their own marketplaces. At the same time, they will be better equipped to reach for new clients around the world, thus expanding the niche-market for Islamic financial banking. Increasingly, geographic is becoming a secondary factor.
But in a global market there is more at stake. Financial institutions around the world need to learn from one another— and cultivate and explore ideas on an international level. With the implementation of the WTO accords, including those on financial liberalization, this is no longer a luxury but a necessity. Officials at the Islamic banking institutions are increasingly aware that must harness technological advances so as to fully utilize their financial potential. Their aim must not be to solely market to Muslim investors and businessmen, but also to allow for interaction between Muslim and non-Muslim countries, communities and financial markets.
In Bahrain it is becoming progressively more apparent that the Islamic countries must focus on adapting to global financial changes, so as to sustain economic strength and prosperity in the Middle East. For the Islamic banks, the challenge will be the modernization of financial activities, while at the same time not compromising the beliefs of Islamic Shariah – (Albawaba-MEBG)