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Opening Remarks by the Secretary-General of the IFSB at the 14th IFSB Summit 2019 - Islamic Finance for Sustainable Development in the Era of Technological Innovations

Date posted: 26 November 2019

Date : 13 November 2019
Event / Venue : 14th IFSB Summit 2019 - Islamic Finance for Sustainable Development in the Era of Technological Innovations | Jakarta Convention Center | Indonesia
Speaker : Dr. Bello Lawal Danbatta Secretary General, IFSB

It is indeed a great pleasure and honour to welcome you all to the 14th Summit of the Islamic Financial Services Board, with special thanks and appreciation to H.E. Dr. Perry Warjiyo and Bank Indonesia (BI) for hosting this event and for welcoming all of us so warmly to Indonesia.

As a founding member of the IFSB, BI has been continuously and actively supporting the IFSB’s activities over the years, welcoming and hosting numerous meetings and events of the IFSB, and making valuable technical contributions to the IFSB’s working groups, task forces and reports. The latest of such cooperation was last year’s IFSB-BI joint seminar and workshop on Financial Inclusion and Islamic finance that supported the development of an IFSB technical note on Financial Inclusion. The IFSB also values a similarly strong working relationship with the financial services authority (OJK) of Indonesia. 

Indonesia’s remarkable potential for Islamic finance does not only stem from its large Muslim population, but can also be linked to the level of commitment shown by the country’s policy-makers towards the development of a suitable ecosystem for Islamic finance as part of the country’s Sharīʻah Economy Masterplan which in turn is an integral component of the Medium Term National Development Plan 2019-2024.

Your Excellencies,
Distinguished Guests, Ladies and Gentlemen,

[The IFSB’s Mandate]

Allow me to say a few words about the IFSB and how it serves its mandate and its stakeholders. The IFSB was established in 2002 to promote resilience, stability and soundness of the Islamic financial services industry in all its three sectors – Islamic banking, Islamic capital markets and takāful.

I would like to share with you three key aspects of the IFSB’s mandate. First, it is to issue high quality standards and guiding principles for the regulation and supervision of Islamic finance. We have issued 30 standards and guiding notes since our establishment and the IFSB’s standards are benchmarked against those of our international comparators, with whom we work closely – namely; the Basel Committee for Banking Supervision (BCBS), the International Association of Insurance Supervisors (IAIS), the International Organization of Securities Commissions (IOSCO) and most recently, the AIDI.

Our research programme, which is closely aligned with our core mandate, has so far produced 11 working papers, offering insights on several areas including Financial Safety Nets, consumer protection, Sharīʻah non-compliance risk and microtakāful, among many others. Our annual flagship IFSI Stability Report, which has been issued annually since 2013, offers developments and assessment of resilience of various segments of Islamic finance by tracking over 50 indicators. It has already become the most referred industry report in Islamic finance by the professionals, international organisations and business media.

Second, the IFSB has a vital mandate in building capacity in our member jurisdictions, in particular by assisting them to adopt the standards that we have issued through workshops, Technical and Policy Advice and other capacity building initiatives. 

And third, the IFSB serves as a platform for international cooperation on issues of stability and resilience in Islamic finance by taking advantage of its wide membership to strengthen cooperation amongst supervisory agencies, the private sector, and other stakeholders towards the common goal of enhancing the resilience and stability of Islamic finance. This Summit is a reflection of the efforts between the IFSB and its members. 

Our ‘Prudential and Structural Islamic Financial Indicators’ project, or “PSIFIs” is benchmarked against IMF’s Financial Soundness Indicators (FSIs). Through PSIFIs, the IFSB collects, reviews and disseminates quarterly data of Islamic banking systems of 24 countries on the IFSB website. We soon plan to do the same for the ICM and takāful sectors. We believe that this database offers the most reliable and consistent macro-level statistics for the Islamic banking industry.

Your Excellencies,
Distinguished Guests, Ladies and Gentlemen,


The theme for this Summit attempts to explore the future of Islamic finance. Economic challenges, environmental awareness and technological innovations are resulting in changes to our traditional understanding of how the financial industry should operate. Sustainability is a growing concern among investors, industry players and regulators. Investors, for example, now ask themselves whether their investments will contribute to food and water shortages, increased poverty, forced displacements, droughts and floods – all through rising carbon dioxide emissions. We have seen reports of a sharp rise in the number of investors dumping fossil fuel stocks due to its harmful effects on the environment. Profit, appears no longer the main driving factor for some investors’.1

Financial industry players, on the other hand, are becoming conscious of whether their assets’, and counterparties’, are influenced by risks arising from climate change. We are now also seeing some regulators beginning to explore introducing indicators into their regulatory frameworks to better capture climate risk exposures and vulnerabilities of financial institutions within their purview.

These developments have led to the emergence of several conceptual innovations and tools in the Islamic financial services industry. These include Waqf Initial Public Offering (IPO), Corporate ESG sukūk, Sovereign Green sukūk, Waqf based sukūk, socially responsible investing (SRI), and a few others. These news tools represent environmentally-friendly and commercially-viable Islamic finance instruments that, many say, are taking the industry from the “halal” phase to the “halal and tayyib” stage. There, however, needs to be a strong regulatory, supervisory and legal underpinning that facilitates the mainstreaming of these instruments. And we should not assume that the path is clear for SRI and similar concepts to gather and sustain momentum across the globe. After all, carbon assets do, in fact, represent a major component of economic activity and employment in certain countries. Therefore, a key consideration for regulators is the delicate balancing of financial stability objectives and the achievement of longer-term climate change targets.

Your Excellencies, 
Distinguished guests, Ladies and gentlemen


FinTech, a common, all-encompassing term describing technological tools that facilitate financial transactions, is now viewed as a tool not only for more efficient financial services, but also as a means to achieving financial inclusion objectives. For example, and since we are in Indonesia, only a few weeks ago, we have seen the world’s first block chain sukūk issued here in support of micro-SMEs and entrepreneurs. With the world having already successfully achieved the first Millennium Development Goal target of reducing poverty by half since the 1990, poverty remains a challenge in the Organisation of Islamic Cooperation (OIC) member states as over 23% of the OIC population lives below US$1.25 per day. 

While technology could certainly provide the means to reach the financially-excluded, it would present its own set of regulatory challenges, including determining the type of FinTech activities that would fall within the regulatory ambit, and the manner to deal with issues like cyber risk and money laundering. The element of Sharīʻah compliance is an added consideration for Islamic finance regulators.

Your Excellencies, 
Distinguished guests, Ladies and gentlemen

[The IFSB’s Role in Sustainability and FinTech] 

All these developments and opportunities have to be addressed and harnessed. And at the IFSB, we now take cognizance of these changes in our existing work stream. In our most recent publication, being an Exposure Draft on the Revised Capital Adequacy Standard, we consider cyber risk as part of operational risk for the purpose of capital adequacy. While in IFSB-22: Disclosures to promote transparency and market discipline for IIFS [Banking Sector], which was issued last year, the IFSB requires certain disclosures around how institutions offering Islamic financial services have integrated sustainability, or the ESG criteria, into their governance, financing and investment strategies; activities undertaken to reduce the IIFS’ carbon footprint; and activities relevant to the procurement of sustainably produced goods and services, among others.

In a previous exposure draft, and one of our soon-to-be-issued standards purely dedicated for financial inclusion, we devote a subsection to digital finance, addressing the topics of web-based platforms, data protection and cyber-security, among others.

We have also recently organised a successful forum, jointly with the International Centre for Education in Islamic Finance in Kuala Lumpur, specifically on the effective Utilisation of the Islamic Capital Market Instruments for Sustainable and Responsible Growth. So these issues have captured our attention. But there is certainly more to be done. We are still learning our way in a fast-changing environment.

Your Excellencies, 
Distinguished guests, Ladies and gentlemen


I would now like to conclude with the following observations: First, Indonesia represents a unique blend of commitment and action, with a clear target to accelerate the development of an Islamic finance ecosystem that forms an integral part of its national economy. The theme of this Summit is a remarkable match to Indonesia’s vision for Islamic finance.

Second, the IFSB is strongly committed to facilitating the development and sustainability agenda of the IFSI, through the development of robust researches and awareness programmes, and appropriately addressing emerging issues in our Standards and guidelines. 

Finally, and after a fruitful day yesterday in the pre-summit events, I look forward to a productive and though-provoking Summit in this beautiful setting that Bank Indonesia has welcomed us to. I would also like to take this opportunity to thanks all our strategic partners, sponsors, multilateral and media partners, invited guests, moderators and speakers, delegates, the dedicated team from BI, my able team from the secretariat and most importantly all IFSB members for their wonderful support for this summit. 

We now look forward with great interest to the outcomes of your deliberations during the next one and a half days, which we intend to publish as Summit Proceedings later this year.

Thank you and assalamu alaikum wa rahmatullahi wa barakatuh.

1  https://www.ft.com/content/4dec2ce0-d0fc-11e9-99a4-b5ded7a7fe3f 

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