By Charumini de Silva
Sri Lanka’s banking watchdog – Central Bank said that it will accommodate Islamic banking and finance within the existing legal and regulatory framework.
Central Bank Director – Bank Supervision Yvette Fernando said, “The Banking Act was amended in 2005 and still some of the provisions are being amended. As the regulator we are doing the necessary changes in a very prudent manner.”
She made these remarks at the first Islamic Finance news (IFN) Road Show held at the Hilton Colombo, recently.
“It certainly is a time consuming process because there is no way that we could amend the act over and over again. Nevertheless, Central Bank is closely looking into the broader and systematic perspective in doing these changes,” she noted.
Answering a question Fernando said, “We have never interrupted or tried to manage your business. Our role as the regulator is to facilitate and create a favourable environment for efficient financial intermediation.”
She further said that the Central Bank warmly welcomed the issues of Islamic banking and finance companies.
CIMB Islamic Bank Malaysia Executive Director and CEO Badlisyah Abdul Ghani sharing the Malaysia’s experience and success said, “Sri Lanka has taken the right decision in opening its windows to the Islamic banking and finance industry, where country is enjoying an impressive economic growth after a three decade war.”
“Nevertheless, it is very important to manage and regulate the Islamic banking and finance or otherwise it will collapse. Sri Lanka could learn from the Malaysian case study and build a good industry to have the maximum benefits to uplift the economy,” he stressed.
KPMG Sri Lanka Managing Partner and Country Head Reyaz Mihular said that there was much room for Islamic banking and finance products in Sri Lanka especially in the retail market.
“Banks and finance companies must come out with different products from grassroots levels to the corporate business level. There is much potential for micro takaful in Sri Lanka in the agriculture, fisheries and other SME sectors. Thus, we must endorse largely on the Islamic banking and finance retail sector. However, it is vital to have the regulatory framework in place to develop the Islamic finance and banking in the country,” he said.
He said Islamic finance and banking does not have to be restricted to Muslims only. Despite the small market proportion there has been a significant boom in the takaful segment during the past two to three years.
NDB Bank Islamic Banking Head Imran Zahir said it was important that the companies capitalize and set the standards in identifying the business, analyzing the business and delivering the business; which the industry currently lacks. Along with that the industry needs to uplift the key criteria of Shariah compliant products, customer requirements and legal/regulatory framework.