Dear Ali Sakti,
President Barack Obama has proposed a sweeping regulatory overhaul for the US financial sector, claiming that it can stop future crashes and deter lax oversight, greed and huge debts. New discipline and transparency are to be injected into these markets.
Critics have been quick to point out that Obama is merely loading more regulation on top of the huge pile of laws and rules that already exist, and has missed the opportunity for a genuine reform of the financial system. Independent Senator Bernie Sanders, in calling for greater action, said: "We need to enact a national usury law so that big banks can't charge outrageous interest rates and sky-high fees. If a bank is too big to fail, it is too big to exist."
What’s of greater concern to the international financial community is Obama’s effort to also impose his brand of regulation on the rest of the world, which inevitably includes the Islamic finance sector. He said that “to ensure that our own safeguards are not undermined abroad”, the US is demanding “strong, modern regulation and supervision around the world”. On the face of it, his proposals are portrayed as being sensible, but the underlying concern is how far the US will go in pushing its brand of banking regulation on other nations.
All is not lost, however. The heads of state of the BRIC countries — Brazil, Russia, India and China — held their first-ever summit meeting this week at which they pledged to advance the reform of international financial institutions so as to reflect changes in the world economy. “The emerging and developing economies must have a greater voice,” said a declaration issued after the summit. All four countries, representing 40% of the world’s population and 15% of global gross domestic output, are favorably disposed towards Islamic finance.
Another point to be made is that Obama’s proposed overhaul won’t make the US financial system any more receptive towards Islamic finance. One glaring distinction is that while Islamic finance focuses on the consumer and the real economy, Obama’s version continues to be fixated on the financial institutions, with consumers and economic activities largely relegated to being appendages.
In his recent address to the Muslim world, Obama proposed a corps of American business volunteers to partner with counterparts in Muslim majority countries, and to help create connections between business leaders, foundations and social entrepreneurs in the US and Muslim majority countries. He also promised to create a fund to support technological development in Muslim majority countries, and to help transfer ideas to the marketplace so they can create more jobs. Does Islamic finance have no place in this?
Again, all is not lost. Islamic finance has still a considerable distance to go in establishing itself in Muslim majority countries. It has yet to sufficiently penetrate its own backyard: Indonesia (207 million Muslims), Pakistan (160 million), India (151 million), Bangladesh (132 million), Egypt (71 million), Turkey (71 million), Iran (64 million), Algeria ((33 million) and Morocco (32 million). Fresh fields to conquer yet.