Islamic Banking and Finance in South-East Asia: Its Development and Future

Abstract

Islamic Banking and Finance in South-East Asia: Its Development and Future. By Angelo M. Venardos. Singapore: World Scientific Press, 2006. Pp. 238. Spanning more than seventy-five countries and charting an estimated average annual growth of 15 to 20 per cent, Islamic finance has emerged as a globally recognized and accepted form of financing. Southeast Asian regulators and stakeholders increasingly face challenges and opportunities in integrating the system of Islamic financing into mainstream systems of financing. With interest in Islamic finance rising rapidly worldwide, Singapore-based banker, Angelo M. Venardos's volume, Islamic Banking and Finance in South-East Asia, turns the spotlight on Southeast Asian forays into Islamic financing. In a concise volume, Venardos draws attention to the emerging Islamic financial hubs of Malaysia, Indonesia, Labuan, Singapore, and Brunei. As destinations that demonstrate considerable promise, the growth of Islamic finance in these four centres is outpacing many business segments in the global banking system. Recognizing the promise that Southeast Asia exhibits, Venardos's study covers the origins of Islamic finance, the fundamentals of its practice, and legal issues and challenges in Southeast Asia. Islamic Banking and Finance in South-East Asia is a valuable addition to the existing repertoire on Islamic finance. With much of the existing literature focused on the Gulf and the Middle East, this study is one of the early pioneers in investigating the scope of Islamic finance in Southeast Asia. Venardos's volume will be of interest to an audience keen on exploring the historical developments, techniques, and rules and regulations of Islamic financing in the region. Written in a straightforward style and organized in an easy-to-digest format, the coverage of this book is wide-ranging. Islamic Banking and Finance draws from the disciplines of politics, law, religious studies, economics, and finance to provide an overview of the characteristics and operation of Islamic banking and finance in Southeast Asia. Venardos approaches Islamic finance by setting it in the context of the underpinnings of Islam and the economic system it advocates. He delineates the major tenets of the Islamic belief system, highlights the key values in financial decisionmaking, and chronicles the spread and influence of Islam. He also considers the central questions of how Islamic principles are interpreted and applied across Southeast Asian countries. The role of Islamic beliefs and social values play in ordering financial transactions and structuring financial institutional behaviour are also important themes in this volume. The evolution of Islamic finance, as governed by shari'a law and Islamic jurisprudence, is contextualized in the development of an economic system that advances the goals of a just and fair society. Outlining the contours of Islamic commercial law, Venardos juxtaposes conventional JudaicGreco law and Islamic shari'a law. The close historical connection between Islam and commerce is an idea that is threaded through the thirteen chapters that comprise this book. The moderation of business and financial activities by spirituality is central to the practice of Islamic finance. Going beyond the well-known prohibition of paying or receiving interest (riba), Islamic commercial law also stipulates that property and its ownership are grounded in the Quran, and the Sunna are matters with which God is concerned. The inextricability of profit and loss sharing schemes from the practice of Islamic finance is also explored in depth. Business partnerships divide profits and losses in accordance with the capital share and effort, and such arrangements are not rooted in guaranteed rates of return. In contrast to interest-based financing of conventional systems, Islamic finance relies heavily on equity-based systems of financing, where the efforts and risk carried by business partners are the sole determinants of the profit and loss sharing arrangements. …