ISLAMIC BANKING SYSTEM MUST BECOME STRONG FINANCIAL MODEL

KUALA LUMPUR, April 10 (Bernama) -- The Islamic banking system must emerge
as a strong financial model that need not rely on conventional banking, says
University of New Orleans director Prof Dr M. Kabir Hassan.

He said many of the Islamic banks in the world did not understand thoroughly
the Islamic banking concept.

"To make it a financial system supported by all communities, the authorities
or bank managements must find the sources and new alternatives.

"If the system is copied from the conventional banking system, surely
customers will be doubtful," he said after delivering a public lecture
entitled "Can Islamic Financial System Be An Antidote To The Global Financial
Crisis" at University Putra Malaysia, recently.

Kabir said he believed the Islamic financial system was the best solution to
revitalise the current financial system facing a global economic crisis.

Islamic financial systems such as Takaful, Sukuk and Ar-Rahnu had proven
to be the best alternatives to the current banking crisis, he said.

Kabir said this phenomenon exhorts Muslims to make an evaluation and conduct
a study on the approach and current practices of Islamic financial products so
that its market become the best choice.

"We need to think of ways to improve the existing Islamic financial system
to play the role as the centre of excellence for the world Islamic banking
system," he said.

Kabir said the Islamic banking sector needs three phases of banking system
to further strengthen the industry.

"The first phase is a system akin to conventional banking where people
can deposit their money in the bank and banks use the customers' money for
their requirements," he said.

"The second phase is through the mudarabah (syariah compliant) institutions
or companies in which the people keep their money and the money is used for
developing many things.

"This model is very suitable to finance small-and medium-scale enterprises.

"The third phase is to create a system like the venture capital or
musyarakah involving financing infrastructure projects," he added.
-- BERNAMA