Amana Bank’s Managing Director/CEO Faizal Salieh delivered a country presentation on the topic ‘The Journey of Islamic Finance in Sri Lanka’ at the IFN Asia Forum held in Kuala Lumpur, Malaysia recently.

The IFN Asia Forum held over 2 days at the Kuala Lumpur Convention Centre drew well over 2000 participants from all parts of the world including investors, Islamic banking practitioners, regulators, academics and industry experts.

In describing the journey in Sri Lanka, Salieh elaborated on the key milestones reached, including the changes made to the Banking Act that enabled Islamic banking transactions and the licensing of Amana Bank as the country’s first and only bank to fully operate on Islamic banking principles. He also talked about the challenges the pioneers faced in growing the market, building confidence of the regulators and obtaining the first banking licence for a Sharia-based bank.   He said that the partnership with Bank Islam Malaysia, membership with AAOIFI, the branch reach and products structured on the principles of equity and fairness were of strategic value in building credibility with the regulators and the market. He further talked about how Amana Bank faced and overcame the formidable challenge of raising more than the required regulatory capital against the global financial crisis in 2009, the height of the war against terrorism in the country, a ‘below investment grade’ country rating and a limited enabling environment. Salieh emphasised that, in this context, the investment in the bank’s equity made by Bank Islam of Malaysia and the Islamic Development Bank based in Saudi Arabia were of particular significance.  

Salieh also presented key economic and banking sector indices of Sri Lanka and the country’s potential for investment in the post-civil war period. He outlined how Sri Lanka’s Islamic banking space and eco-system is at present and said that of the estimated USD 1.5 billion potential for Islamic banking in Sri Lanka, Islamic banking assets have so far accounted for only about USD 0.25 billion, which is shared by one full-fledged Islamic commercial bank, four Islamic banking windows and three finance company windows.

Sharing his views on the challenges in taking Islamic banking forward, Salieh stressed the importance of establishing certainty in the enabling environment in terms of a level playing field and competitive regulatory, tax and legal frameworks. He also said that Islamic banking institutions must be constantly involved in product development through better understanding of Islamic banking principles and that the industry needs to build scale and reach critical mass and connect with Islamic finance markets overseas to mobilise cross-border transactions.

In his closing remarks he stressed that Sri Lanka is in the process of revival after a 30 year civil war and with political and economic stability Sri Lanka could very well work towards positioning herself as an Islamic banking hub in South Asia, connecting and benefitting from investment flows between the Middle East and Far East. He spoke about the scope for sovereign sukuks, Islamic capital markets, Islamic securitisation, and Islamic micro finance and stated that these are being actively pursued by the industry by way of engagement with the regulatory authorities.