Let’s explore Islamic finance models

Stressing the need for continued collaboration amongst the D-8 central banks, Governor State Bank of Pakistan (SBP) Yaseen Anwar Wednesday said the member countries need to explore ways to promote Islamic financing in the wake of challenging global economic landscape.
While opening and chairing the 2nd meeting of central bank governors of the D-8 countries in Islamabad, Anwar said there was aneed for exploring sustainable models to promote Islamic finance in the Developing-8 (D-8) economies.
He said macroeconomic policies of D-8 countries must be balanced to check overheating pressures from strong recovery, high credit growth, volatile capital flows, elevated commodity prices, and renewed risk of inflation.
“We must continue to rebalance our economies to sustain growth through modulating domestic consumption, increase in trade and allow capital to flow freely between emerging and developing economies in search of better returns as against investment in debt ridden advanced economies”.
He noted that a sudden drop in the growth rate in 2009 immediately after the 2008 crises was perhaps the principal reason why the D-8 central bank governors in their first meeting agreed to set this meeting agenda on strengthening monetary and financial cooperation.
“The global growth is projected to further drop from 3.8 percent in 2011 to about 3.3 percent in 2012. As a result, the real GDP growth in the emerging and developing economies is projected to be further slower from 6.3 percent in 2011 to 5.2 percent in 2012. Therefore, we need continued collaboration to further strengthen our economies,” he added.
There was only one central bank in each country/monetary area, and therefore, it was very logical for central banks to look beyond their national borders for advice and collaboration, he said adding that in recent years, increasing globalization has further enhanced the need for central banks’ cooperation to tackle risks due to the cross border interdependencies and to make the most of emerging opportunities.
The central banks’ cooperation had been facilitated through collaborative multilateral forums such as the G20, the FSB and the meetings of the IMF, BIS and a number of bilateral and regional initiatives for cooperation. “The enhanced role of these forums also reflects the increasingly important role that the central banks of emerging and developing economies are playing at these international forums,” said the SBP governor. Stressing the need for strengthening cooperation amongst D-8 countries, Anwar said the D-8’s secretariat must be strengthened to collect and maintain information on our economies and their interconnectedness.
“This would serve the dual purpose as it would provide regular updates on the state of D-8 economies and would help us in reviewing and measuring progress of our economies on economic and financial cooperation,” he said. Anwar suggested that D-8 countries must collaborate and focus on the optimal use of monetary policy tools which are at best the first line of defence against the global crisis. The D-8 countries must collaborate on how to rebalance its growth model from export-led growth to diversifying demand through structural changes in their economies that would enable sustainable future growth and make their economies less susceptible to volatility in other financial markets, particularly by raising domestic demand and recycling more of the D-8 countries savings into investments at home.