Ibrahim Warde, adjunct professor of international business at the Fletcher School of law and diplomacy at Tufts University, works on the Islamic Finance Project at Harvard University. He has authored three books — including “The Price of Fear: the Truth behind the Financial War on Terror” — numerous articles for Le Monde diplomatique and lectures at institutions worldwide on the topics of banking and finance. The TREND Training Center, along with the Egypt Stock Forum, invited Warde to instruct the “Islamic Banking and Finance” training program held recently in Cairo. Warde sat down with Daily News Egypt to discuss the development of and challenges facing Islamic financial institutions.
« Egypt is in a special position within the Islamic world in that there is a history in terms of some bad experiences, not with Islamic banks but with Islamic money management companies, around the 1980s, and I think it had a traumatic effect on Egyptian society.
So now could be a good time for sober reflection on all those questions and to understand, for example, how to set up the system that learns from past mistakes and, at the same time, does not forget the big issues of ethics and all those rules of conservative finance.
I think that there is a lot of pent-up demand for Islamic finance in Egypt. If you look at the population at large, there is a lot of interest in Islamic finance. As the Central Bank starts loosening restrictions, I think there is potential for a big boom. My understanding is that the potential is there for the Egyptian economy and high demand exists.
Paradoxically, one of the challenges is the very burst of interest in Islamic finance which is always a bit worrisome. With any sudden demand, the risk of a bubble forming and bursting becomes apparent. The main risk of Islamic finance is in fact in its popularity. Probably Egypt, because of the memory of what happened in the 1980s, would be very cautious of something that catches fire.
So that’s the kind of thing that financial regulators are very keen on making sure they can control: the growth, so that it doesn’t get out of hand. I would say this regulatory function is probably the main challenge. » Read Mr. Ibrahim Warde’s full interview