Senator Cory Bernardi’s party room rant that Islamic, or Sharia, finance is "wholly incompatible with Western values" shouldn’t just be embarrassing for the Liberal Party, already battling with enough sitting members with hazy knowledge of finance, but is embarrassing for the nation as a whole and, particularly, its financial services industry.
In and amongst the context of the Singapore Exchange’s proposed takeover for the ASX, falling productivity compared to other OECD nations and an economy becoming more and more dependent on primary industry, it’s no wonder that Sydney and Melbourne are falling behind on global finance centre rankings and international students are changing their study destinations.
Notwithstanding the strong Australian dollar, our country should be a regional hub for finance, services, education and other smart industries. After all, we have a stable government, excellent infrastructure and on the World Bank’s Ease of Doing Business index we rank ninth. We also have an enviable quality of life, with our major cities consistently high in The Economist’s World’s Most Liveable Cities list. In Asia, the statistics show that Australia should be the place to be.
Yet in the minds of international and regional investors and decision makers, it is comments like Bernardi’s that stick and the image of Australia as a nation of sunny beaches but parochial bigots remains. Recent editorials in Singapore’s Straits Times and Dubai’s Khaleej Times show that Australia’s reputation as the "white trash of Asia”, in the words of Lee Kuan Yew, is alive and well. And Australia’s notoriety – ill-deserved or not – as a xenophobic, backwards nation, has indeed become such a cliché that it is now the subject of a hit Bollywood film: Crook.
So instead of adding fuel to the fire, the opposition should take the lead in advancing Australia’s international standing. Instead of decrying the Singapore Exchange’s interest in the ASX, both sides of politics should see it as an opportunity to further integrate our economy into the fast-growing Asian region. Instead of fearing things like Sharia banking, which has nothing to do with burkas or marriage laws and everything to do with ethical investment and financial innovation, we should be embracing it and contributing our finance industry’s significant intellectual resources to this fast-growing sector.
The Financial Services Institute of Australasia and other industry bodies have usefully begun policy forums and encouraged research and innovation in Sharia banking, but they should go further in actively disendorsing comments such as Bernardi’s and proving that Australia is a forward-thinking, innovative and open society. Australia’s big four banks, rather than continue the unwinnable argument of hiking rates to solve declining net interest margins, should look instead to areas like Sharia banking, microfinance and socially-responsible impact investing to underwrite future and sustainable growth.
Islamic finance, where, broadly speaking, interest is replaced by shared profit and risk taking, proved to be highly resilient to the global financial crisis and, according to the IMF, Islamic finance institutions were indeed more profitable than conventional banks prior to the crisis. Australia has a nascent footprint in this $1 trillion sector, but the so-far piecemeal efforts of the big banks and the under-resourced presence of small, privately-operated Islamic finance cooperatives belie our potential.
Industry figures like Ahmad Fahour, now CEO of Australia Post, and a number of prominent Australian academics are already international thought leaders in Islamic finance. Fahour, for instance, recently managed the transformation of Gulf Finance House, one of the Middle East’s most prominent Sharia-compliant lenders, while the business faculty at La Trobe University now runs one of the world’s few Masters programs in Islamic banking and finance. Indeed, Melbourne has been selected to host a leg of next year’s prominent Islamic Finance Roadshow, an annual event this year hosted in Sydney.
With Islam the religion of well over 1 billion people, most of whom live in the Asia Pacific region, Australia should be developing its attractiveness for Sharia finance in earnest. Earlier this year Trade Minister Simon Crean said the sector was a "crucial plank in the government's strategy to make Australia a financial hub in the Asia Pacific.”
Crean, the Treasurer, Finance Minister Penny Wong and the Prime Minister – fresh from a series of high-level meetings with regional leaders – should not let the ball drop due to the errant populism of a few backbenchers. Australia needs to get over its cultural cringe if it its finance sector is to survive and grow in the years ahead.
Michael Feller is a financial analyst and former Business Spectator columnist who has worked with Muslim business people in Asia, the Middle East and Africa. The opinions expressed in this article are his own.