Martin Raiser, Country Director for Turkey of the World Bank, said Thursday "Islamic finance can contribute to reduce financial risks in the future but the real question is how big is the contribution?"
Speaking at a conference on the International Forum on Financial Systems sponsored by the Anadolu Agency, in Istanbul, Raiser said as Islamic finance links the provision of resources with a concrete project in the real sector, this can help to reduce the excessive risk taking.
He also touched on the sharing of emerging markets in the global savings, investments and capital funds.
"Emerging markets are no longer about creating financial systems that just mobilize domestic resources or attract resources from the advanced economies," he said. Emerging markets need to achieve much greater degrees of regulatory harmonization and that also means the competition for capital amongst emerging markets."
There will certainly be a much greater role for banks from emerging markets, he said adding "But it is not clear which emerging market banks are going to win the competition to intermediate capital flows from emerging to other emerging markets."
He noted that the major challenge that Islamic finance faces is more standardization and more harmonization of the regulatory framework and added "Some other challenges that Islamic finance faces in order to benefit from this opportunity - is improving rebalancing tax treatment and ensuring adequate equity."
The International Forum on Financial Systems is organized by Independent Industrialists' and Businessmen's Association (MUSIAD), BORSA Istanbul, Statistical, Economic & Social Research and Training Centre for Islamic Countries (SESRIC), Participation Banks Association of Turkey (TKBB) and Islamic Development Bank (IDB).
Anadolu Agency (AA) is the media sponsor of the forum.
