Lauren McAughtry, Managing Editor of IFN, recently interviewed Stella Cox CBE to discuss the current trends and future potential for the Islamic finance industry, both in the UK and worldwide. The article below was published in the Islamic Finance news on 25th April.
“Stella Cox founded DDCAP in 1998 as an intermediary for the Islamic finance space – a connector for various institutional and bank participants across a broad spectrum of financial disciplines and asset classes, with a focus on the treasury and capital markets space. But she is much more than that – as the chair of TheCity UK Islamic finance market advisory group and a member of the board of trustees of the RFI Foundation, Cox has her finger in numerous pies and is an eminent champion of both fintech innovation in the Islamic space and socially responsible investing (SRI) within the industry. IFN Managing Editor Lauren McAughtry caught up with Cox in London to discuss her views on where the industry is headed – and what challenges it currently faces.
‘It has been a very interesting 12 months. In the capital markets space, we have been extremely busy – there has been an elevation of activity, particularly in sovereign Sukuk, with a lot of high-profile transactions in the first quarter,’ noted Cox. One of these was the landmark US$1.25 billion IDB issuance, which it is hoped will not only expand the Sukuk landscape but deploy proceeds into sustainable and responsible initiatives – a trend which Cox believes is key to the future of the industry.
‘We have now seen Indonesia issue the first sizeable green Sukuk, and Malaysia has been very busy in rolling out regulations to embed SRI principles within its broader Shariah compliant legislation. There is plenty going on.’
But could Islamic finance and SRI be in danger of overlapping too far?
‘It is a very interesting question,’ agreed Cox. ‘Are Islamic and ethical finance the same? My view is no, but there is overlap, and there are perspectives that are very similar. If we look at green initiatives, for example, based on the stewardship that we see in the Shariah code then in terms of impact investment there is a lot of similarity – but then if we look at our core industry, we have emerged as a banking platform from markets and countries that have built their economies on revenue from traditional fossil fuels. So in terms of the green environment, and prospects for Shariah compliant ‘green’-focused investments and issuance, I think there has to be a drawing together of perspectives and a common understanding. There has been a lot of development over the last few years, but it is about policy formation – and as governments buy into climate change and controls, that is going to have an impact on the Islamic finance industry. But it will be very much driven by public sector engagement.’
But what does the Islamic investor community want – and why is the SRI sector so keen on attracting Shariah compliant interest? ‘The Islamic financial footprint has grown from its original banking platform – now it is all about assets under management, liquidity, deployment of funds,’ said Cox. ‘SRI itself is really based more on an asset management model and its footprint has predominantly been in the international space. But now there are an awful lot of asset managers that are interested in exploring the overlap. It is a dialogue worth having, to see where different perspectives can be combined to best effect.’
DDCAP has been particularly involved in promoting the use of technology, and fintech is a key focus for the firm. But it has not always been easy.
‘We cover the core banking and wholesale financial services space, and a lot of the processes and transactional flows surrounding our business have historically been very manual, so anything that serves to automate those and make them more effective is very helpful. However, it has taken us an awfully long time to evolve and implement our own automated platform, because we have had to be cognizant of some of the reticence and sensitivities of our core client base. In moving from a manual to an automated process, they fear that some of the integrity and transparency of process is lost, and we have had to explain that this is not the case,’ explained Cox.
New entrepreneurs in fintech are often described as disruptive, but Cox feels that this may not always be the case. ‘As far as we are concerned, when you look at the core requirements of Islamic financial services, fintech is really enabling in order to support the outreach of Islamic financial practice. It supports the process of creating better financial inclusion. And actually, for the banks, there is a very significant role to play in terms of participating in the Islamic fintech movement.’