In 2016, Shariah-compliant trade finance accounted for 24.1% of total trade finance provided by the Malaysian banking sector. However, our Islamic finance industry only financed about 5% of total exports in Malaysia, again, signifying an untapped growth area with large potential. Increasing bank financing for SMEs would also encourage more market based solutions to meet the funding needs of the halal sector participants, which are now largely reliant on government initiatives. There are however a number of challenges that may impede trade finance facilitation by Islamic finance players. I would like to highlight two. First is – “process inefficiencies” – that can contribute to higher operational risks such as fraud. This can be mitigated through use of technology that reduces reliance on traditionally document-intensive and multi-tiered manual processes. In Malaysia, I am happy to note that six Islamic banks have embarked on digitalisation of trade finance processes – through an integrated web-based platform that offers trade finance and working capital management solutions. The second challenge is, – the need to improve connectivity between the Islamic finance industry and the international trade community – to facilitate effective intermediation of trade finance needs. Again, the use of technology can ease the application and submission of trade-related information and documents which can expedite the whole process. If these challenges are not addressed, industry players are at risk of becoming irrelevant in the trade finance space.
If petroleum revenues were to be used as they accrue, this would lead to wide fluctuations in demand in the Norwegian economy and thereby amplify cyclical fluctuations. Third, the use of petroleum revenues will have an impact on competitiveness in Norwegian business and industry. A high level and wide fluctuations in the use of petroleum revenues will have a negative impact on the operating parameters for internationally exposed industries. The challenges associated with the emergence of the petroleum sector have contributed to the development of the four main pillars of Norway’s economic policy, which were established in the 1990s and in 2001. The pillars are: the oil fund mechanism, the fiscal rule, a floating exchange rate and inflation targeting. The Government Petroleum Fund was established in 1990 with a view to safeguarding long-term considerations in the use of petroleum revenues. The first allocation to the Fund was made in 1996, and the market value of the Government Pension Fund – Global, as the Fund is now called, had reached over NOK 1500 billion at the end of June this year. Under the oil fund mechanism, increased government petroleum revenues are invested abroad. This curbs the impact of oil price fluctuations on domestic demand and output - and on inflation and the krone exchange rate. A floating krone exchange rate also has a stabilising effect, and the exchange rate normally appreciates in favourable periods and depreciates during adverse periods. A flexible exchange rate can reduce fluctuations in employment and output.