This document discusses the concept of a borderless economy from an Islamic finance perspective. It argues that while modern banking products like ATMs and credit cards allow borderless transactions, corporate banking is still limited by national borders. However, some borderless corporate banking may already exist in international markets. The document suggests that with internet-based borderless payments, the need for banks and international reserve currencies as intermediaries in global trade may decline. It proposes alternatives like governments or book-based settlement between OIC countries' central banks as intermediaries in international trade.

1. THE BORDERLESS ECONOMY
FROM ISLAMIC FINANCE PERSPECTIVE
PRESENTED BY MUHAMMAD ZAHID ABDUL AZIZ,
MALAYSIA
3RD OIC-ASIA TRADE & ECONOMIC FORUM 2014
KUALA LUMPUR
NOVEMBER 2014
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2. A BANK USED TO BE BRICK AND MORTARS OPERATING
WITHIN A SPECIFIED BORDER.
WHILST THIS IS TRUE, MANY OF CURRENT BANKING
PRODUCTS CAN BE USED IN A BORDERLESS WORLD.
FOR EXAMPLE AN ATM MACHINE CAN GIVE YOU CASH
IN ANY PART OF THE WORLD.
FOREIGN EXCHANGE CAN BE BOUGHT IN ANY BRANCH
OF THE WORLD
CREDIT CARDS CAN BE USED IN ANY PART OF THE
WORLD
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3. HOWEVER THE BORDERLESS ASPECTS SEEMS TO BE
CONFINED PRINCIPALLY TO RETAIL PRODUCTS
WHAT ABOUT CORPORATE PRODUCTS?
CAN A COMPANY OBTAIN A LETTER OF GUARANTEE FROM AN
OVERSEAS BANK WHO HAS A RELATIONSHIP WITH ITS LOCAL
BANK?
CAN A COMPANY OBTAIN A WORKING CAPITAL, TERM
FACILITY, LEASING/IJARAH OR ANY CORPORATE FACILITY
FROM AN OVERSEAS BANK WHO HAS A RELATIONSHIP WITH
ITS LOCAL BANK?
CAN A COMPANY OPERATE A CURRENT ACCOUNT IN AN
OVERSEAS BANK BASED ON THE OVERSEAS BANK’S
RELATIONSHIP WITH ITS LOCAL BANK?
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4. IT SEEMS MUCH POSSIBLE AND MAY ALREADY EXIST IN
INTERNATIONAL INVESTMENT BANKING?
CAN A COMPANY IN ENGLAND ENGAGED AN ARRANGING
BANK IN MALAYSIA TO RAISE AN INTERNATIONAL
SYNDICATION FOR ITS PROJECT IN SOUTH AFRICA WITH
PARTICIPANTS MAINLY FROM MIDDLE EAST?
CAN A COMPANY IN GERMANY RAISED A SUKUK BY
ENGAGING AN ARRANGING BANK IN DUBAI FOR ITS PROJECT
IN LATIN AMERICA FUNDED MAINLY BY BANKS IN ASIA?
CAN A MERCHANT BANK IN AMSTERDAM BRING TO LISTING
ITS CLIENT IN KOREA AT THE NEW YORK STOCK EXCHANGE?
CAN AN ASSET MANAGER IN EIRE RAISED A FUND IN THE
MIDDLE EAST FOR PROJECTS IN ASIA?
IF THERE ARE STILL REGULATORY HURDLES TO THESE, THEN
WE HAVE NOT YET REACHED A BORDERLESS WORLD FOR
FINANCE.
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5. IN MALAYSIA IT IS REPORTED THAT BECAUSE OF THE EASINESSS
OF BORDERLESS INTERNET PAYMENTS BETWEEN COMPANIES
INTERNATIONALLY, DEMANDS FOR LETTERS OF CREDIT FACILITIES
FROM BANKS ARE DWINDLING.
WILL THIS LEAD TO INTERNATIONAL TRADE CONDUCTED WITHOUT
THE NEED FOR BANKS AS INTERMEDIARIES?
THE HANSEATIC LEAGUE OF GERMAN INTERNATIONAL TRADERS
THRIVED FOR 4 CENTURIES (13TH-17TH CENTURY) WITHOUT BANKS
IN INTERNATIONAL TRADE. EQUITY INVESTING AND VERY
DIVERSIFIED INVESTMENTS IN NUMEROUS SHIP CARGOES WAS
THE SOLUTION.
WITH THE CURRENT BORDERLESS WORLD OF INTERNET
PAYMENTS AND INTERNET ENGAGEMENTS BETWEEN TRADE
PARTNERS WILL WE SEE THE DEMISE OF BANKS IN
INTERNATIONAL TRADE?
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6. IN THE BORDERLESS WORLD OF INTERNET PAYMENTS DO WE STILL
NEED AN INTERNATIONAL RESERVE CURRENCY TO SETTLE
INTERNATIONAL TRADE?
CAN NOT INTERNATIONAL TRADE BE SETTLED ALL BY LOCAL
CURRENCIES?
CAN GOVERNMENT INSTEAD OF BANKS PLAY THE INTERMEDIARY
ROLE IN INTERNATIONAL TRADE TO PAY THEIR EXPORTERS WITH
LOCAL CURRENCY?
CAN GOVERNMENT INSTEAD OF BANKS PLAY THE INTERMEDIARY
ROLE TO ACCEPT PAYMENT FROM THEIR IMPORTERS IN LOCAL
CURRENCY AND EFFECT PAYMENT TO THE CORRESPONDING
FOREIGN CENTRAL BANK IN THEIR LOCAL CURRENCY?
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7. CAN OIC NATIONS STOCK OF GOLD BE KEPT CENTRALLY IN
ONE AGREED MUSLIM CAPITAL CITY, AND INTERNATIONAL
TRADE BETWEEN OIC NATIONS SETTLED VIA BOOK ENTRIES
OF NET INTERNATIONAL TRADE SET OFFS?
WHY DO WE NEED AN INTERNATIONAL RESERVE CURRENCY
WHEN WE CAN BYPASS THAT THROUGH BROTHERLY MUSLIM
TRUST?
CAN WE EXTEND THIS ARRANGEMENT TO FRIENDLY NON OIC
AND NON MUSLIM COUNTRIES?
IN THE MATURING OF THE INTERNATIONAL BORDERLESS
ECONOMY IS INTERNATIONAL TRADE WITHOUT BANKS AND
WITHOUT AN INTERNATIONAL RESERVE CURRENCY A
PROBLEM?
OR IS IT ACTUALLY THE BOON THE WORLD INTERNATIONAL
TRADE AND THE WORLD ECONOMY IS WAITING FOR?
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