Former deputy prime minister Musa Hitam today said people lost confidence in the Western finance model after the 2008 global financial crisis.

This is because, he said, the crisis revealed the weakness of the Western finance model in that it had bad corporate governance.

The 2008 global financial crisis was triggered by the bursting of the housing bubble in the United States which led to a recession

"No transparency, no honesty, cheating and fraud. This brought down years of assumption that (the Western finance model) was the best.

"Nobody observed corporate governance (in the Western finance model)," he told reporters during the World Islamic Economic Forum in Kuala Lumpur today.

As the collapse of the Western finance model proved that it was not a superior finance model, the Islamic finance model rose to prominence, he said.

"Business communities were looking for an alternative because of the failure of the Western finance model that was previously considered good and modern,” he added.

Islamic finance fulfilled what people are looking for now, he added, especially the sharing of risk as advocated by Islamic finance.

"When people looked at it, they realised that this is a system of banking that seemed to suit the demands of corporate governance.

"What is it? Ethics, orderliness, transparency and very importantly, the sharing of risks," Musa said.

In the 'so-called modern finance model', the risks tend to be higher for the customers and less on the banks whereas in Islamic banking, the sharing of risks was 50-50, he explained.

Islamic finance ecosystem

Prime Minister Najib Abdul Razak, who had also attended the forum, said that Malaysia was currently the leader in Islamic finance.

"We can - without blowing our own trumpet - declare ourselves as the leader in terms of Islamic finance and we can offer that to the world," he said at a press conference after the forum today.

Najib revealed that for example, Malaysia was the biggest issuer of sukuk (Islamic bonds) in the world with 57.4 percent of the total global sukuk issuance in 2014 coming from Malaysia.

"Not only in terms of sukuk , but also in terms of the whole plethora of supporting services, the ecosystem to enable economic finance to thrive can be found in Malaysia," he said.

Najib also said that there were more non-Muslims using Islamic banking than Muslims in the country, which shows the credibility of the system.

During the press conference, the moderator insisted on limiting the questions to those related to the forum only.