Published On:28 January 2012
Posted by Indian Muslim Observer

Islamic Finance doing well, up 20% in Gulf

But Sharia limits expansion in the world

Dubai: Islamic finance has increased exponentially in the last decade, with transactions worth more than one billion billion dollars in 2011, but is yet to pass the 1% mark in global financial movements, because of a series of internal issues that see the system trapped between Sharia law, upon which it is based, and economic laws governing international markets.

Islamic finance assets in the MENA (Middle East and North Africa) region increased by 416 billion dollars in 2010, a cumulative annual increase of 20% against growth of less than 9% for traditional banks, according to the Oxford Business Group's recently presented Abu Dhabi 2011 report.

The most solid markets are those in Arab gulf states and Malaysia but the Islamic model has at least 310 Islamic finance institutes operating in more than 75 countries. After making an appearance in such fabled centres of the western economy as the City of London, Islamic banking has also arrived in China, where the Beijing government has just approved the licence for the first Islamic finance institute.

"Growth is growing because of the emphasis on ethical principles, the constant commitment towards transparency and the application of the principles of mutual benefits for all sides in financial operations," says Tirad Mahmoud, the chief executive of the Abu Dhabi Islamic Bank (ADIB), commenting the presentation of the report.

Yet despite international interest, a day of talks at the Emirati centre for strategic studies has shown that Islamic finance still faces a number of challenges, beginning with internal issues.
Fatwas, the Islamic rulings which govern the sector, vary from bank to bank and sometimes contradict one another and delay the process of growth, as some institutes adopt financial instruments that others consider illegal, the economist Mohammad Al Asoumi explains. From the outside, the Islamic principle of sharing profits and losses clashes with the practice of adjusting interest rates in line with those of London's Interbank Offered Rate. The problem is already being studied in the banks' various fatwa offices but, as analysts admit, a solution is difficult to find as the Islamic banking system cannot be set aside from the international sector.

(Courtesy: ANSAmed)

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Posted by Indian Muslim Observer on January 28, 2012. Filed under , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Indian Muslim Observer on January 28, 2012. Filed under , , , . Follow any responses to the RSS 2.0. Leave a response

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