Financial Crisis Creates Opportunity for further Islamification
As banks in the Islamic world were not so stupid as to invest in the guaranteed dead-end sub-prime market in America, the global financial crisis has not affected those nations’ financial institutions.
The crisis is therefore an opportunity for Sharia-compliant Islamic banking to further its position internationally, bankers said at a forum in Saudi Arabia last Saturday.
Islamic banks have been barely bruised by the global credit crisis so far, although falling property and commodity prices and slowing economies are starting to affect the sector.
But bankers at the forum, on how the world finance crisis could affect Islamic banking, saw the sector strengthening.
“It is a must for Islamic finance to seize the opportunity that came with this global financial crisis,” Ahmad Ali, president of the Jeddah-based Islamic Development Bank (IDB) said at the discussion organised by IDB.
“Global investment banks should be set up that realise the Islamic economy and offer the world a new vision and different way to manage assets, invest wealth and create products.”
Sharia-compliant finance bans the receipt of interest and investments in companies dealing in alcohol, gambling and pornography.
Islamic financing deals are backed by assets, commonly real estate and commodities, due to the Sharia requirement that transactions must involve real economic activity.
There are more than 300 Islamic financial institutions worldwide and the sector is valued at about $1 trillion (£628 billion).
The growth of Sharia banking has been fuelled by an increasing focus on Islamic values and cash from Middle East oil exporters hungry for assets that comply with Islamic principles.
But with Muslims making up almost a fifth of the world’s population, the Islamic industry was seen as offering plenty of room for longer-term growth.
Saleh Kamel, a Saudi entrepreneur who heads the General Council of Islamic Banks, said the global crisis suggested Islam was the “third way” after the failure of great ideologies.
“Perhaps through this crisis, that is a great evil for the world, God will lead us to the school of moderation,” he said. “Communism has failed and capitalism failed, and only now are they starting to admit this failure,” he said.
