Escolar Documentos
Profissional Documentos
Cultura Documentos
First published September 16, 2010, in his weekly economics and finance column at
alrroya.com
A proposed new mosque near Ground Zero in New York may symbolise a new
berthing for Islamic ideals—and finance—in the heart of arguably the world’s most
important financial centre. Michael Bloomberg, Mayor of New York City and majority
owner of Bloomberg L.P., the global media colossus, is an adamant supporter of the
mosque. And with his media company in the forefront of global Islamic finance
reporting, he just might be a champion of Islamic finance too.
Islamic finance is spreading around the world. Governments realising its potential for
profits and jobs are duelling with each other to create the best regulatory and
supportive framework for it. Western money centres with growing participation in
Islamic finance include London, New York City, Paris, Frankfurt, Tokyo, and Toronto.
Islamic financel activities in these centres usually encompass the licensing of Islamic
banks and offering of Shariah-compliant financial products that include bank
accounts, home loans, and bonds.
Among countries, the growth and acceptance of Islamic finance varies considerably.
For obvious reasons, it is in Muslim countries where its growth appears faster.
However, the financial storms of recent years have earned it an increasing attention
globally.
The ethics and morals behind Islamic finance and Shariah-compliant investing have
similarities to ethical investing and finance, yet with significant differences too.
Islamic financial structures avoid gambling style speculation and interest rates, and
all trading, loans, and investing have to involve real assets.
The estimates vary as to the size of Islamic finance globally. Abdul Rahman Al Baker,
executive director of financial institutions supervision at the Central Bank of Bahrain
(CBB) believes it to be now more than $1.5 trillion. Bloomberg reports that Moody’s
research indicates global Islamic finance totals about $950 billion. Malaysian based
Islamic Financial Services and Saudi Arabian Islamic Development Bank are
projecting the market to grow to $1.6 tn by 2012. Going even further is another
report quoting Moody’s that Islamic finance could eventually reach $5 tn.
The countries with the largest Shariah-compliant banking assets are Iran, Saudi
Arabia and Malaysia.
However for 2010, Bloomberg says that Malaysia leads the way in the international
issuance of Islamic bonds. (These bonds, called sukuk, are asset-backed and the
holder usually receives a percentage of profits rather than interest.)
By August 26 of this year, Bloomberg reported that Malaysia had 72 per cent of the
total $9.8 bln issuance of international Islamic bonds. The Gulf States issued $2.5
bln representing about 26 per cent of the total. Media reports also said that Gulf
sukuk issuance is down by 24 per cent from last year due to Dubai’s real estate
problems and the sukuk defaults by Saad Group (Saudi Arabia) and Investment Dar
(Kuwait).
The money centres with the biggest trading in sukuk are London, Dubai and
Malaysia.
Bloomberg also says that Malaysia last year established a commodities trading
platform based on ‘murabahah,’ where the prices are governed by a negotiated profit
margin that is Shariah-compliant, and that Bahrain is establishing a similar trading
platform that will also include the trading of sukuk, real estate investment trusts,
and options.
Shariah-compliant mutual funds now exist in several countries including the US,
Canada, and India. Interestingly, some precious metals mutual funds are becoming
Shariah approved as well. Furthermore, according to ETFdb.com, “Shariah compliant
ETFs (exchange traded funds) are becoming popular investment options around the
world – over the last year they have been introduced in Britain, India, Singapore,
Malaysia, and South Africa.”
In some respects, Mayor Bloomberg of New York and his media empire’s global
coverage of Islamic finance are reflective of a rising consciousness in the world of
finance. In a financial world where greed has run amok and deceit and dishonesty is
commonplace, the morality and ethical basis of Islamic finance may have much to
offer. That is being realised as countries, East and West, North and South, Muslim
and non-Muslim, compete to adopt and integrate Islamic finance into their own
financial systems.
Copyright alrroya.com