Islamic investment industry predicts exponential growth

Islamic investment industry predicts exponential growthThe Islamic investment sector is focused on “expanding the global footprint” of the industry, according to discussions at the 8th Annual World Islamic Funds and Financial Markets Conference (WIFFMC 2012) last month.

With an estimated yearly growth between 15-20%, the sector is one of the biggest growers in the financial world, and delegates at the conference, which took place in Manama, Bahrain, in May, picked out the socially responsible investment (SRI) model as something for the Islamic investment industry to aspire to.

On the face of it, the two investment styles are similar. But whilst the investments made by SRI funds are selected based on a predetermined criteria, Islamic funds look to Sharia law – Islam’s legal system.

The law prohibits Muslims from investing in such areas as tobacco, pornography and financial services, which is where the similarity with SRI comes up.

And officials at WIFFMC 2012 recently said the industry is set for exponential growth.

Sharia-compliant capital markets activity currently still remains a niche market; but certainly can and will build international reach and scale”, said Fernand Grulms, CEO of Luxembourg for Finance.

Islamic finance is no longer limited to the countries in which it began, or to the early adopters and one of the key hurdles to achieving international reach and scale is a lack of transparency in the product development area.

“The absence of a consistent published set of legal rules can be perceived by the market as uncertainty, inefficiency, increased time to market and increased costs, which are elements that markets dislike.”

In March, Blue & Green Tomorrow spoke with Craig Bonthron, manager of the SWIP Islamic Global Equity Fund. And on the back of WIFFMC 2012, Bonthron’s colleague, and co-manager of the fund, Johnny Russell offered his own perspective on the Islamic investment industry.

In the UK, the number of Muslims who take out Islamic-based savings products is pretty low”, says Russell.

But if you compare this to the size of the conventional savings industry, there’s quite a significant potential for growth within the community.”

One of the main drawbacks for funds of this kind, though, Russell says, is the naming convention of Islamic funds.

A lot of people will see the word Islamic and immediately think that they don’t want to invest in it”, he explains.

But actually, if they looked at the principles that an Islamic fund might follow, such as the exclusion of tobacco and pornography, then they are very closely aligned to quite a lot of the principles that are followed within ethical funds.

The naming convention is important and people won’t necessarily look at an Islamic fund because of its name, but actually, it does a lot of what an ethical fund  would do.”

There is an estimated $58 billion tied up in Islamic funds worldwide – a figure that is rising as the sector begins to attract more mainstream attention.


Islamic banking conference set

MUSCAT — The Sultanate’s first conference on Islamic banking and finance will be held next week in co-operation with the Central Bank of Oman (CBO).

The two-day conference, due to be held at Al Bustan Palace Hotel on January 23 and 24, will be organised by Al Iktissad Wal-Aamal Group.

The opening ceremony of the conference will be presided over by Darwish bin Isma’eel al Balushy, Minister Responsible for Financial Affairs.

The conference will tackle key issues on the Islamic financial industry, including policies and regulatory perspectives of Islamic finance, the growth of Islamic banking and its international propagation, Islamic finance and capital market activities, the supervisory and regulatory role of the Sharia code and socio-economic accountability.

Conference is also to consist of sessions revealing the latest research and studies accomplished by a group of prominent specialists, academics and senior staff in the financial and Islamic banking sectors, from diverse regional and international leading organisations and corporations in the industry.

The conference will bring together around 400 participants from various Arab and Islamic countries, including representatives of foreign banks and investment firms and commercial and consulting firms and a number of Sharia panels in the Arab and Asian countries.

Speakers include Hamoud bin Sangour al Zadjali, CBO Executive President, Sultan bin Nasser al Souwaidi, Governor of the Central Bank of the UAE, Ra’ed Charaf Eddine, First Vice-Governor of the Central Bank of Lebanon, Adnan Ahmed Youssef and Chairman of the Union of Arab Banks. — ONA

Event to shed light on latest trends in Islamic finance

MUSCAT: Under the patronage of Darwish bin Ismail bin Ali Al Balushi, minister responsible for financial affairs, the Sultanate of Oman will host the first ‘Islamic Finance & Banking Conference’, from January 23 to 24, at Al Bustan Palace Hotel, here.


The event, organised by Al Iktissad Wal-Aamal Group, in collaboration with the Central Bank of Oman, will highlight key issues relevant to the Islamic finance industry, which includes policies and regulatory perspectives of Islamic finance, Islamic banking growth and international expansion, Islamic finance and capital market activities, supervisory and regulatory role of Sharia boards and the socio-economic accountability of Islamic finance.

Prominent speakers who will speak on the latest trends in the sector include Hamood Bin Sangour Al Zadjali, executive president of the Central Bank of Oman; Sultan bin Nasser Al Souwaidi, governor of the Central Bank of the United Arab Emirates; Raed Charafeddine, first vice-governor of the Central Bank of Lebanon; and Adnan Youssef, chairman of the Union of Arab Banks.

Dr Ahmad Mohammed Ali, president of the Islamic Development Bank, will be heading a high-level delegation. He will deliver a keynote speech at the conference’s opening ceremony.

400 participants

Conference sessions will reveal latest research and studies accomplished by a group of prominent specialists, academics and senior staff in the financial and Islamic banking sectors, from diverse regional and international leading organisations and corporations in the Islamic financial industry.

About 400 participants will gather at the event from various Arab and Islamic countries including Islamic and commercial banking leaders, fund managers, Sharia and legal experts, representatives of foreign banks and investment firms and world-level consultants, in addition to a large number of participants interested in Islamic banking. The conference is sponsored by Al Ahli Bank, Oman, Diamond sponsor, among others.


BankMuscat, the largest financial services provider in the sultanate, has won the first place in the Corporate Governance Excellence Award 2011, which was organised by the Oman Centre for Corporate Governance of the Capital Market Authority (CMA).

BankMuscat was the overall winner in all the three sectors – Financial, Industrial and Services. In the Financial sector, BankMuscat bagged the top prize followed by National Bank of Oman and Oman Arab Bank.

Oman Cables Industry led the race in the Industrial sector while Oman Fisheries Company and Majan Glass Company bagged the second and third positions, respectively. In the Services sector, Shell Oman Marketing won the top accolade followed by Oman Oil Marketing and Al Ahlia InsuranceCompany.

The awards ceremony was held at the Grand Hyatt last week and H E Sheikh Sa’ad bin Mohammed bin Said al Sa’adi, Minister of Commerce and Industry, presented the honours to the winners.

Speaking to Muscat Daily, Abdullah bin Salem al Salmi, executive vice president of CMA said that most of the listed Omani companies are in full compliance with the code of corporate governance and some of them are equipped to exceed the current requirements.

“It is not the end of corporate governance requirements; we are going to the next stage now and we need to upgrade the code of corporate governance. I also think some companies are capable of doing more than the current requirements.”

Salmi added that the award encourages companies to adhere and increasingly adopt the code of corporate governance. “This competition encourages non-listed companies also to come ahead and compete with the listed companies.”

After receiving the award, AbdulRazak Ali Issa, CEO of BankMuscat said, “Our board of directors and the management pay full attention to be compliant with corporate governance requirements. We are the market leader in the business and we would like to remain market leader in corporate governance as well.

“The year 2011 has been a good year for the banking sector. We are ready to start Islamic banking services once we get a green signal from the regulator.”

GLOBAL: Business schools turn to Islamic finance

As unemployment levels remain high in the West, finance students are being encouraged to gain expertise in Islamic banking so that they will be able to work in the Gulf states and in the wider Islamic world.

Universities are also exposing students to other non-conventional and ethical finance models that include eco-finance and micro-finance.

While universities in the United Kingdom and France have offered Islamic finance programmes for some years because of their large Muslim populations, Spain is also increasingly looking into these programmes.

The Instituto de Empressa (IE) business school in Madrid has been offering Islamic finance programmes for five years and partnered with Saudi Arabia’s King Abdul Aziz University (KAU) to launch the Saudi-Spanish Center for Islamic Economics and Finance (SCIEF) earlier this month.

Speaking at the event, Dr Ahmad Mohamed Ali Al Madani, head of the Islamic Development Bank, said the financial crisis had raised people’s concerns beyond profit margins into where their money is invested. Al Madani was acting rector of KAU from 1967 to 1972 and was Saudi Arabia’s deputy minister of education in the 1970s.

Business schools needed to respond accordingly and Spain was in a good position to do this considering the country’s Arabic heritage, he said.

“You look around and find that Islamic institutions are in the hundreds. Amounts of the assets are in the billions. The system proved that it can support economic systems and respond to big demand from people in different parts of the world.”

Professor Ignacio de la Torre, IE’s academic director of the masters in finance programmes, said at the SCIEF launch that there is already US$1 trillion of Islamic money, and that it is growing at 20% with US$200 million of additional Islamic money coming in every year.

“When you travel to the Gulf, where 50% of banking has been Islamised, there are not enough people with skills and understanding of Islamic finance,” he said.

He added that, from a career perspective, students would be wise to have knowledge of this area because those who work in conventional finance will sooner or later be faced with Islamic finance.

Due to the increasing focus on Islamic finance globally, the subject is now mandatory for masters in finance students, said Dr Celia de Anca, director of the centre for diversity at IE business school.

“We’ve been teaching it as an elective for five years and now it is mandatory because we realise the world of finance is changing so much that students and future financial managers should know more about what’s going on,” she said.

Students were showing an interest in sustainability in finance, ethics in finance and ecological finance and the school is looking into developing specialisations in alternative finance, de Anca said.

A number of UK universities have a strong tradition in Middle East studies and more recently in Islamic finance. At Durham University, Islamic finance programmes have been offered for more than 25 years, Durham Centre for Islamic Economics and Finance director Dr Mehmet Asutay said at the Madrid launch.

The university has the largest PhD programme in Islamic finance as well as masters degrees in arts and in science in the field.

“In addition to Muslims coming from all over the world to the centre, we have English German, Italian and Spanish students,” he said.

The field is not without its challenges. Professor Simon Archer of the Henley University of Reading’s International Capital Market Association said the area was relatively new and “there is not a wealth of excellent textbooks”.

Archer added: “Research literature is sparse and spread over a number of different journals and not tremendously accessible.”

In addition, there were “opportunistic” universities in the UK that have responded to the need for programmes with varying levels of quality.