Islamic Finance Development Indicator launched in Dubai

The ICD-Thomson Reuters Islamic Finance Development Indicator, or IFDI, was officially launched on Tuesday in Dubai. The indicator is a numerical measure representing the overall health and growth of the Islamic finance industry worldwide.

Islamic Finance Development Indicator launched in Dubai

Islamic Finance Development Indicator launched in Dubai

 

The IFDI was officially launched by Khaled Al Aboodi , chief executive officer, Islamic Corporation for the Development of the Private Sector , at the Global Islamic Economy Summit (GIES) to expand the scope of Thomson Reuters’ universe of Islamic finance content, research and news analysis.

“The indicator is designed to assess how well the industry has addressed its religious, economic, legal, ethical and discretionary responsibilities. It provides simplified, quantified, development, knoweledge, corporate and social responsibility, governess and awareness,” Al Aboodi said.

The concluding day of summit also witnessed the findings from IFDI, developed in collaboration with the Islamic Corporation for the Development of the Private Sector , or ICD, the private sector development arm of the Islamic Development Bank , or IDB. As per the analysis, the size of the Islamic finance industry globally was $1.35 trillion in 2012.

This was based on a bottom-up analysis of disclosed financial statements of Islamic institutions. The largest components of the industry were Islamic banking with $985 billion in assets, and sukuk with $251 billion . Russell Haworth , managing director, Middle East & North Africa , Thomson Reuters, said:

“The IFDI’s findings demonstrate the size and breadth of the Islamic finance economy and will serve as a critical reference point for its growth going forward. The ability to accurately size the Islamic finance industry, based on disclosed financial information as opposed to assumptions and conjecture, is key to providing meaningful analysis aimed at developing the industry. ” The findings also highlighted that Malaysia was the largest Islamic finance economy, with total Islamic finance assets of $412 billion and has the largest sukuk market, valued at $171 billion and the second largest Islamic banking market, valued at $194 billion . The Saudi Arabia was second in terms of Islamic finance assets, with assets of $270 billion and the Kingdom also has the largest Islamic banking market, with total Islamic banking assets of $217 billion . Further there are 1,003 financial institutions operating in the Islamic finance space. “Accurate information on the size of Islamic financial industry, its institutions and performance, based on bottom up analysis, is one of the key outputs of IFDI.

Unlike other sources that are focused on specific countries or regions, or utilise sample testing and assumptions to develop their estimates, the IFDI provides accurate information on the entire Islamic finance space and its sub-components,” added Al Aboodi . For more stories on investments and markets, please see HispanicBusiness’ Finance Channel   Source: Khaleej Times (United Arab Emirates) http://www.hispanicbusiness.com/2013/11/27/islamic_finance_development_indicator_launched_in.htm

Islamic finance gaining growth

DUBAI — The Islamic finance industry is gaining growth with each passing day due to its rising demand, and the Middle East has been playing a key role in developing the sukuk market, a top banker said.

“The Islamic finance industry has a long way ahead and it needs to address the concepts such as financial planning and estate and succession planning rather than just products and services,” Fares Mourad, managing director and head of Islamic finance of Switzerland’s Bank Sarasin & Co Ltd, told Khaleej Times in an interview.

He said one of the issues slowing the industry’s growth globally is the scarcity of professionals. “Only Indonesia alone needs annually 200,000 qualified Islamic bankers for the coming five years. This shortage is witnessed in every country in which the industry is active and has not only an effect on its growth but also on the scope and quality of the services provided,” Mourad said. Excerpts from the interview:

How do you see the future of Islamic finance? Do you think the Middle East can play a lead role in developing the sukuk market?

The Middle East is the birth place of Islamic finance and ever since the area has contributed to the development of this field. New products and services are emerging every day, supported not only by innovation but also by the ever-growing demand. The drivers behind the birth and growth of the industry are not only intact but also gaining growth.

What are the plans of Bank Sarasin-Alpen to promote Islamic finance in the Middle East?

We are offering Islamic finance through from a conceptual angle, and are not focusing on a specific range of products or services. To illustrate this, Bank Sarasin in Switzerland is the first bank which combined its long standing knowledge in private banking since 1841 with Islamic finance and thus offering a full range of Islamic private banking spanning from estate and succession planning to liquidity management, structured products, portfolio management and provide leverage if and when needed. In short, we are like a shopping mall were an investor can find all his needs in relation to Islamic private banking without having to cross the street to acquire a service not found in one bank but with another. As a further illustration, we are the first to address the issue of Islamic financial planning and estate and succession planning — these are concepts and issues not related to products but to needs and requirements of every investor.

Do you have a plan to promote sukuks or Islamic finance in the region?

Sukuks are a domain of investment banking and as such we are only active in this area as an advisor and would facilitate investors’ requirements to invest in sukuks. Having said that, and as a general elaboration to your questions, while sukuks and the various structures through which they have been created, offer a wide range of flexibility and innovation alike, the area still provides a fertile ground for more innovation in which investors and issuers requirements are addressed.

How do you analyse Islamic equity and indices performance over the last year to illustrate that diversification remains key for investment without compromising Islamic principles?

 

For the last years and even prior to the financial crises, Islamic equities outperformed conventional equities. Through the application of Shariah screening, investor would not only tend to invest in companies focusing on their core activity to generate profit and have a solid balance sheet, but would also address issues related to environment and social responsibility. Thus the investments tend to be sustainable as well. This combination of the various elements has made some conventional investors also follow the Shariah guidelines in their investments. Market development has shown that such investments (and applying the modern portfolio theory to them) have indeed been blessed.

What are the main challenges for Islamic finance? How do you address the challenges facing Islamic mutual funds to achieve growth and performance?

Islamic finance is still in its infancy. However it has to be stated and be clear to everyone, that the industry has achieved a lot. Since the time about 50 years ago when the first Islamic bank was established, the industry offers many products and services spanning from cash management, portfolio management, structured products…etc. Despite this, the industry has a long way ahead and it needs to address new concepts such as financial planning and estate and succession planning rather than just products and services. Besides, the industry needs to address issues related to sustainability, environment investments, and social responsibility.

Managing the Islamic wealth cycle through the entire process of wealth acquisition, preservation and distribution is a key challenge. What can you say about this?

I am delighted you posed the question. We see the challenge and we are dedicated to assist our valuable clients in the process. This prompted us to organise the Islamic wealth management forum last month with a focus on Islamic financial planning. In short a full day is dedicated to show how this issue is addressed from various angles; we have grouped bankers, scholars, lawyers and consultants to speak at this event. With knowledge you can assess your current situation correctly, draft a plan and monitor its realisation and be aware of any changes or amendments need to be done while implementing and heading towards your targets. This process reduces many challenges to the levels of obstacles.

Do you think the shortage of professionals leads to low-quality asset management and lack of transparency in banking?

One of the issues slowing the industry’s growth globally is the scarcity of professionals. Recently this issue was raised loudly by the Indonesian Minister of Economy who stated at the Islamic banking conference in Singapore that Indonesia alone needs annually 200,000 qualified Islamic bankers for the coming five years. This shortage is witnessed in every country in which the industry is active and has not only an effect on its growth but also on the scope and quality of the services provided.