Sharia funding moves into mainstream-compliant savings accounts, deposit
By David Oakley
Published: March 30 2008 22:23 | Last updated: March 30 2008 22:23
Many economists think the growth of Islamic finance, which is estimated at $800bn when investment funds are included, is more about geography than religion. Oil has been the wealth creator in the Gulf, where many of the biggest Islamic banks and richest Muslim investors are based.
Oil wealth has boosted the balance sheets of Islamic banks on the retail side as wealthy individuals increasingly using Shariaaccounts and personal loans. Islamic credit cards are also widely used in the Gulf.
On the wholesale side, the Islamic bond, or sukuk, market is growing in spite of the collapse in confidence elsewhere, although credit spreads have widened.
Geert Bossuyt, head of structuring for the Middle East and Africa at Deutsche Bank, said: “The sukuk market has held up fairly well. Deals are being done, unlike in some other markets, but it is more difficult. We live in a global world so there has been some impact from the credit crisis.”
Arul Kandasamy, head of Islamic financing solutions at Barclays Capital in Dubai, said: “The Bahrain government and Khazanah, the investment arm of the Malaysian government, have both issued sukuk in recent weeks. The market is still open.”
The bond and loan markets are still benefiting from a combination of western companies looking to expand on the back of Middle Eastern money, and Gulf investors looking to put their money to work in markets outside their region.
Sharia finance, in which investors are paid profits or rent rather than interest, has also become competitive as a way of financing as banks and law firms have become more adept at structuring products.
In the west it is London that has realised the potential of Islamic finance. The UK government has led the way in introducing reforms to help the market grow.
So far New York has taken a back seat, partly because of its time zone and partly because of the continuing fallout from the 2001 attacks. Some investors still think of Islamic financing as being linked to terrorist funding.
This could be about to change, however. Bankers say they have mandates to launch Islamic bonds from a number of listed western companies, including one well-known corporate that is registered on the S&P 500 index. US investors are also showing more interest in Islamic finance.
“At some point, some of the big investment managers will set up Islamic funds, both in London and the US,” said Davide Barzilai, senior associate in Islamic finance at law firm Norton Rose. “It might be a private equity house that is looking for new ideas or some other big institutions.”
But, for the time being, London has cemented its position as the leading Islamic financial centre in the west and Muslim fund managers show more appetite to invest in the City and British companies.
Recently the UK’s biggest residential property deal using Islamic finance was sealed. It will turn the Chelsea Barracks, one of London’s prime real estate locations, into luxury apartments. Qatari Diar, a real estate investment company that is an arm of the Qatari government, led the deal, which was worth £1.3bn.
But, more than anything, it is the case of Aston Martin that captures how money from the Gulf is being used to develop the jewels of British manufacturing. James Bond may have saved the world many times over, but Islamic finance has secured the future of one of his favourite cars. allyson comments= (this analogy, quite frankly, makes me ill! James Bond would have figured out what is behind this influx of Petro Dollars, found the culprits, brought them to Justice, and we would have all lived happily ever after. The problem is, James Bond is no longer, Aston Martin is owned by Kuwait, The Archbishop of England likes Shariah, and our CIA and FBI are in bed with the enemies. We are doing little if nothing to stop the rise of this incidious way to spread Shariah law into our lives, and we will see a decline of democracy if this is not stopped now. Wake up! This is more than just making money and bailing out bad investments, this is Islam moving into our lives in a way that we are entangled, and there will be no way to pull out. If you are not concerned, be concerned, be very concerned!
Copyright The Financial Times Limited 2008