Manama: Islamic banking can no longer claim immunity from the global financial crisis now that it is hitting the industry’s main source of funding and property values in the Gulf Arab region.

The industry escaped the immediate fallout from the crisis as its ban on interest and its lack of structured products prevented it from investing in the assets that turned toxic for conventional banks.

In a report issued last week, debt rating agency Moody’s said Islamic financial institutions in the Gulf showed strong resilience during the global financial turmoil, but that they are not risk-immune due to a shortage of liquid instruments and the lack of an Islamic interbank market.