|The Rise of Islamic Banking in a Time of Economic Crisis
How some financial institutions avoid trouble by following the strict rules of the Koran
By Thomas K. Grose, Posted December 10, 2008
Shopping for a business loan during a global credit crisis is tough work even if you’re a fast-growing start-up like Ireland’s Blue Ocean Wireless. And the scrutiny can cut both ways. Blue Ocean, which supplies wireless communications for merchant shipping, was giving a closer-than-normal look at whether possible lenders could be counted on amid the ongoing financial shakeout.
When the company got a $25 million loan this fall, it came from what might seem an unusual source: the Bank of London and the Middle East, or BLME, which strictly follows Islamic sharia law rather than conventional western banking practices. Islamic banking requires transactions be structured in alternative ways since the rules ban interest and trading in debt. Blue Ocean is one of many European companies benefiting from a surge in Islamic financing that’s pushing sharia-compliant banking into the mainstream and extending its appeal to non-Muslims. The sector’s growth comes at a time when the western banking system is caught in a liquidity crisis. Blue Ocean took comfort in the fact that BLME draws on the petrodollar surpluses of Persian Gulf oil producers. “The liquidity was there,” says Blue Ocean’s chief financial officer, Tariq Aslam.
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