Tuesday, April 14, 2009

Islamic finance must resolve inner tensions: FT

Proponents of the US$800 billion (RM2.87 trillion) industry argue that the prohibition on dealing in interest has saved Islamic institutions, preventing them from investing in all the dubious structures that have brought down high-flying international institutions, argues a recent article in the Financial Times.
A small idea is developing into a big hope in the Middle East. It is that the answer to the global financial crisis lies in Islamic finance, it said.
The article, entitled "Islamic finance must resolve inner tensions", goes on to say one cheerleader for Islamic finance is Humayon Dar, chief executive officer of BMB Islamic, a subsidiary of The BMB Group, the global alternative asset management company.
He told the UK-based newspaper that he was starting to worry about his job at the end of last year because of the changing economic climate, adding "But I’m pleasantly surprised. The inquiries we’ve been receiving are numerous."
However, the article noted that many of the Gulf’s Islamic banks have not been immune to the financial crisis — the liquidity squeeze in the region has put pressure on these banks just as much as their conventional counterparts, adding that the volume of sukuk, or Islamic bonds, has dramatically declined, though predictions abound that it will take off again later this year.
"But it is true that Islamic banks have been relatively protected because they had no exposure to securitised debt-based assets.
"This fortunate condition, however, may be due to the immaturity of the industry. The financial wizards who flocked to Islamic banks in recent years had not yet engineered the synthetic structures that would pass muster with sharia (Islamic law) scholars, whose job is to sign off on the probity of products," the article argues.

No comments: