Sunday, August 2, 2009

DIFC updates guide for Islamic finance

PHOTO: DIFC's Abdullah (left) and Praesidium senior partner Hri Bhambra
The Dubai International Financial Centre Authority had recently announced the release of the updated version of its 'Guide to Islamic Finance in or from the DIFC'.
Apart from incorporating the new landmarks in the evolution of its model Islamic insurance regulatory framework and operating practises, the latest publication also takes into account the changing overall scenario as a result of the ongoing financial crisis that is gripping the world, it said in statement.
At the same time, it said the publication retains and expands on its original aim of assisting those parties from within the region and outside, who are interested in learning about the rapidly expanding world of Islamic finance.
The publication provides a summary of the underlying concepts in Islamic finance and examines the issues facing the Islamic financial services industry.
The Islamic financial services industry is growing at a phenomenal rate, it noted.
"What emerged as a niche industry has now pervaded almost every major financial market in the world. Markets are seeking to introduce Islamic products under various labels like Islamic Finance, Shariah-compliant Finance, or even Alternative Finance, but whatever title is used, it is without doubt one of the fastest growing financial sectors in the world. Most global banks either have a subsidiary or a division dedicated to Islamic Finance," the statement said.
DIFC Authority chief executive office Abdulla Al Awar said the authority had identified Islamic Finance as one of its major pillars even before it became globally popular.
In recent years, the statement noted there has been a dramatic growth in Islamic or Shariah-compliant financial products, reflecting a number of trends including changes in Islamic law such as the approval in 1985 by the Grand Counsel of Islamic scholars of the Takaful system as the alternative form of insurance written in compliance with Islamic Shariah and the emergence of an international market in sukuk (Shariah-compliant) bonds.
The publication points out that the total size of the Islamic banking industry is currently estimated to be between US$800 billion to $1 trillion, and is estimated to have a global potential of $4 trillion. It is growing at 15-20% per annum and within the next 8-10 years Islamic banking industry is projected to capture half of the savings of the world's 1.6 billion Muslims.
Currently, it said market penetration amounts to an estimated 20% of the Arab population. This figure is expected to rise dramatically and it is expected that within the next decade, 50-60% of the total savings of the world's 1.2 billion Muslims will be in the form of Shariah compliant products.
It also noted that assets under management in Islamic funds are estimated to be between $50-70 billion and the total value of sukuks issued is valued at more than $88 billion, of which $13 billion is listed on NASDAQ Dubai.
DIFC Authority had commissioned Praesidium to develop the publication.

(This story appeared in The Malaysian Reserve on July 27, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

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