A forum on Islamic finance held in Tokyo. The remarks given by Hamad Saud Al-Sayari, the governor of the Saudi Arabian Monetary Authority (SAMA), the Saudi central bank focused on the growth the industry has experienced in recent years and the regulatory changes needed for the industry to continue growing. The governor of Bank Negara, the Malaysian central bank, Dr. Zeti Akhtar Aziz provided remarks on the stability of the Islamic financial industry despite the global credit crunch. Remarking on her country's Islamic financial industry's stability during the Asian Financial Crisis in 1997-1998, she said “We are pleased to report that the Islamic financial system demonstrated its resilience to the stress that occurred 10 years ago during the financial crisis". Her comments about the robustness of the Islamic financial industry followed comments by the Bank of Japan governor Toshihiko Fukui that the industry has not faced the stresses that will demonstrate its robustness.
Apart from Malaysia, his comment makes sense: the Islamic financial industry has seen the most rapid growth since 2001, a period of relative stability apart from the recent subprime crisis. In my opinion, however, the credit crisis does not pose much of a threat to the industry; not because it is fundamentally insulated from the conventional financial industry but because oil prices are still high. The industry's growth has occurred during a period in which oil prices, the source of additional liquidity, particularly in the Middle East that has fueled the industry's growth, rose from $20-30 in 2000 to $100 per barrel in 2008. The stability of the Islamic financial industry will face its greatest test if oil prices drop significantly, something not particularly likely unless the credit crunch produces a significant fall in demand across the world.
The Gulf Finance House in Bahrain announced the launch of a Shari'ah-compliant "Energy Bank", which will invest in energy production projects. No mention of any renewable/sustainable energy projects, which could benefit the Islamic finance industry due to greater demand for alternative energy.
The U.K. government will go ahead with plans to issue government sukuk, the first sovereign sukuk to come out of the G8. The Times (U.K.) has an article discussing the growth of Islamic finance in London in light of the recent comments of the Archbishop of Canterbury.
The first Islamic bank in Italy will open later this year and could be part of the London-based European Islamic Investment Bank (EIIB).
Moody's has a new report on the differences, from a ratings perspective, between conventional and Shari'ah-compliant finance.
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