North Africa is beginning to see more growth in Islamic finance, although the higher cost of Islamic finance products is proving to be a greater hurdle than in the GCC countries, where consumers were less sensitive to cost initially. However, like the GCC where consumers are becoming more sensitive to the cost of Islamic financial products, some banks in Tunisia and Morocco have begun to offer Shari'ah-compliant products which are cost competitive with similar conventional financial products.
During the recent worldwide boom in equities, Islamic finance was seen to be underperforming conventional alternatives, but the credit crunch and slump in equity prices has led to changing opinions about the relative performance and riskiness of Shari'ah-compliant versus conventional investments says Jahangir Aka, senior executive of SEI in the Middle East. The avoidance of the financial sector is just one reason these funds have been more stable than conventional alternatives over the previous year. The greater due diligence and 'buy and hold' investment approach, along with the avoidance of highly leveraged companies, has led to more robust returns in periods of instability in the financial markets. Gartmore, a UK-based investment company, has also pointed out that investors see greater safety in Shari'ah-compliant methods of financing due to the recent volatility and Islamic finance's reliance on 'real assets' to underpin financing.
The lack of market makers in sukuk has slowed the development of a secondary market and made it difficult to determine current value of outstanding sukuk issues. The lack of qualified professionals, as well as scholars, is still currently threatening the sustainability of current growth rates in Islamic finance. This shortage has spurred the development of new academic and professional training schools for Islamic finance professionals. One group of professionals who are entering Islamic finance rapidly is lawyers.
Islamic banking advisor Lahem Al-Nasser argues that many of the new products offered by Islamic banks are nothing more than new marketing methods, like a credit card in Saudi Arabia that earns airline miles. Instead, Islamic banks need to encourage more creativity by not focusing too much on expenditure for new product development or dismissing those who develop unsuccessful products, which he believes "cripples creative thinking". The growth in Islamic finance products and development of new products, however, is not entirely without controversy.
A contributor to CPI Financial discusses the different ways to replicate short selling in Shari'ah-compliant ways.
Despite having great potential for developing a market for Islamic finance, France has been slow to encourage growth in the industry, says a special comment from Moody's Investors Service. In contrast, Kenya has seen its Islamic financial industry growing rapidly as banks begin to offer a growing range of Islamic finance products. India's Islamic finance industry is just beginning to start growing rapidly and some companies like Reliance Money, have begun expanding into the GCC offering Islamic financial products.