Saturday, November 22, 2008

Islamic finance and the credit crisis; sukuk issuance to rebound in 2009

The Academy for International Modern Studies (AIMS) released a press release describing the advantages of Islamic finance based on its reliance on real economic activity underlying the financial system. While there are a number of benefits of the Islamic financial system, there are also risks posed by the way it is currently practiced. Specifically, the focus of much of the financing in the GCC on real estate projects leaves many Islamic financial companies overexposed to the real estate market and thus a fall in the value of the real estate could lead to the same types of problems facing the conventional financial system albeit less amplified because the Islamic financial companies do not use huge amounts of leverage that spread and amplified the crisis in the conventional financial system. Islamic finance is not just for Muslims either; the underlying ethical screens are widely held by many non-Muslims as well
and can be expanded to include environmental screens as well. The head of the Islamic law program at the New York City Bar adds his thoughts on the potential for Islamic finance to avoid crises like the one currently experienced by the conventional financial system.

Sukuk issuance will be slow until the second half of 2009 according to Badlisyah Abdul Ghani, CEO of CIMB Islamic. The head of Middle East capital markets at BNP Paribas expects the sukuk market to be $50 billion in 2009. The Wall Street Journal's Deal Journal Blog interviews a lawyer at Clifford Chance about Islamic finance generally and sukuk specifically.

The U.K. government will offer a Shari'ah-compliant pension option for people who do not already have a pension. An article describes Shari'ah-compliant banking in Kenya.

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