Capitalization of IFIs:
"Preliminary estimates for the sector (but not individual banks) suggest that most are relatively well capitalized but most still have relatively small market shares. Moreover the rate of growth of Islamic bank assets and of funds placed in Sharia-compliant securities and funds is likely to be significantly slower than many predicted in 2008 as slower growth and tighter liquidity restrict the funds to be invested."Impact of asset prices on Islamic finance:
"The core of Islamic finance stipulates that financial transactions should be backed by real assets - In practice, real estate and sometimes commodities. As a result, Islamic banks are greatly exposed to the ongoing property sector downturn and a phase of price correction especially in the GCC. Thus any stress scenario should factor in at least another 40% drop in property prices in Dubai and considerable drops in other markets. Islamic banks operating in advanced economies like the UK or the US are also exposed to such property declines. However, at least in the U.S. the community banks focused on Islamic finance may suffer fewer delinquencies than their counterparts given a reluctance to lend to subprime borrowers and lack of securitization."Exposure to global credit markets, liquidity and Shari'ah-compliance issues:
"The absence of liquid Sharia-compliant asset classes does create a challenge to managing liquidity among the Islamic financial institutions. Moreover many securities are based off of libor providing a vulnerability to global credit conditions. Following the liquidity crunch, global sukuk issuance worldwide reportedly declined to $20 billion in 2008, compared with more than $40 billion a year earlier. Nonetheless, although the liquidity crunch of 2008 and pressure on most asset markets contributed to a drop in the global level of sukuk issuance (as it did to conventional bond issuance and equity public offerings), it was not the only factor. Concerns about the Sharia compliance of several sukuk structures contributed to lower demand even before liquidity conditions worsened in the gulf. This uncertainty as well as the regulatory issues will be a check to growth until resolved."
- Saeed Jawed Ahmad, a Saudi Arabian-based Islamic banker has an interesting commentary about the differences between conventional and Islamic finance.
- Islamic mortgage providers Amlak and Tamweel are expected to have their merger approved by shareholders. Amlak sukuk are currently trading at about 62 percent of par value as common share trading has been suspended and the government took control and the companies' lending was stopped.
- Dubai World may sell a minority stake in its ports businesses, DP World, to private equity firm Abraaj Capital. A dilution of the Dubai World stake could hurt the credit rating of the company because it would reduce the likelihood of government support according to Martin Kohlhase, an analyst at Moody’s in Dubai. This could hurt the prospects of holders of the company's $3.5 billion sukuk.
- Malaysia hopes that the easing of restrictions recently will allow it to attract a few larger banks providing Islamic financial services.
- AFP has a short summary of the IFSB summit, but confuses one fact about the prohibition of riba in Islamic finance with the prohibition of gambling (maysir). Arab News has a more complete summary with additional commentary.
- Mawarid Finance and Al Arabiya launched an Arabic-language portal for information on Islamic finance.
- Shariah-Fortune, a relatively new, UAE based informational website on Islamic finance, released a study showing that the Middle East leads the industry overall and Malaysia is the leading country in Asia.