Islamic finance shrugs off global banking worries

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InterAksyon.com
The online news portal of TV5

DUBAI - Despite negative spillover effects from the Euro zone debt crises and various scandals at Western banks, the Islamic finance industry celebrates a comeback.

According to Kuwait Finance House, the Gulf region's second largest Islamic bank by assets, the global volume of issued Islamic bonds reached 66.4 billion US dollars in the first half- year of 2012, representing a year-on-year growth of 40 percent. The largest share of global issuances took place in Malaysia, which has been traditionally a hotbed for Islamic bonds, known as sukuk.

"This is the biggest year for sukuk simply because supply is finally catching up to demand," John Sandwick, wealth manager at Islamic asset management firm Safa Investment Services in Geneva, said in an e-mailed interview with Xinhua.

In addition, "The sukuk market is finally hitting its stride since substantial standardization by Islamic finance organizations such as AAOIFI, the Accounting and Auditing Organization for Islamic Finance."

Recently reported results of leading Islamic financial institutions have also sent positive signals. Dubai Islamic Bank, the oldest regulated Shari'ah-compliant bank in the Gulf Arab region, reported for the second quarter of 2012, net profit reached 310 million Dirham (84.53 million US dollars), representing a quarter-on-quarter increase of 27 percent.

Bahrain's largest Islamic investment bank Gulf Finance House or GFH, which was hit badly in the wake of the Gulf real estate crisis, swung back to profits in 2011 and continued to grow in 2012. In the first half-year, GFH generated a net profit of 5.7 million US dollars, up from 0.7 million US dollars in the same period last year.

Meanwhile, the central bank in India announced in mid-August it will examine whether legalize Islamic banking shall be legalized in the country. A fifth of India's 1.1 billion total population are Muslims. Kenya has ambitions to become an Islamic banking hub in East Africa, while the central bank in Uganda has likewise taken steps to expand Shari'ah-compliant banking in the country.

Global consultancy Ernst and Young, Islamic finance is on the way to reach a global volume of 1.1 trillion US dollars in 2012, representing an compound annual growth of 20 percent since 2006. Once called a niche marker for very religious Muslim investors, Islamic banking is moving at stop-watch speed to become a mainstream industry which is not only dedicated to the Middle East and the Far East, but globally

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