Islamic Finance Expanding Fast
In this second article of the series, Dr Mohammad Manzoor Alam expresses satisfaction over the worldwide growth of Islamic finance.
A happy trend that has held steady for years, including 2012, is the steady growth of Islamic banking and finance. By 2011, it had financial assets around the world worth $ 1.3 brillion, which was a 150 percent increase over five years.
According to Global Islamic Finance Report 2012, the Islamic banking industry has grown to $1.35 trillion. Ernest & Young’s Islamic Banking Competitiveness Report 2013 says that Islamic banking assets held by commercial banks would cross $ 1.8 trillion this year.
The top 20 Islamic banks hold 57 percent of the total global Islamic banking assets and are concentrated in seven core markets: Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, Malaysia and Turkey. Egypt, Iraq and Libya are well on their way.
Yet other countries ripe for expansion are Australia, Azerbaijan, Nigeria and Russia. According to one report, Gordon Bennie, Partner MENA Financial Services Leader at Ernest and Young, has said: “Ten of the world’s 25 rapid growth markets have large Muslim populations and present significant growth prospects for Islamic banking. The fast growth economics now form almost half of the global GDP and remain the main contributors to overall growth. The outlook for Islamic banking in these markets is bright.”
That is exactly what we have been saying for years: Outlook for Islamic banking and finance in the fast developing economies is bright. Over the years we have held seminars, symposia and talked to government, business and industry leaders, especially those from banking and finance industry, in India and other countries to promote this idea.
Present and former Reserve Bank of India officials have led a sympathetic ear to these presentations. However, banking laws in India are not conducive to Islamic banking here. Such laws need amendment to facilitate Islamic banking. RBI officials are generally in favour of such legislation keeping in view the huge benefits that would accrue to the country.
The problem is that far more sweeping amendments and new legislations are on the cards in other areas of life, but there is very little consensus on the issues. Legislation itself has become a contentious issue, whatever the subject.
In the prevailing climate of political disarray, a new law on Islamic banking may take more time to become a reality. Meanwhile, options for integrating essential features of Islamic banking within the traditional banking system are under consideration. However, as a country we will not have the full benefits of Islamic banking without a full-fledged Islamic banking system in operation. g