Global Trends In Islamic Finance
Annual Islamic Finance Conference
July 3 2013, Mombasa, Kenya
Overview
+ Shameless Advertisement
+ Trends (7 Dichotomies)
+ Questions
+ Bonus Slides?
– More Dichotomies
– Ugly Statistics
Shameless Advertisement
+ World’s 3rd largest financial data vendor
+ Founded September 1978
+ 1990 released first non-US data
+ 1996 listed on NYSE
+ 2009 dual listed on NASDAQ
+ Great Islamic investment (debt to capital)
FactSet Services
+
+
+
+
+
+
+
+
+
+
Broker Research
Corporate Activism
Corporate Governance
Economic
Estimates
Events
Financial Entities
Fixed Income
Fundamentals
Global Filings
+
+
+
+
+
+
+
+
+
+
+
Market Aggregates
Mergers
Mutual Funds
New Issue
Ownership
People
Private Company
Private Equity
Research
Transcripts
Venture Capital
Recent Recognition
+ 2011, Inside Market Research names us “Best
Research Provider”
+ 2011, Ranked 60 by Forbes on “America’s Best
Small Companies” list
+ 2009, Received PilotHouse Innovator Award from
Nemertes Research
+ 2009, Ranked 59 by Business Week’s InfoTech’s
100
+ 2009, Best Analytics provider, Inside Market Data
+ 2007, Named to Deloitte Tech Fast 50
Dichotomies
-Mutually Exclusive
-False Dichotomy
-Top 7 – Here they come!
Source: Wikipedia
#1
+Prophet vs Profit
– Why do we participate in Islamic Finance?
– Why do others participate in Islamic Finance?
– Does everyone have the same motivation?
#2
+Islamic vs Participatory
– How should Islamic financial institutions be identified?
– Does a rose by any other name smell as sweet?
– Islamic? Participatory? Cooperative? House? Ethical? “Bank”?
#3
+Apple vs Halal Foods
–
–
–
–
Intra vs Extra-investment?
Halal Foods 560 b per year
Islamic Finance valued at: 1.8 t
Dow Jones Industrial Market Capitalization 4.4 t; Nasdaq 5.5 t; S&P
500 14.9 t
– Nairobi Stock Exchange Market Capitalization 1.7 t
– Apple Market Capitalization: 372 b; Google 292 b
#4
+Inter vs IntraBenchmarking
– LIBOR? vs IIBR?
– IIBR must always be higher than LIBOR?
#5
+Growth vs Profit
– Growth rates of 15% per annum for years
– ROE was 12% in Islamic Banking vs 15% in Conventional
– Islamic Bank Challenges
•
•
•
•
Subscale Operations
Asset Quality
Negative Operating Income
Weak Risk Culture
Source: E&Y Competitiveness Report
#6
+SEA vs Gulf
–
–
–
–
–
Who will influence global Islamic markets the most?
Who speaks for Islamic Finance?
Who sets the standards?
Who will train the next generation of scholars?
Who will Africa follow? Or will Africa forge its own identity?
#7
+Data vs Relationship
– How are decisions made in Islamic Finance?
– How are decisions made in places where Islamic Finance is
practiced?
Break
Questions?
Joe Nehila
Content Development
jnehila@factset.com
*Were they true or false dichotomies?
Bonus - Dichotomies
+Windows vs Fully Fledged Banks
+Core vs Varied Offerings
+Niche vs Alternative
+Retail Banking vs Investment
+Lower Class vs High Net Worth
+SME vs Micro
Bonus – Dichotomies 2
+Informal vs Formal Systems
–Not just informal economy, Cooperatives,
Credit Unions, SME Banks, Microfinance
Banks, etc.
+Mitigation vs Contract Law
+Centralized vs Disbursed Authority
+Top Down or Bottom Up
Bonus - Stats
+2010 new equity = $387 b
+Most from Emerging Market (60%)
+Global Stocks $212 t (2010)
+$96 t foreign investments
Source – McKinsey, Aug 2011 Mapping Global Capital Markets
Bonus - Stats
+Africa on the Map?
–“Rest of World”
–Egypt Only
–GIFR
• Kenya 22 (down from 17)
• UK 12; US 15
• Sudan 9; Egypt 14; SA 21; Algeria 27,
Tunisia 28; Nigeria 32, Senegal 36;
Gambia 42, Mauritius 43
Source – GIFR 2013; E&Y Competitiveness Report
Bonus - Stats
+Banking
–Bahrain, $47b vs $13b (27%)
–Egypt, $215b vs $8b (3.8%)
–Malaysia $579b vs $106b (19%)
–Indonesia 4%
–Kuwait 33%
–Pakistan 6%
–Saudi Arabia 49%
–Turkey 5%
–UAE 17%
Source –E&Y Competitiveness Report
Bonus – Math Problem
+Problem
–
–
–
–
–
–
$212 t total finance value
$2 t Islamic value
$210 t conventional value
.9% value Islamic to Conventional
CAGR Islamic 20%
CAGR conventional 1.5%
How long will it take to:
5%
7.5%
10%
20%
50%
Bonus – Math Solution
+Solution
5%
7.5%
10%
20%
50%
10 Years
13 Years
15 Years
19 Years
24 Years
Realistic (2.75% Conventional, 15% Islamic Growth)
5%
15 Years
7.5% 19 Years
10%
21 Years
20%
28 Years
50%
36 Years
Bonus – Math Prediction
+Prediction
-1.6 billion Muslims, 23% of world population
-Varying levels of adherence
-Attractive to non-Muslims
-Growth Rates:
Islamic 15% 7 years, 10% 10 years, 7% 15 years, 5% thereafter
Conventional: 2.5% 2 years, 3% 3 years, 5% 4 years, 3.5% thereafter
5%
7.5%
10%
12.5%
15 %
20%
50%
34 Years
(World Takes Notice)
62 Years
(Significant Waypoint)
83 Years
(Important Achievement)
98 Years
(Target)
110 Years
(Realistic Objective)
130 Years
(Stretch)
194 Yeras
(*Unlikely unless rebranded as
an alternative and ethical)