THE LANDSCAPE OF ISLAMIC
FINANCIAL INDUSTRY
Mohammad Farrukh Raza
Managing Director – IFAAS – UK, France & Bahrain
4th Biennial International Business, Banking & Finance Conference
University of West Indies, Trinidad - 24th June 2011
©2011
IFAAS.
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rights
© 2010
IFAAS.
rightsreserved.
reserved.
HISTORY OF ISLAMIC FINANCE
 The underlying principles of Islamic finance have existed for centuries.
 They were widely practiced in various forms of business until the advent
and dominance of modern interest-based financial system.
 The Islamic economic system had its renaissance in form of
modern Islamic finance in 1960’s and since then its appeal is
capturing varied and growing audiences.
1980’s
Growth
started in
1960’s
Islamic
First
countries
contemporary
experience in
Egypt
2000
Innovation and
internationalisation
WHAT IS ON OFFER TODAY?
 Banking
 Retail
 Investment
 Corporate & Commercial/SME
 Sukuk (Asset based Islamic securities – sovereign & corporate)
 Asset Management
 Equity Funds
 Real Estate Funds
 Exchange Traded Funds
 Takaful (Islamic insurance & reinsurance)
 Structured & Project Finance (infrastructure, aviation, shipping,
real estate etc)
 Private Equity, Venture Capital & Syndication
 Microfinance
THE GLOBAL ISLAMIC FINANCE MARKET
The assets of Islamic financial industry have doubled in 4 years and the
sharp growth trend continues despite the market shocks.
Global Islamic
Finance Report
2011 has
estimated the
current size of
Islamic finance
industry to be
US$1.4trillion
with a potential
to reach
US$4trillion in a
few years with
current rate of
growth
ISLAMIC FINANCE IN THE EAST
 The majority of Muslim countries have rapidly growing Islamic
financial markets
 Malaysia and the GCC countries are leading the way in rapid
transition to Islamic finance
 A number of emerging economies and developing countries
are entering into Islamic Finance
 Several non-Muslim countries like the UK, Luxembourg,
France and South Africa have already built a significant edge
and many others like Japan, Brazil, Russia, Australia, China
and India are joining the race
 The main focus of this presentation will be on Islamic Finance
in the West due to the relevance with Trinidad & Tobago and
the CARICOM region
ISLAMIC BANKING IN THE WEST
Banks with Islamic offering in
the UK
Banks offering Islamic products & services in western countries
SUKUK (ISLAMIC BONDS/SECURITIES)
 London Stock Exchange has 31
Sukuk listings worth of US$19bn
 Luxembourg has 16 Sukuk
listed worth of US$7bn
 Nasdaq Dubai has 16 Sukuk
listings for US$11bn
 GE Capital was the first US
corporate to issue a Sukuk
 World Bank IFC issued a
US$100M Sukuk
 First French corporate Sukuk of
€1bn to be issued in 2011
ISLAMIC FUNDS & INDICES
 Dow Jones Islamic Market Indexes
 FTSE Islamic
 S&P Shariah Indices
 MSCI Islamic Global Indices
Source: Ernst & Young
INTERNATIONAL KEY PLAYERS
WHY THIS GROWTH IN THE WEST?
Political/strategic drivers
 Strategic positioning of market places/competition
 Fostering existing and establishing new trade links
 New business opportunities
 New and fresh capital, investments and funding channels
 Diversification
 Financial inclusion
Commercial drivers
 Fulfilling customer demand/new customer acquisition
 Competitive advantage
 Product, asset, risk and income diversification
 Customer loyalty/retention
WHY THIS GROWTH IN THE WEST? (CONT’D)
Technical drivers
 Different way of doing business
 Resilience of the model and structures
 Different type of risk with competitive returns
 Access to new liquidity
 More conservative approach means more robustness
Moral drivers
 Equitable, fair and sustainable alternative
 Universal values in common with the humanity
 Ethical appeal for Muslims and non-Muslims alike
 Supports real economy and creates new opportunities
 Does not discriminate anybody
CASE STUDY - FRANCE
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Strong political will driven by the finance minister
Strategy to catch up with the UK in terms of Islamic finance
Aim to position Paris as the Islamic financial hub in the west
Target of raising €100bn of fresh capital
Teamwork between all stakeholders propelled by Paris Europlace
Commission for Islamic Finance
No regulatory hurdles
Majority of tax issues resolved by way of gradual tax reforms
introduced in the financial acts
2 applications for new Islamic banks in progress
First corporate Sukuk of €1bn anticipated later this year
First retail banking product launched last week
Some investment and asset management products already available
RELEVANCE TO TRINIDAD & TOBAGO
 Strongest economy in the region
 Potential for becoming the regional financial hub with a
bigger, diversified and comprehensive offer
 Attracting new inward investments from cash rich countries
 Possibility of funding major infrastructure projects
 Access to new markets
 Domestic primary market of a sizeable local Muslim
community
 A real alternative for the wider community
 Opportunity of delivering something new, different and good
to all Caribbean communities regardless of faith
CHALLENGES
 Lack of awareness amongst the stakeholders and customers
 Myths about Islamic finance:



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It’s too difficult and complicated
It’s only for Muslims
It promotes terrorism
There is no demand for it as all Muslims are already banked
 Regulatory and taxation issues
 Human capital
 Institutional questions:

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Do we really need it?
What if it doesn't work?
How do we get it right?
What is my exit strategy?
Where can I get the right help from?
THANK YOU
farrukh.raza@ifaas.com
www.ifaas.com