That is down from an average annual growth of 19 per cent over the past four years. A recent report by Ernst & Young suggests that growth of Islamic financial holdings will slow in 2013 to 11 per cent or $1.8 trillion. Essential concepts in Islamic finance, such as the ban on usury and speculation, are rooted in the very early days of the religion.Įstimates vary on its true size. The belief that parties should deal with each other equitably and without exploitation was as strong then as it is now.Īccording to the theory, Islamic finance would serve as a pure economic system that would see people treat each other like respected brothers rather than as gullible consumers to be exploited, a common criticism of conventional finance today. Unlike conventional finance, Islamic finance prohibits all forms of interest, as well as investments in industries such as gambling, pork, pornography, alcohol and drugs.Įssential concepts in Islamic finance, such as the ban on usury and speculation, are rooted in the very early days of the religion.
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It was the brainchild of visionary businessman Haj Saeed Ahmed Lootah, who convinced the then emir of Dubai, Sheikh Rashid bin Saeed Al Maktoum, that a new form of finance was needed.īut it is a financial system that is deeply tied to the basic tenets of Islam, going back hundreds of years. The origins of the Islamic finance industry are rooted in the recent past, 1975 to be precise, with the creation of Dubai Islamic Bank in the United Arab Emirates. In the wake of the global financial crisis, Islamic finance has gathered momentum with Shari’ah compliant principles. The real engine for growth of the industry remains the GCC although other centres have not given up trying. Some leading Islamic investment banks have gone to the wall in the meantime and some new kids have arrived on the block. What remains in little doubt is that the industry is still short of enough good talent to go around. Perhaps the saddest development is that a number of senior Islamic investment bankers have given up the game and left the industry for one reason or another. The Islamic investment banking industry, however, does not look too dissimilar to the way it did in 2009 although it has grown in scale during that time. The Eurozone had introduced negative interest rates and global interest rates were at the lowest they have been in decades.
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What no one could have predicted at the time was that the US economy would go into freefall, that the Federal Reserve would pump trillions of dollars of free money into the economy to get it all back on track.īy mid-2014 the Fed was still quantitative easing, although its monthly bond purchases had been scaled back and should be phased out by October 2014. Like other sectors, the industry hunkered down until the worst of the financial tsunami was over. Much of the research work that was undertaken to produce this report on Islamic investment banking was undertaken in 2009 and paints a picture of an industry that was recovering from the severe battering that the financial world as a whole took in the aftermath of the global financial crisis.Īt that time the Islamic finance industry as a whole was on a tremendous growth path that looked like it was about to come off the rails because of extrinsic shocks from the conventional world.