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Wednesday, 27 June 2012

Shariah-compliant finance gaining ground in the West

Leading executives at global institution Standard Chartered say that Shariah-compliant banks are on track to boast around half of the region’s banking assets by 2020 - on the back of surging growth which has seen the industry expand by 30 per cent in the region in just two years, according to a report on Tuesday.

Standard Chartered told 7 Days newspaper that Islamic banking now accounts for 25 per cent of the UAE banking industry. 

Potential revenues from Islamic banking are absolutely huge, according to Khalid Elgibaly, head of consumer banking in the region at Standard Chartered. Way of winning client trust and encouraging loyalty are an important factor for investors regardless of their religion, ethnicity, and background and aim to produce a “feel good” factor for the investor. 

Ethical investor method aim to bring in potential clients closer to their own objectives and helps them translate their own political preferences into their financial practices investment portfolios.

“These characteristics if found would make Shariah-compliant finance appealing to non-Muslims as well,” Elgibaly added. 

Islamic finance applies both an ethical screen to investment and also advocates specific ethical approaches to business. Many Islamic scholars have expressed concerns about Muslims building large personal fortunes through conventional finance. Standard Chartered’s global head of private banking, Stephen Evans, believes that ethical investment has become a big driver for investment choices. 

“Making money is fine in Islam, trade is something that is absolutely fine in Islam - it’s the way you trade. “Islamic banking is much respected in worldwide investment circles. We have the Muslim world to thank for the words ‘bank’ and ‘cheque’,” Evans told 7Days on Sunday.
Islamic finance around the world is expected to climb 33 percent from its 2010 levels to $1.1 trillion by the end of 2012, following frustration with conventional finance in the wake of the global debt crisis, consultants Ernst & Young said in a report in November 2011. 

The Middle East has experienced a growth, with assets rising to a projected $990 billion by 2015 from $416 billion in 2010, as new countries open up to Islamic finance, the report indicates. 

Still, the profitability of Islamic banks, which were hit during the global financial crisis by higher tax provisions and operating expenses, may stabilize. Return on equity is at 10 percent against 23 percent in 2006, prompting Islamic banks to focus on repositioning their businesses as well as considering mergers and acquisitions, said Ernst & Young.

(Al-Arabiya News / 26 June 2012)

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