|By TAP Staff|The rising popularity of Islamic finance in the West is prompting analysts to conclude that the world is finally recognizing the fact Islamic finance is not just for Muslims and it ready to go mainstream.
Islamic finance received a shot in the arm recently with the move by US investment bank Goldman Sachs to revive plans to issue its first sukuk. In June when the UK issued its first sovereign sukuk, which was 10 times oversubscribed. Similar plans have been announced for Hong Kong, China and other countries.
Islamic finance is one of the few areas of the financial services industry—perhaps the only one—growing at a double-digit pace. Total assets in the sector are expected to reach US$2 trillion this year, a pool large enough for prominent sovereign issuers and banks in the West to take notice.
Indeed, global banks are keen to get a piece of the pie. To do that, they need size and expertise when it comes to structuring deals that adhere to shariah law. This is no small feat, as Goldman Sachs can attest after the bank encountered criticism that an initial attempt in 2011 to launch sukuk securities did not follow shariah requirements.
Zeti Akhtar Aziz, the governor of Malaysia Central Bank, which has been in the forefront of promoting Islamic finance, attributes the growing attraction of Islamic finance to the fact that unlike most forms of traditional credit creation, Islamic finance has to be backed by real assets.
she believes Islamic finance can support the trend seen since the financial crisis of growing trade and investment ties between emerging markets around the world.
“Trade patterns are changing, and there is a greater volume of trade happening between developing economies. This needs to be supported by finance, and Islamic finance because it’s linked to economic transactions… will facilitate this kind of economic activity,” Zeti said in an interview.
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