BMB Islamic, which provides Shariah structuring and advisory services, has launched a 244-page guide to the $1 trillion Islamic banking and financial services sector, in a bid to fill what it sees as continued gaps in knowledge about this growing field.
The Global Islamic Finance Report 2010 lists, in exhaustive detail, both the size and growth of this sector as well as looking at more qualitative aspects of Shariah finance.
“Despite the fact that this industry has grown significantly over the last two decades, there remains a shortage of authentic data on the size, growth and performance of each of the institutions involved, and the product range they offer,” the report said.
Shariah-compliant banking in its modern form dates back to the mid-1970s, the report says, flourishing as oil wealth in the Middle East rapidly developed, with the Dubai Investment Bank spearheading development after its founding in 1975. While growth has been strong, the sector has also been hit by the global financial crisis, affecting areas such as real estate, to which Shariah-based banks are typically exposed. There are also remains the issue of whether all Shariah products will pass the approval of all Muslim scholars since some Islamic jurisdictions, such as Saudia Arabia, are typically more conservative than others.
“GIFR 2010 is the first of what will be an authoritative annual account of Islamic banking and finance which is at once scholarly, robust and professionally rigorous. It aims to provide the most accurate figures on the size and growth of the market, with global, regional, institutional and product-level coverage. We believe it is the first such attempt and is bound to be a trend setter in the Islamic banking and finance industry,” said Dr Humayon Dar, chief executive of BMB Islamic and editor-in-chief of the survey.
As reported by WealthBriefing and elsewhere, a number of private banks, including those with origins outside Muslim countries, are offering products compliant with Shariah rules on issues such as the prohibition of interest and gambling. Such rules have driven alternative structures, such as Sukuk, a form of debt instrument.
It is estimated that with volumes of Shariah finance expanding by 20 per cent a year, the industry will be worth around $4 trillion by 2015, but Islamic assets are estimated to account for only 1 per cent of total worldwide banking assets (while the global Muslim population is estimated to be 1.6 billion is around 20 per cent of global population, highlighting considerable future growth potential).
In oil-producing countries alone, Islamic finance will account for around half of all banking assets in next 10 years, according to a report in 2009 by PricewaterhouseCoopers.
According to Maybank, one of Malaysia's largest banks, there are now 614 registered Shariah-compliant institutions in 47 countries, 430 of which are dedicated Islamic financial services institutions. HSBC, BNP Paribas and RBS (to name a few) have all opened Islamic units, for example.
The BMB report said that the top 20 banks in the Gulf Cooperation Countries have seen their combined assets rise by 24 per cent between 2007 and 2008 to $200 billion, with Al-Rajhi Bank of Saudi Arabia ranked top, with $44 billion of assets; Kuwait Finance House in second place, with $38.1 billion, and DIB, of Dubai, third, at $23.2 billion (source: MEED).