Islamic finance is about to get its first mega bank if Sheikh Saleh Kamel has his way.
The billionaire chairman of Bahrain-based Al Baraka Banking Group is head of an alliance hoping to launch a $10 billion Islamic bank before year-end. He will have his work cut out. Islamic banks may have avoided the worst of U.S. sub-prime dross, but Islamic banking has risks of its own.
Islamic finance has enjoyed a benign decade. It has been growing at a 20 percent-odd clip since the turn of the century, with assets of $600 billion at the end of 2008. Moreover, Islamic banks avoided the complex collateralized debt polluting most western banks, thanks to Shar’ia restrictions on riba (interest).
Those western banks have been struggling to repair their ravaged balance sheets, with governments often the only (unwilling) investor.