Exclusive outtakes from industry leaders
The limited number of Sharia scholars has meant the same
group of men are on various advisory boards which has led to criticism
that people can go “fatwa shopping” and that scholars are in it for the money.
Not so, says Harris Irfan, head of Islamic products at
“We’re not out fatwa shopping,” he said at the Reuters
Islamic Banking and Finance Summit. “We want to work with the
scholar who’s willing to say ‘no’ (to non-Sharia products)”
A study last year by Funds at Work, a consultant for the
fund industry, looked at scholars’ engagement by financial firms
in the Gulf Arab region. It found the top 10 scholars hold about
46 percent of all available positions in the region.
Internationally, excluding the Gulf, the top 10 scholars –
out of 70 active outside the region — hold 58 percent of board
Anyone waiting for Gulf banks to consolidate — a long talked about prospect — can forget about it for now.
With debt markets shut, leaving only pricey equity financing, budding suitors are standing frozen, unable to make a commitment.
Islamic banking is one of the world’s fastest growing financial sectors, according to industry estimates. It has attracted more attention in the aftermath of the global financial crisis as investors are increasingly looking for alternative, ethical ways of investing. This has also intensified a debate within the industry on whether it should move further away from conventional banking, designing products based more directly on Islamic principles.
Global issuance of Islamic bonds, or sukuk, is expected to fall this year from 2009 levels, a recent Reuters poll showed, as the Dubai debt crisis and an expected rise in borrowing costs weigh on market sentiment. In the Gulf Arab region, a funding crunch at Bahrain-based Islamic investment house Gulf Finance House shows that the financial crisis is far from over in the region and that the industry urgently needs to develop new products and business lines to generate revenues.
It’s not just traditional western banks that are hurting — the recession is hitting Islamic finance hard, too.
The industry, which operates according to Islamic law and hence has an in-built conservative investment strategy, is seen as relatively insulated from the financial crisis. But some executives at the Reuters Islamic Banking and Finance Summit are not so sure.