A Short History of Islamic Banking & Sukuk Bond Wealth

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Malaysia is a world leader in Islamic finance, beaten only by Iran.

Islamic Banking:— Islamic financing in and of itself derives from interpretations of Islamic law, of which there are many unique types.[1] However Islamic financing differs from conventional interest-based financing; as it seeks to gain profits through socially responsible and moral actions.[1][2] For example industries based around gambling,[1][3] alcohol,[1] prostitution,[3] pork,[3] tobacco[3] and the apartheid state of Israel would be forbidden (notable for their ongoing genocide against the Palestinians). The trade in such financing is also real,[1] and not imaginary.[1] Islamic banking has grown fiscally at some 15-20% per year;[1] providing an alternative to banking for Muslims everywhere. As of December 2012 the industry was worth around $1.3[1]-1.6[4] trillion dollars (in real term assets), but is said to rise to $2 trillion dollars by the end of 2014.[5] Beyond this several sources give differing accounts of it's net worth. Dr. Faleel Jamaldeen, author of "Islamic Finance for Dummies", notes some experts estimate the total assets to worth at least $5 trillion dollars by 2016,[6] whilst the Arab News stipulates a more modest number of around $3.4 trillion dollars by 2018.[7] Islamic financing has so far largely been successful in only a few of the Muslim-majority countries. Iran in 2012 alone had captured 36% (37% in 2014[8]) of the market.[9] In 2014, the UAE had captured 7% of the market, Kuwait 6%, Qatar 4%, Turkey 3%, and Indonesia 2%.[8] Saudi Arabia holds 18% of this market.[8] In 2015 alone, at least $32 billion dollars worth of Sukuk bonds were sold.[10]

Expansion:— Expansion is likely for the foreseeable future, but is dependent upon the interpretations of Islamic law.[1] There is currently no standardisation of religious financial rules at the moment which presents one of the biggest hurdles in the ethical financing objective, which thus explains why it only has been successful in a few Muslim countries.[1] Overseas markets have less clearer rules as well.[1] In addition to this although the UK became the first non-Muslim Western country in the world to adopt the Sukuk Islamic bond, Prime Minister David Cameron (who is part Jewish himself through his great-great-grandfather according to Rabbinical authority "Yaakov Wise"[11]) declared Israeli companies will not be prevented from benefiting from such ventures as it would be "discriminatory"[12] (whilst at the same time maintaining sanctions against Iranians). Nevertheless the £200 million sukuk found tremendous demand, and managed to secure around ten times the funding originally required (at £2.3 billion).[13] The bond is expected to provide a fixed dividend of around 2.036% per year over five years (2% lower than conventional however).[13] Cameron had announced the initial formation of the bond at the World Islamic Economic Forum (WIEF) in London 2013, noting at the time Islamic bonds had increased in value by over 150%.[14] In 2014, however (according to "Worldwide Finance") the biggest markets for Islamic finance are expected to be Qatar, Indonesia, Saudi Arabia, Malaysia and the UAE.[15] Malaysia's bonds have also been attractive to it's agnostic population.[16]

Dubai's laws are entirely Shari'ah based but different from Saudi Arabia's.
Malaysia is a world leader in Islamic finance, beaten only by Iran.

Islamic Banking:— Islamic financing in and of itself derives from interpretations of Islamic law, of which there are many unique types.[1] However Islamic financing differs from conventional interest-based financing; as it seeks to gain profits through socially responsible and moral actions.[1][2] For example industries based around gambling,[1][3] alcohol,[1] prostitution,[3] pork,[3] tobacco[3] and the apartheid state of Israel would be forbidden (notable for their ongoing genocide against the Palestinians). The trade in such financing is also real,[1] and not imaginary.[1] Islamic banking has grown fiscally at some 15-20% per year;[1] providing an alternative to banking for Muslims everywhere. As of December 2012 the industry was worth around $1.3[1]-1.6[4] trillion dollars (in real term assets), but is said to rise to $2 trillion dollars by the end of 2014.[5] Beyond this several sources give differing accounts of it's net worth. Dr. Faleel Jamaldeen, author of "Islamic Finance for Dummies", notes some experts estimate the total assets to worth at least $5 trillion dollars by 2016,[6] whilst the Arab News stipulates a more modest number of around $3.4 trillion dollars by 2018.[7] Islamic financing has so far largely been successful in only a few of the Muslim-majority countries. Iran in 2012 alone had captured 36% (37% in 2014[8]) of the market.[9] In 2014, the UAE had captured 7% of the market, Kuwait 6%, Qatar 4%, Turkey 3%, and Indonesia 2%.[8] Saudi Arabia holds 18% of this market.[8] In 2015 alone, at least $32 billion dollars worth of Sukuk bonds were sold.[10]

Dubai's laws are entirely Shari'ah based but different from Saudi Arabia's.

Expansion:— Expansion is likely for the foreseeable future, but is dependent upon the interpretations of Islamic law.[1] There is currently no standardisation of religious financial rules at the moment which presents one of the biggest hurdles in the ethical financing objective, which thus explains why it only has been successful in a few Muslim countries.[1] Overseas markets have less clearer rules as well.[1] In addition to this although the UK became the first non-Muslim Western country in the world to adopt the Sukuk Islamic bond, Prime Minister David Cameron (who is part Jewish himself through his great-great-grandfather according to Rabbinical authority "Yaakov Wise"[11]) declared Israeli companies will not be prevented from benefiting from such ventures as it would be "discriminatory"[12] (whilst at the same time maintaining sanctions against Iranians). Nevertheless the £200 million sukuk found tremendous demand, and managed to secure around ten times the funding originally required (at £2.3 billion).[13] The bond is expected to provide a fixed dividend of around 2.036% per year over five years (2% lower than conventional however).[13] Cameron had announced the initial formation of the bond at the World Islamic Economic Forum (WIEF) in London 2013, noting at the time Islamic bonds had increased in value by over 150%.[14] In 2014, however (according to "Worldwide Finance") the biggest markets for Islamic finance are expected to be Qatar, Indonesia, Saudi Arabia, Malaysia and the UAE.[15] Malaysia's bonds have also been attractive to it's agnostic population.[16]

Sources

References

  1. ^ a b c d e f g h i j k l m n o p q r s t u v Pak, Jennifer (5 December 2012). Islamic finance faces growth challenges. BBC News. Retrieved 29 June 2014.
  2. ^ a b Ahmed, Imaduddin (7 January 2011). What if the world had been following Islamic financial practices?. The Guardian. Retrieved 29 June 2014.
  3. ^ a b c d e f g h Jamaldeen, Faleel (September 2012). The Forbidden Industries of Islamic Finance. For Dummies (from "Islamic Finance For Dummies" ISBN: 978-0-470-43069-9). Retrieved 29 June 2014.
  4. ^ a b Ajmal, Rachid (19 September 2012). $1.6 Trillion Worth of Assets of Islamic Financial Industry By The End of 2012. Microfinance Loans. Retrieved 29 June 2014.
  5. ^ a b Total Assets Forecast To Surpass USD 2 Trillion By End Of 2014; Islamic Banking Sector Assets To Reach USD1.6 Tln. 1 July 2014. Arab Times. Retrieved 29 June 2014.
  6. ^ a b Jamaldeen, Faleel (September 2012). Ten Reasons the West Should Pay Attention to Islamic Finance. For Dummies (from "Islamic Finance For Dummies" ISBN: 978-0-470-43069-9). Retrieved 29 June 2014.
  7. ^ a b Ghafour, P.K. Abdul (22 May 2014). Global Islamic banking assets to cross $3.4 trillion by 2018. Arab News. Retrieved 29 June 2014.
  8. ^ a b c d e f Islamic Finance Outlook 2014. January 2014. Pg. 4. Kuwait Finance House. KFH Research LTD. Retrieved 4 July 2014.
  9. ^ a b Jamall, Ashruff (2012). Islamic Finance Creating value. Price Waterhouse Coopers. Retrieved 29 June 2014.
  10. ^ a b Dania Saadi (July 25th, 2016). Sukuk issuances to match or beat last year’s $32bn, says Fitch. The National. Retrieved July 30th, 2016.
  11. ^ a b Flanagan, Padraic (12 March 2014). David Cameron speaks of Jewish ancestors including great-great-grandfather and Yiddish novelist. The Telegraph. Retrieved 4 July 2014.
  12. ^ a b Watt, Nicholas (29 October 2013). David Cameron to unveil plans for £200m Islamic bond. The Guardian. Retrieved 29 June 2014.
  13. ^ a b c d Millikin, David (June 25, 2014). Britain's first Islamic bond draws torrent of bids. Reuters. Retrieved 4 July 2014.
  14. ^ a b Cameron unveils Islamic bond plan. 29 October 2013. BBC News. Retrieved 29 June 2014.
  15. ^ a b Top 5 growth markets for Islamic finance. April 23rd, 2014. World Finance. Retrieved 29 June 2014.
  16. ^ a b Wong, Chien Mi (21 May 2014). Malaysia's Islamic bonds lure "agnostic" investors. Finance Asia. Retrieved 29 June 2014.

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