2012 podcast kaur islamic finance

Islamic finance – is it here to stay?

28 June 2011

The article at a glance

The first Islamic Finance Forum held at the School detailed the progress being made in this rapidly moving financial sector Leading figures …

Mosque crescentThe first Islamic Finance Forum held at the School detailed the progress being made in this rapidly moving financial sector

Leading figures from the world of Islamic finance formed a first for Cambridge Judge Business School with a forum to discuss this rapidly growing sector under the heading ‘Islamic finance: is it here to stay?’

Baljeet Kaur Grewal of KHF Research said that Islamic finance had been growing over the last four years at the rate of 15 per cent per year.

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“We are looking at an industry that has seen a growth in assets of about $1 trillion. Our conservative estimate is for the industry to grow to $1.6 trillion by 2020. The impetus for growth is coming from vast developments in emerging markets predominantly in the Middle East and Asia.”

There is also a post-financial crisis move towards ethical finance and growing demand for Islamic instruments in an industry that is “fairly robust and positive in its growth trajectory”.

According to another member of the forum, Farmida Bi of International Securities Group, Norton Rose, Islamic finance is an alternative to conventional banking and is being explored by a growing number of countries.

“Islamic finance offers an addition to the conventional markets and an additional source of liquidity. It therefore makes sense for institutions in countries like Russia, the UK and other countries to be able to tap both the Islamic market and the conventional market because it offers them a broader range of investors and, combined, would allow them to raise more finding or offer them better terms.”

Richard Thomas, Chief Executive Officer of Gatehouse Bank, has 30 years in the sector and stressed the need for a level playing field across the sector so that all Islamic banks should have the same constraints, costs and regulatory environment as their competitors.

“The conventional system rewards debt and penalises equity through the mechanism of tax or accounting or regulatory capital. The Islamic banks either need to pay more tax on some of their products or need to carry more capital than the conventional banks.

“The levelling of that environment is important and below that basic regulation of things, like depositor insurance, where Islamic banks cannot quite see the world in the same way that conventional banks do.”

The forum was attended by MBA students, alumni, academic staff and industry professionals, and could be the forerunner to the establishment of a more structured research establishment in Islamic finance.