Islamic Finance

Last month, the world's first Islamic Interbank Benchmark Rate (IIBR) was launched. It was the result of a collaborative approach taken by many Islamic financial institutions, industry associations and Sharia scholars to decouple Islamic finance from a conventional western pricing benchmark (Libor). The IIBR is an interbank benchmark that offers a reliable and realistic standard to better measure the cost of funding for Islamic financial institutions.

IIBR brought together more than 20 Islamic finance institutions to create a proprietary Islamic pricing benchmark. It is a major indication to the world that Islamic finance has come of age. The benchmark is designed to be used to price a number of Islamic instruments including common overnight to short-term treasury investment and financing instruments such as murabaha, wakala and mudaraba, retail financing instruments such as property and car finance, and sukuk and other Sharia-compliant fixed-income instruments. It can also be used for the pricing and benchmarking of corporate finance and investment assets.

Link: http://www.thenational.ae/thenationalconversation/industry-insights/finance/benchmark-a-major-step-for-islamic-finance

Fitch Ratings launched its new Islamic portal service yesterday. The ratings agency said it had developed the new service created to showcase Fitch's Islamic rating coverage and research content on a dedicated section of the global website. It combines ratings and research on both Islamic issuers and Islamic issuances in one place. Users accessing the Islamic finance pages are able to get a global view on the Islamic finance rating coverage by Fitch.

Link: http://www.theislamicglobe.com/index.php?option=com_content&view=article&id=1093:fitch-launches-new-islamic-service&catid=6:article&Itemid=38

At the currently ongoing MENA Investment Management Forum undergoing in Doha, Islamic fund managers are debating whether or not convergence with conventional finance is necessarily desirable. Participants are arguing that the first step is for Islamic finance to develop an open architecture whereby there is greater convergence within the industry itself. This would allow the industry to tap into more opportunities in conventional financial markets around the world such as asset financing and trade finance, both areas that need minimal tweaking to become Sharia compliant. Read more about it here:

Link: http://tilt.ft.com/#!posts/2011-10/31751/islamic-finance-converge-not-converge

There is much excitement in the world of Islamic Finance as Central Bank of Oman has announced plans in May to allow Islamic banks to operate from Oman. Oman has been amongst the few countries in the Muslim world with a non-existent Islamic finance sector, as regulations have been slow to come by.

However, this is now expected to change very quickly with two banks: Bank Nizwa and Bank Al Izz have received Islamic banking licenses and reports of several conventional banks also considering opening Islamic banking windows.

Link: http://tilt.ft.com/#!posts/2011-09/29461/islamic-banks-open-oman-2012

A few excerpts from the coverage of the 8th summit of Islamic Finance Services Board (IFSB) in gulfnews today:

Islamic banking and finance is becoming increasingly popular in the West since financial institutions in non-Islamic regions took a closer look at the sector after the global economic crisis. Instruments based on Islamic values seemed more stable and sustainable during the crisis than most vehicles used by the Western financial model.

The global Islamic finance industry is valued at $1.14 trillion (Dh4.3 trillion), as per the Global Islamic Finance Report 2011 published by BMB Islamic in March 2011. According to an estimate by ratings agency Moody's issued last June, the potential for Islamic banking could even reach up to $5 trillion by 2014. Worldwide, there are about 300 Sharia-compliant banks in operation.

The Islamic finance sector in the UK is the biggest in Europe, with London the most important centre for Sharia-compliant banking and financing outside the Muslim world. It accounts for up to $20 billion invested in Islamic assets.

Link: http://gulfnews.com/gn-focus/islamic-finance/islamic-banking-goes-west-1.825718