gif Islamic Finance
• Ban on charging interest (Riba) • Ban on uncertainty • Risk-sharing and profit-sharing • Ethical investments which benefit soci- ety
• Asset-backing
Islamic and conventional finance can learn from each other, and the two industries of- ten work together to design new products
Figure 3: Estimated Global Issuance of Islamic Bonds (Corporate and Sovereign) 2007-2010
50 45
40 35 30 25 20 15 10
5 0.00 2007 2008 2009 2010
Source: Standard and Poor’s, Ernst & Young and Kuwait Finance House
Figure 4: An overview of Shariah-com- pliant assets worldwide
Islamic equity funds 2.5%
Islamic mutual funds 3.5%
Sukuk 7.0%
Takaful 0.1%
which they can market. Islamic finance can learn from its conventional counterpart, which has a long standing in the financial in- dustry. Conventional finance can be a valua- ble source for finding out about professional methods and standards.
On the other hand, Islamic finance has de- veloped a niche that conventional finance cannot fit. Figure 1 shows the number of in- stitutions which provide Shariah-compliant products.
The market should not fear the Islamic finan- cial industry, but embrace it, taking advan- tage of the tailored financial products and the Shariah values. Even though Islamic fi- nance is rapidly spreading across the world, there are countries and regions which are still not familiar with Islamic finance. Educa- tion is an important aspect for consideration within the industry. The influential people featured in this list have all written books or contributed chapters, given important in- terviews, and spoken at conferences. They have all contributed to spreading awareness of Islamic finance. They all promote the ben- efits of Islamic finance, and regularly take the time to discuss issues and possible so- lutions within the industry.
Islamic finance is taking on a prominent role in the global financial system, with the es- tablishment of more and more Islamic finan- cial institutions. The development of Islamic financial products and services has also contributed to the industry.
2003
Islamic banking 86.9%
Proof that Islamic finance has spread world- wide is shown by the location of Islamic fi- nancial assets in a range of countries around the world, including Qatar, Thailand and the United Kingdom. The industry will continue to expand within other countries, together with conventional banking institutions, and are providing subsidiaries to cater to the growing market. These will be located in re- gions such as Japan, Germany and China. Figure 2 shows the distribution of Shariah- compliant assets around the world.
2010
Islamic funds 4.6%
Sukuk 11.3%
Takaful 0.8%
Takaful and Sukuk are two sectors of Islamic finance that have played a large part in driv- ing the growth of the Islamic finance indus- try. The industry may be powerful and grow- ing rapidly, but there are still challenges that need to be overcome.
Islamic banking 83.4%
Source: the Euromoney Kuwait conference 16 Global Islamic Finance April 2012
The challenges include the constant changes in the financial environment and the speed of change, the impact of the internet and mobile technology, and the need for an in- ternational focus. Influential people and the decision-makers within the industry need to be creative, innovative and master quality management.
The positive side to Islamic finance today is that it is being accepted and embraced in both Muslim and non-Muslim countries around the world. Our listing of the most in- fluential people in the Islamic finance indus- try shows a wide range of countries where Islamic finance is present.
The value of the Sukuk market is estimated to reach over US $200 billion by 2013, which shows that the market for Sukuk looks prom- ising. Global sales of Sukuk are predicted to rise by nearly 60% in 2012 to more than US $22 billion. One of the problems with Sukuk issuance is that it is more expensive than its conventional counterpart.
However, within the countries with heavy volumes of Sukuk issuance, the influential people in the industry have altered regula- tions to tackle this problem. The majority of Sukuk issuance in 2012 is predicted to emerge from issuers in the Malaysia and Middle East region. Issuance could also come from the United States, Singapore and Indonesia.
However, the Takaful market is also look- ing promising, with a prediction from Ernst & Young of a value of US $12 billion by the end of 2011, and US $25 billion by the end of 2015. Currently the Middle East, North Af- rica region and Malaysian regions dominate the Takaful market. The market is set to ex- pand worldwide, covering regions including Indonesia and the Indian sub-continent.
There are four key ways to expand the Islam- ic financial industry and to ensure a bright future. Influential people within the industry are likely to focus on the following key points throughout their career.
• Providing a diversity of offerings and products
• Humanising Islamic financial services • Creating mutual recognition of Shariah differences
• Building the infrastructure
By looking at the key points in more detail when building the infrastructure, the indus- try could promote the issuance of new Islam- ic licences in order to create an active and competitive environment. The industry could provide a platform through windows in the conventional markets, promoting the option of Islamic finance.
When focusing on the diversity of offerings, equity-participation is important as a way of moving away from the debt-financing in- struments seen in conventional banking. In the future, the industry could develop high- level financial engineering products such as Islamic ETFs, Islamic derivatives and struc- tured Islamic products. The purpose of Is-
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