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Islamic Finance - Opportunities for global growth

By Daud Vicary Abdullah - February 22, 2011

Blog_bigben_162x250This week finds me in London with another opportunity to present on Basel 3 and Liquidity Management for Islamic Financial Institutions. The fact that there is continuing debate and discussion on this important topic is encouraging. Besides making my usual points regarding the importance of cross-border liquidity for the growth of Islamic Finance on a global scale, I will also be highlighting the fact that the provision of Sharia’a compliant liquidity is not only for the benefit of IFI’s but also for any institution requiring short term liquidity. The IILMCo is not just a reaction to the needs of the Islamic Financial community, but a response to the general requirements for global financial stability. See this as one of the many contributions that Islamic Finance can make in the “post-financial crisis” world.

The needs for continuing work in the fields of  education and perception, with regard to Islamic Finance, have never been more urgent or important. Helping people and businesses to understand the value of Islamic Finance can be a major contributor to growth. However, helping Sovereign Wealth Funds to recognize the availability and acceptableness of Sharia’a compliant investments still remains a challenge. Many of these funds are based in the Middle East and we need to do more to ensure that they play their part in contributing to the global growth of Islamic Finance by ensuring that they divert some of their investments and acquisitions to being Sharia’a compliant ones. If they were to do this consistently over the coming five years, it would not be unreasonable to expect the current level of 1 percent of global assets that are Sharia’a compliant to grow to at least 5 percent very quickly. Then Islamic Finance could claim to be punching its weight.

As always, there is still much to do and not a moment to lose.

Daud Vicary Abdullah is the Global Leader of Islamic Finance at Deloitte and has more than 35 years experience within the finance and consulting industry, working in Asia, Europe, Latin America, and the Middle East. He is a regular commentator in the media on matters relating to Islamic Finance and has written and contributed to a number of books on the subject, including co-authoring the book Islamic Finance: Why It Makes Sense.


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I support the views that the Basel III plays to the strength of Islamic banks which advocates a common equity capital – and well balanced capital structure such as Malaysian Islamic banks and Gulf Islamic banks . for instance IFIs in the UAE, Kuwait and Qatar have scored high capital ratios well above the LCR set by B III.

Do you consider that Islamic Banks could be handicapped when aligning regional regulation with Basel III reforms, and why?

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