Living in perfect harmony has been saved
Living in perfect harmony
ME PoV Fall 2015 issue
The growth of Islamic banking has outstripped that of conventional banking in recent years with total Islamic banking assets crossing the US$1.5 trillion mark in 2013. The widely held expectation that this superior growth record will continue is understandable given that approximately one-sixth of the world’s population is Muslim–most of which is based in the Middle East and Asia. Taking note of the demand, a number of western countries have recently started allowing Islamic banks to operate in their respective jurisdictions. The UK became the first leading western country to issue a government Sukuk (Islamic bond.) The first full-fledged Islamic bank in Germany was launched earlier this year; while Japanese regulators are considering issuing regulations that will allow Japanese banks to provide Islamic finance products in Japan.
Yet, despite the increased interest, Islamic banking penetration in non-Muslim countries has been slow as Islamic banks find it difficult to expand into different jurisdictions and face regulatory and Shari’a complications in terms of approvals. Islamic banks are also finding it challenging to cope with the evolving global banking environment and making appropriate rules and regulations to cope with these changes while still remaining competitive with their conventional counterparts. Additionally, the industry lacks consistency in product structures and investment practices that adversely affects its credibility, reputation, perception and regulation capabilities.