Sep 10 - 16, 20

The Islamic finance industry is becoming one of the fastest growing components of the global financial system, with experts projecting growth rates of between 15% to 20% per annum.

The Middle East region, which has played a pivotal role in the development of the Islamic banking and finance industry internationally, is witnessing a rapid expansion in the market share of its Islamic financial institutions with billions of dollars moving from the conventional banking system to the Shari'a model.

The World Islamic Banking Report, which was developed by Ernst & Young and launched at the 18th Annual World Islamic Banking Conference (WIBC) in Bahrain last November, noted that Islamic banking assets in the Middle East and North Africa (MENA) region increased to $416bn in 2010, representing a five year CAGR of 20% compared to less than 9% for conventional banks. The report also said that as new geographies open up to Islamic banking, the MENA Islamic banking industry is expected to more than double to $990bn by 2015.

No one could have foreseen that Shari'a-compliant banking could grow into the $1.1tn global industry that it has become today. Whether one accepts it as a financial phenomenon or not, the numbers speak for themselves. The success of Islamic finance is linked to a growing population of Muslims who readily deposit their funds with Shari'a-compliant banks, both local and international. Banks have seen mandates increase as the sale of Islamic bonds in the region has risen exponentially to $5.7bn in the year to date, from $500m in the same period last year, and $446m the year earlier, according to Dealogic.

Such a success in a short time prompted many companies and corporations to come up with their own shari'a compliant financial products. One of them which stand out is National Bonds Corporation, UAE. Currently, they have over 650,000 customers worldwide, making them the world's largest Islamic retail saving scheme. Their distinctiveness includes innovative shari'a compliant financial products to help serve the needs of customers from all backgrounds. Customers of National Bonds range from over 200 nationalities. The Mudarbah Fund in National Bonds Corporation seeks to secure its bondholders and investors steady returns through an allocation of its assets to various strategies and aiming to build a highly diversified discretionary portfolio that delivers maximum returns at lower levels of risk while remaining vigilant in preserving capital. Their investment initiatives are also derived from investment objectives of the Mudarabah Fund. and includes investments in education, health, retail, equity sectors etc. National Bonds Corporation has a dedicated Shari'a Board to oversee all financial aspects, including product-related operations and investments. The Shari'a Board is chaired by Dr. Hussain Hamid Hassan, a leading Shari'a scholar who is currently presiding the Fatwa and Shari'a Supervision Boards of many Islamic financial institutions in the United Arab Emirates, and many others overseas.

With oil prices back on the rise, increased cash-flows, liquidity and average per capita income, the major markets in the Middle East continue to be a place of significant interest for regional and international investors. The Middle East has also seen an unprecedented increase in public spending in the recent past. This denotes significant potential for the Islamic finance industry in the region as the leading Islamic financial institutions have strong balance sheets and are well positioned to fund these large-scale developmental projects at a time when the global liquidity pool is shrinking.

There has been a significant increase in the market share of Islamic financial institutions not only in the Middle East region but internationally. The global financial crisis has given the Islamic banking and finance industry a great opportunity - an opportunity to tap into the growing interest in the Shari'ah-compliant finance model resulting from the obvious flaws in the conventional model. This will provide a solid foundation for the future growth of the Islamic finance industry. The growth opportunities are especially strong in the Middle East as the region has been the least affected by the financial crisis.