The Islamic finance industry is worth about $800bn globally and is growing at an annual rate of 10 to 15 per cent. The sector’s dramatic growth since 2000, when it was worth $150bn, and profusion of investment products has been fueled by an increasing desire by Muslims for investments that comply with Islamic law. Demand has also been triggered by the big increase in wealth in the Gulf, where growth has doubled since 2002 on the back of the soaring oil price.
FT.com interactive feature explores the main Islamic financial instruments, the key players and where the industry is heading.
Islamic Finance Bubble ?
“It strikes me that as impressive as the growth has been in the past seven years, it corresponds rather precisely with the big Gulf boom driven by hydrocarbon prices. There is much loose talk of huge new Muslim markets, counting up the global number of Muslims – African, Asian, etc. – as potential market numbers (see the articles here). This, like your average « MENA » but really Gulf Fund, playing with regional numbers to inflate potential is utter bollocks. Much boosterism comes from the Gulf, and more from City bankers with a thin understanding of the variations in the Islamic world and the extent to which poorer markets with more liberal approaches to Islam are going to be genuinely willing to pay a premium for services (or be exposed to more risk – although that is more likely to be disguised). Perhaps worth a further discussion, but it strikes me that Islamic finance growth right now is intimiately and almost uniquely driven by asset inflation in the Gulf, that makes everything look attractive.”
The Lounsbury, “Aqoul”