The world’s roughly 1.5 billion Muslims need a way to bank and invest according to Islamic Sharia law, which bars receiving or paying interest on loans or deposits. A massive market infrastructure is being built to facilitate clients that include wildly rich Persian Gulf oil tycoons.
Yet isn’t this industry being pirated by the Bank of Japan, Federal Reserve and other central banks destined to offer interest-free loans? As US president Richard Nixon, echoing Milton Friedman, famously quipped in 1971: « We are all Keynesians now. » By 2009, we may all be Islamic bankers, too.
It’s an odd yet apt comparison. Islamic banking is more about the means by which a certain group of people obtains money. Zero interest rates are about getting as much money, in any way possible, to everyone. There’s still something to be said about the spreading appeal of scrapping interest rates. It’s no longer a unique aspect of certain transactions or a banking novelty. It’s becoming the norm, and it’s quite disorienting…
The point here isn’t to downplay a fast-rising asset class. Globally, Islamic banking assets are estimated at $600bn to $650bn and have registered annual growth of 10 percent to 15 percent over the last decade, according to Celent, a Boston-based financial research and consulting firm.
That kind of growth means Islamic assets will top $1 trillion by 2010, Alexa Lam, deputy CEO of the Hong Kong Securities and Futures Commission, said at a EuroMoney conference in Hong Kong last month.
The reason why data from Boston and perspectives from Hong Kong are being highlighted here is to show just how anxious the world is to get a piece of Islamic finance. The figures and growth rates speak for themselves. Islamic bankers are looking to marry that potential with China’s rapid growth.
« The pie is getting bigger and bigger, » says Badlisyah Abdul Ghani, CEO at CIMB Islamic, the Islamic banking arm of Malaysia’s second-largest bank.
Only now, the pie is going to get really, really big as the world’s major central banks offer zero-percent loans.
Read the full article by William Pesek on Arabian Business,
William Pesek is a Bloomberg News columnist.