Islamic finance on the rise

Topics: Islamic banking, Bank, Investment Pages: 2 (604 words) Published: April 25, 2014
“There is a gap between all the money coming in to Islamic banks and the deployment of that money into real economic assets,” says Sayd Farook, the global head of Islamic finance at Thomson Reuters. “A crazy amount of money has gone into their coffers and they need somewhere to invest it.” There was a need for a bank that followed the rules and bans of certain investments and money handling, and this began the establishment of Islamic Banks in the 1970’s. The establishment of these banks opened a new way to invest. Which has started an abundance of depositors into the Islamic Banking system. One example is the Sharjah Islamic Bank. It has tripled its depositors from 2006 to 2012 to $3 Billion. This is only one example of the growth. The entire Islamic Banking sector has increased in the last 30 years from virtually nothing to $1.6 Trillion. Real estate is a top asset for Islamic banks. But because of the restriction on types of investments and companies to invest in, Islamic banks are over flowing with money that needs to be invested. And after the financial crisis in 2008, the Islamic banks needed a new way to invest money. Banks started selling sukuk. The amount of sukuk sold every year has grown 6 times since it first began. From 2006 to 2012, sukuk grow to $133 Billion. Yavar Moini, the former head of Islamic banking at Morgan Stanley, began an operation that would collect assets from around the world that can be packaged into sukuk. He established this idea because he believes there are not enough opportunities for Islamic investors. And this caused them to invest in the conventional field. The financial crisis actually benefitted Islamic Banking, while other conventional banks were having trouble during this time period. The industry’s assets grew 19% and then 20% the following year while other conventional banks in the rest of the world only grew less than 10%. And as stated before, since real estate was hit hard during the financial crisis,...
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