Islamic banking feels ripple
Islamic bankers are learning the hard way that no financial market is immune to international turmoil.
A report yesterday by the Islamic Finance Information Service said that the issuance of Islamic bonds had fallen 54 per cent in the first half of this year compared with the same period last year. “The drop in issuance confirms that Islamic finance has become intertwined with global financial markets and is in no way an isolated market,” the report said.
The knock-on effect of ailing financial institutions has been felt across the GCC, with some institutions in the region directly linked to failures on Wall Street. Amiri Capital, an Islamic asset management company, has delayed its planned Shariah fund of hedge funds because of the collapse of Lehman Brothers. Lehman was lined up to act as prime broker for the fund, the first of its type.
Richard Ellis, the co-founder of Amiri Capital, said the fund would still go ahead, once new partners were found.
“No one is immune or insulated from the pressures abroad – the international finance community is more inter-related than ever,” said David Pace, the chief financial officer of Unicorn Investment Bank, a Shariah-compliant firm based in Bahrain, with offices around the world. “Even in Islamic banking, where demand has not waned, it now takes longer to do deals, everything has slowed down, but at least we can still can get deals through.”
However, financial institutions are continuing to press ahead with Shariah-compliant products. Salama, part of the Takaful Group, an Islamic brokerage, partnered with BNP Paribas Investment Partners lastweek to launch BNP Paribas’s first Shariah-compliant fund, the Global Equity Optimizer. T
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