Islamic finance assets to hit $1.1 trillion in 2012 -study

Tue Nov 22, 2011 9:12am GMT

MANAMA Nov 22 (Reuters) - Islamic finance assets around the world are expected to climb 33 percent from their 2010 levels to $1.1 trillion by the end of 2012, boosted by the aftermath of the Arab Spring uprisings and dissatisfaction with conventional finance in the wake of the global debt crisis, consultants Ernst & Young said in a report on Tuesday.

Growth in the Middle East and North Africa will be particularly strong, with assets rising to a projected $990 billion by 2015 from $416 billion in 2010, as new countries open up to Islamic finance, the report predicted.

Egypt, for instance, has raised the possibility of issuing a sovereign sukuk (Islamic bond), while Tunisia and Libya have indicated that sharia-compliant banking will probably play a role in their financial systems after their changes of regime this year.

"After the Arab spring, we found a shift in the MENA market with a number of countries making announcements that they would consider a comprehensive Islamic financial system," said Ashar Nazim, Islamic financial services leader at Ernst & Young.

"Islamic finance has more equitable distribution of wealth and forbids excess leverage. We're suddenly seeing much bigger appeal and acceptance."

Nizam said the Occupy Wall Street protests in the United States demonstrated mounting anger about imbalanced wealth distribution in capitalist systems, which might benefit growth of Islamic finance, which forbids the use of interest and pure monetary speculation.

Islamic banking in MENA is expected to grow over the next five years at a compound annual rate of 20 percent, compared to less than 9 percent for conventional banks, the report said.

However, the lack of a benign legislative, regulatory and tax environment among Organisation of the Islamic Conference (OIC) countries will continue to pose barriers for the industry by raising costs for Islamic banks, it said.

"Where there are guidelines and standards issued by industry infrastructure institutions, their reach and enforceability remains a concern," Nazim said.   Continued...

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