Sajjad Chowdhry Associate Editor, DinarStandard Islamic Finance Strategy Forum Toronto – May 25, 2007 Islamic Finance – A ...
Agenda <ul><li>Industry Definition  </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Ind...
Agenda <ul><li>Industry Definition  </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Ind...
History of Islamic Finance <ul><li>Over 1400 years of development </li></ul><ul><li>Commerce flourished under Islamic comm...
What makes Islamic Finance different? <ul><li>Revelational basis - God’s commands and the Prophet’s (s) example </li></ul>...
Agenda <ul><li>Industry Definition  </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Ind...
Global IF Market Size Source: Bank for International Settlements, International Islamic Finance Forum <ul><li>Total Global...
Islamic Finance ‘Clusters’    … of Opportunities? Muslim Population in each country/ region (millions) 150+  100-150  50-1...
Islamic Finance ‘Clusters’    … of Opportunities? *Malaysia:  $30 billion in Assets (largest market); 11.3% of total banki...
The industry’s comprehensive product offering <ul><li>Investment Banking </li></ul><ul><li>Capital Markets </li></ul><ul><...
Global IF Leaders - Commercial Banks Source: IFIS May 9, 2007 2,081,092  UAE Sharjah Islamic Bank 10 3,035,489  Qatar Qata...
Global IF Leaders – Investment Banks Source: IFIS May 9, 2007 293,300  Bahrain Unicorn Investment Bank 7 329,912  Kuwait G...
IF Activity in Europe Will the Financial Services Authority (FSA) UK experience in UK provide a framework for other Europe...
IF Activity in North America <ul><li>Guidance </li></ul><ul><li>Shape </li></ul><ul><li>LaRiba </li></ul><ul><li>Devon </l...
IF Activity in the GCC <ul><li>Retail Islamic Finance </li></ul><ul><ul><li>Dubai Islamic Bank, Al Rajhi, ABC Islamic </li...
IF Activity in Pakistan <ul><li>In 2001, the industry comprised of just two players </li></ul><ul><li>In 2006, the industr...
IF Activity in Malaysia Source: Bank Negara Malaysia, Financial Times <ul><li>Islamic Finance assets close to 13% of the t...
Agenda <ul><li>Industry Definition  </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Ind...
Sukuk – Islamic “Bonds” <ul><li>Conventional bonds are  Riba , and are forbidden </li></ul><ul><li>But a transaction struc...
Sukuk – Selected Issuance Source: Liquidity Management Centre
Sukuk – Issuance Growth Source: Islamic Finance Information Service
Human Resources <ul><li>Increasing sophistication of Shari’ah scholars </li></ul><ul><ul><li>Yet there remains a dearth of...
Major Training Institutions <ul><li>Distance Learning </li></ul><ul><ul><li>International Islamic University, Malaysia </l...
Agenda <ul><li>Industry Definition  </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Ind...
Current Trends to Watch <ul><li>Opportunities </li></ul><ul><ul><li>Cross border cooperation </li></ul></ul><ul><ul><li>In...
Thank You Dinar Standard   Business Strategies for the Muslim World 206 Bloomfield Street, Suite 6 Hoboken, NJ 07030 [emai...
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  1. 1. Sajjad Chowdhry Associate Editor, DinarStandard Islamic Finance Strategy Forum Toronto – May 25, 2007 Islamic Finance – A Global Appraisal
  2. 2. Agenda <ul><li>Industry Definition </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Industry </li></ul><ul><ul><li>Who are the key players, where are they, what do they do? </li></ul></ul><ul><li>What’s Happening </li></ul><ul><ul><li>A focus on innovation and current trends </li></ul></ul><ul><li>Industry Outlook </li></ul>
  3. 3. Agenda <ul><li>Industry Definition </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Industry </li></ul><ul><ul><li>Who are the key players, where are they, what do they do? </li></ul></ul><ul><li>What’s Happening </li></ul><ul><ul><li>A focus on innovation and current trends </li></ul></ul><ul><li>Industry Outlook </li></ul>
  4. 4. History of Islamic Finance <ul><li>Over 1400 years of development </li></ul><ul><li>Commerce flourished under Islamic commercial law during Classical period </li></ul><ul><li>Development languished under impact of Colonial regimes </li></ul><ul><li>Theoretical revival began in 1960s </li></ul><ul><li>Practical revival began in 1970s </li></ul><ul><li>Today - increasing rapid growth and sophistication; affirmed as a viable industry </li></ul>
  5. 5. What makes Islamic Finance different? <ul><li>Revelational basis - God’s commands and the Prophet’s (s) example </li></ul><ul><ul><ul><li>Prohibition of Riba </li></ul></ul></ul><ul><ul><ul><li>Regulation of Gharar </li></ul></ul></ul><ul><ul><ul><li>Risk Sharing </li></ul></ul></ul><ul><ul><ul><li>Encouragement of cooperation </li></ul></ul></ul><ul><li>The Just Profit Motive </li></ul><ul><ul><li>Ideals in earning the pleasure of Allah and the ability to earn a profit while mobilizing resources for economic development </li></ul></ul>
  6. 6. Agenda <ul><li>Industry Definition </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Industry </li></ul><ul><ul><li>Who are the key players, where are they, what do they do? </li></ul></ul><ul><li>What’s Happening </li></ul><ul><ul><li>A focus on innovation and current trends </li></ul></ul><ul><li>Industry Outlook </li></ul>
  7. 7. Global IF Market Size Source: Bank for International Settlements, International Islamic Finance Forum <ul><li>Total Global Bank Assets - $27 trillion </li></ul><ul><li>Islamic Finance Assets - $265 billion </li></ul><ul><li>Growth of Islamic Finance per annum – 10-15% </li></ul><ul><li>Total Number of Islamic Finance Institutions – over 270 </li></ul>
  8. 8. Islamic Finance ‘Clusters’ … of Opportunities? Muslim Population in each country/ region (millions) 150+ 100-150 50-100 10-50 5-10 . . . . . . . . . . . . GDP Per capita (Color code) High Med Low . . . Pakistan India Bangladesh Iran Turkey Europe US South America Kazakhstan Egypt Copyright: DinarStandard 2006 Source: World Bank
  9. 9. Islamic Finance ‘Clusters’ … of Opportunities? *Malaysia: $30 billion in Assets (largest market); 11.3% of total banking system; leads standardization Singapore : Global Center of Finance Indonesia : Largest Islamic Country but only 1.2% of total assets Islamic * GCC: 40 Institutions with $50 billion in assets; Avg. 15% of total banking system – Potential to 50% of total banking system; Largest market Saudi Arabia just establishing Riyadh Financial Center Source: GCC Islamic Financial Institution Report, AT Kearny IF Report, Bank Negara Malaysia Annual report
  10. 10. The industry’s comprehensive product offering <ul><li>Investment Banking </li></ul><ul><li>Capital Markets </li></ul><ul><li>Project Finance </li></ul><ul><li>Corporate and Structured Finance </li></ul><ul><li>Underwriting </li></ul><ul><li>Advisory </li></ul><ul><li>Syndication </li></ul><ul><li>Personal Financial Services </li></ul><ul><li>Home Finance </li></ul><ul><li>Auto Finance </li></ul><ul><li>Current and Saving Accounts </li></ul><ul><li>Debit and Charge Cards </li></ul><ul><li>Investment products </li></ul><ul><li>Corporate Treasury and Markets </li></ul><ul><li>Liquidity Management </li></ul><ul><li>Yield Management </li></ul><ul><li>Structured Solutions </li></ul><ul><li>Commercial Banking </li></ul><ul><li>Import/Export Finance </li></ul><ul><li>Asset Finance </li></ul><ul><li>Treasury </li></ul>Source: HSBC Amanah
  11. 11. Global IF Leaders - Commercial Banks Source: IFIS May 9, 2007 2,081,092 UAE Sharjah Islamic Bank 10 3,035,489 Qatar Qatar Islamic Bank 9 3,812,690 Malaysia Bank Muamalat Malaysia 8 3,969,483 Malaysia Bank Islam Malaysia 7 4,094,447 Saudi Arabia Bank Al Jazira 6 7,638,998 Bahrain AlBaraka Banking Group 5 17,547,846 UAE Dubai Islamic Bank 4 21,952,613 Kuwait Kuwait Finance House 3 22,440,691 Bahrain ABC Islamic Bank 2 28,056,937 Saudi Arabia Al Rajhi Bank 1 Total Assets Country Commercial Islamic Banks   Islamic Banks Financials (Total Assets) USD$ '000
  12. 12. Global IF Leaders – Investment Banks Source: IFIS May 9, 2007 293,300 Bahrain Unicorn Investment Bank 7 329,912 Kuwait Gulf Investment House 6 376,804 Kuwait The International Investor 5 1,261,109 Malaysia CIMB Islamic 4 1,500,884 Bahrain Gulf Finance House 3 2,707,707 Bahrain Arcapita 2 3,657,859 Kuwait Investment Dar 1 Total Assets Country Islamic Investment Banks   Islamic Banks Financials (Total Assets) USD$ '000
  13. 13. IF Activity in Europe Will the Financial Services Authority (FSA) UK experience in UK provide a framework for other European markets and beyond? Banks with Capital Markets Focus Banks with Retail IF Operations
  14. 14. IF Activity in North America <ul><li>Guidance </li></ul><ul><li>Shape </li></ul><ul><li>LaRiba </li></ul><ul><li>Devon </li></ul><ul><li>University Islamic </li></ul><ul><li>UM Financial </li></ul><ul><li>Ittihad </li></ul><ul><li>Amana Mutual Funds </li></ul><ul><li>Salam Financial </li></ul><ul><li>Ansar Group </li></ul>Focus on Retail IF Operations
  15. 15. IF Activity in the GCC <ul><li>Retail Islamic Finance </li></ul><ul><ul><li>Dubai Islamic Bank, Al Rajhi, ABC Islamic </li></ul></ul><ul><li>Rise of Specialty Finance in the UAE </li></ul><ul><ul><li>Tamweel, Amlak </li></ul></ul><ul><ul><li>ENSeC </li></ul></ul><ul><li>Growth of Investment Banking – </li></ul><ul><ul><li>Calyon, Morgan Stanley, Deutsche Bank </li></ul></ul><ul><li>Regulatory Infrastructure – DIFC and DME </li></ul><ul><li>Drivers – Customer demand, petro dollars, real estate development and infrastructure projects </li></ul>
  16. 16. IF Activity in Pakistan <ul><li>In 2001, the industry comprised of just two players </li></ul><ul><li>In 2006, the industry comprised of 6 Full fledged Islamic Banks and 12 Banks with IBDs </li></ul>Source: Standard Chartered Year 2001 <ul><li>Meezan Bank </li></ul><ul><li>Al Baraka </li></ul><ul><li>Meezan Bank </li></ul><ul><li>Al Baraka </li></ul><ul><li>MCB </li></ul><ul><li>Alfalah </li></ul><ul><li>SCB </li></ul><ul><li>Bank AlHabib </li></ul><ul><li>Habib AG Zur. </li></ul><ul><li>Metropolitan </li></ul><ul><li>Bank of Khyber </li></ul><ul><li>Soneri Bank </li></ul>2002 2003 <ul><li>Meezan Bank </li></ul><ul><li>Al Baraka </li></ul><ul><li>MCB </li></ul><ul><li>Meezan Bank </li></ul><ul><li>Al Baraka </li></ul><ul><li>MCB </li></ul><ul><li>Alfalah </li></ul>2 10 2005 <ul><li>Meezan Bank </li></ul><ul><li>Al Baraka </li></ul><ul><li>MCB </li></ul><ul><li>Alfalah </li></ul><ul><li>SCB </li></ul><ul><li>Bank AlHabib </li></ul><ul><li>Habib AG Zur. </li></ul><ul><li>Metropolitan </li></ul><ul><li>Bank of Khyber </li></ul><ul><li>Soneri Bank </li></ul><ul><li>HBL </li></ul><ul><li>-Bank Islami </li></ul><ul><li>DIB </li></ul><ul><li>Emirates Int’l </li></ul><ul><li>First Dawood </li></ul><ul><li>NBP </li></ul><ul><li>ABN AMRO </li></ul><ul><li>Askari </li></ul><ul><li>PICCIC </li></ul>2004 11 4 3
  17. 17. IF Activity in Malaysia Source: Bank Negara Malaysia, Financial Times <ul><li>Islamic Finance assets close to 13% of the total asset base </li></ul><ul><li>$36 billion Islamic Corporate Bond market </li></ul><ul><ul><li>Close to 48% of the total market </li></ul></ul><ul><li>About 70% of Islamic Finance customers are non-Muslim </li></ul>$34 billion $29.5 billion $24.9 billion Assets 2006 2005 2004
  18. 18. Agenda <ul><li>Industry Definition </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Industry </li></ul><ul><ul><li>Who are the key players, where are they, what do they do? </li></ul></ul><ul><li>What’s Happening </li></ul><ul><ul><li>A focus on innovation and current trends </li></ul></ul><ul><li>Industry Outlook </li></ul>
  19. 19. Sukuk – Islamic “Bonds” <ul><li>Conventional bonds are Riba , and are forbidden </li></ul><ul><li>But a transaction structured on an asset base is permitted </li></ul><ul><li>A series of payments arising from an asset-based transaction may be traded at a market price </li></ul><ul><li>This type of arrangement is referred to as Sukuk , sometimes called “Islamic bonds.” </li></ul>
  20. 20. Sukuk – Selected Issuance Source: Liquidity Management Centre
  21. 21. Sukuk – Issuance Growth Source: Islamic Finance Information Service
  22. 22. Human Resources <ul><li>Increasing sophistication of Shari’ah scholars </li></ul><ul><ul><li>Yet there remains a dearth of scholars in the industry </li></ul></ul><ul><li>Lack of Professional Accreditation and Training </li></ul><ul><li>Emergence of Product Consultancies </li></ul><ul><ul><li>Dar Al-Istithmar </li></ul></ul><ul><ul><li>Yasaar </li></ul></ul><ul><ul><li>SHAPE </li></ul></ul>
  23. 23. Major Training Institutions <ul><li>Distance Learning </li></ul><ul><ul><li>International Islamic University, Malaysia </li></ul></ul><ul><ul><li>Loughborough University, UK </li></ul></ul><ul><ul><li>IBF Netversity, India </li></ul></ul><ul><ul><li>Institute of Islamic Banking and Insurance, UK </li></ul></ul><ul><li>Dedicated In House Programs </li></ul><ul><ul><li>Islamic Research & Training Institute, Islamic Development Bank </li></ul></ul><ul><ul><li>Bahrain Institute of Banking and Finance </li></ul></ul><ul><ul><li>Emirates Institute of Banking and Financial Studies </li></ul></ul><ul><ul><li>Center for Islamic Economics </li></ul></ul><ul><ul><li>Islamic Banking and Finance Inst. Of Malaysia </li></ul></ul><ul><ul><li>Institute of Islamic Banking and Insurance, UK </li></ul></ul><ul><li>Research and Academic Programs </li></ul>
  24. 24. Agenda <ul><li>Industry Definition </li></ul><ul><ul><li>Origins and Ideals </li></ul></ul><ul><li>A Breakdown of the Industry </li></ul><ul><ul><li>Who are the key players, where are they, what do they do? </li></ul></ul><ul><li>What’s Happening </li></ul><ul><ul><li>A focus on innovation and current trends </li></ul></ul><ul><li>Industry Outlook </li></ul>
  25. 25. Current Trends to Watch <ul><li>Opportunities </li></ul><ul><ul><li>Cross border cooperation </li></ul></ul><ul><ul><li>Innovation </li></ul></ul><ul><ul><li>Smart marketing </li></ul></ul><ul><ul><li>Securitization </li></ul></ul><ul><li>Challenges </li></ul><ul><ul><li>Need for Recognized Accreditation Programs </li></ul></ul><ul><ul><li>Standardization </li></ul></ul>
  26. 26. Thank You Dinar Standard Business Strategies for the Muslim World 206 Bloomfield Street, Suite 6 Hoboken, NJ 07030 [email_address]
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