While Islamic Financial assets only account for 1% of global financial market, over the past five years there has been at 150% increase in the assets which hit 1.3 Trillion in 2011. Yearly growth is at 25-30% and doesn't seem likely to stop. With developing countries with large Muslim populations in the Middle East, North Africa, and Southeast Asia getting richer, there is a growing demand for Islamic Financial services. In India, home to 150 Muslims, little Islamic Financial services are being offered.
With London, Paris, Hong Kong, Singapore, and other cities/countries attempting to become a hub of Islamic Finance, are New York and the U.S. missing out?
Robert Tuttle, the former U.S. Ambassador to London who is now a millionaire businessman, warned in a cable to his bosses at the U.S. Treasury that Britain was getting the jump on the United States at a crucial time.
"Should London successfully position itself as a leading Islamic finance center, it could gain an edge on New York, when the global financial markets recover," Tuttle said in a 2009 cable obtained by the Wikileaks website and published in The Telegraph this month.
http://www.businessweek.com/ap/financialnews/D9LI…
Is the U.S. missing out on a rapidly growing sector of Financial Services?
Some further reading:
http://www.reuters.com/article/2012/03/29/islamic…
http://www.dnaindia.com/analysis/column_islamic-b…
It's not a question of getting the business for Islamic Finance but complying with Sharia law. Sharia sets the standards for what investments can and cannot be made, the terms of lending and loans, etc. The issue here with finding people to do Islamic Banking with a solid and fundamental understanding of the religious, legal and moral implications (ie Usury hits all 3 points) is that you do not find it as readily in the states versus abroad in the EMEA region. Sharia law is not an easy concept to fully grasp without a requisite education in the matter. As a result, I just don't think that, unless US Banks choose to hire folks with this background, we will become a major center of Islamic finance.
Why on Earth would the US even want to compete with London for this business? Sure, muslims make up about ten billion people. So what? Plus, they call it Londonistan for a reason. Leave this business to the Brits.
Eddie - as long as their money is good, I don't see a reason not to reasonably try and pursue that avenue. That said, it really requires a fully specialized unit within a bank to handle it and the initial onset of operations in the US that it might not be worth the initial investment unless the potential gain is worth a few years of losses up front.
You can buy a lot of goats and virgins (although sometimes similarly used there) for $1.3 trillz.
Sharia law? I would not even want to open that can of worms.
Regards
CPH - since you don't want to discuss Sharia, let me ask you then... What is the difference between Catholic law in the 1400s to 1700s and Sharia law? Both explicitly stated what members of the faith can and can't do. Both were clear in their origin and spelled everything out. Both had very clear rules about what you could and could not do in terms of investing, lending and the terms used. So what's the real difference? If you're going to invest on behalf of a client with a rather strict set of guidelines is that any different than applying Sharia law? I don't see a big deal about adopting standards to follow Sharia law and obliging it as a means of investment. It would be the exact same as following the rules mandated in any fund agreement or trust document. It's not a crazy concept to believe in.
First off, allow me to apologize. I didn't intend to be rude or disrespectful, so if I was, I'm sorry.
I only meant from a business perspective. Admittedly I know very little about Sharia law but that is precisely why I wouldn't open that can of worms from a business perspective.
As far as I know, the rules in which most funds invest are very small. Typically they have very few, if any, restrictions and when they do it's something along the lines of, no real estate or no re-lending institutions and/or no investments in the 'sin' industries, like booze, casinos and guns. That's all fairly straight forward in my book.
It's my understanding that Sharia law can get rather complex and intricate and knowing all of those rules and regulations would be a lot of info to digest initially. I knew some guys at Arcaptia, which recently filed for bankruptcy protection, and heard some of their stories about investments they couldn't make because they had to be Sharia compliant. I was told about a potential acquisition of a food restaurant (sold primary chicken) that they had to back out of because they also served bacon in some meals...one of which was extremely popular. Because of the amount of bacon that was sold annually (or however it was calculated) they couldn't do the investment.
Granted that Sharia law might not restrict you greatly in your investment focus but coming across something that you think would be a homerun and not being able to do the deal because they sold too many strips of bacon would kill me.
Anyways, my retort is, I don't know of many investors that have very strict guidelines with regards to where their money goes (outside of the few things I mentioned above) so comparing business restrictions from hundreds of years ago with those that some adhere to today seems disingenuous.
Regards
Unfortunately, most Americans would not understand that becoming an Islamic financial center, or at least attracting some Islamic financial entities, is a fundamentally sound business idea. Rather, they would associate wall street with terrorism because, though its is 100% ignorant, many Americans out there are racist against Muslims and this is not another public image debacle that the street needs right now. Public perception would be too great a concern for me even though there is certainly a lot of business that can be generated. I can imagine some dumb-ass politician exclaiming "wall street funds terrorism" or something of that nature to garner support for more wall street regulation an what not. ... I hate stupid people
CPH, you never come across as disrespectful. I didn't mean to come off as challenging. I'm not the fighting words type. I meant to pose that Catholic Law could be viewed in a similar light. All I meant to say is that there is enough religious legal tradition that forms the basis for investing for a number of religions.
As to the points you made, Sharia law is complex and intricate. Then again, almost all law based around religion has extremely specific minutia with the points they make. Yes, it gets complex and is full of rules and regulations but it cal all be boiled down into some pretty clear guidelines. I think the problem becomes, particularly at the fund level, is having a certain degree of compliance by the fund in order to accept Islamic investors. At the same time, it offers different avenues of investing and ways to comply with the laws and still generate returns.
I do, however, think the comparison is apt. Sharia can be viewed as a far more complicated investment mandate. This would be like any investment mandate by a pension, fund, trust and other investment vehicle which explicitly states what investments can and can't be invested in. The rules may not be as strict, but it still offers a more than viable and appropriate way to view the context of Sharia law.
Frieds everything about you just screams Islam.
It's an interesting case to study - particularly the legal and regulatory scope of what can and can't be done. I think it definitely presents a great area to make a good deal of money in and to be a legal scholar in the area means you can make a very good living from it. If you have a small team with the sole job of seeing if investments are Sharia-compliant means job security and a nice income to do the vetting process.
Minor correction OP. I think India is home to a little more than 150 Muslims, haha.
Great insight as always Frieds. However, for reasons alluded to by U Accrete Me (sweet sn btw), I don't think it would be a good idea. I can practically see a politician egging on the OWS crowd by insinuating that Wall Street is pro Islam. Which the ignorant masses clump together with terrorism.
Ut ut fuga voluptatem aut natus dicta. Eveniet ipsum voluptate asperiores quae inventore. Mollitia quia ex reiciendis quo consequuntur. Occaecati suscipit et consequatur perferendis amet.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...