Is Islamic finance the new challenge to Wall Street?

Andrew Sheng writes:

In the 1990s, Islamic finance was a fledgling fringe industry. But today, its size has grown from roughly US$150 billion to about US$1 trillion in size. This is of course still small relative to some of the largest global fund managers and universal banks, who manage more than US$1 trillion each. But the double-digit growth and potential size of the market cannot be ignored. Some pundits think that the market size will reach US$2 trillion within the next five years.

There are roughly 1.3 billion Muslims in the world, with 138 million in India and roughly 30 million in China. These are growing markets in terms of income and wealth. As the Muslim community seeks to invest in interest-free banking, Islamic funds have been growing in leaps and bounds. Today, there are roughly US$800 billion in Islamic banking funds, US$100 billion in the sukuk (or Islamic bond) market and another US$100 billion in takaful (Islamic insurance) and fund management business. Hong Kong, of course, introduced the Hang Seng Shariah Compliant China Index Fund in 2008 to attract Muslim investors.

As oil prices continue to remain at high levels, the Middle East oil-producers will continue to generate surpluses that must be parked somewhere. With the Western markets and economies under pressure, some of that money has moved Eastwards.

Will Islamic finance be a serious challenge to traditional Wall Street finance? That is a question that deserves a good answer.

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1 thought on “Is Islamic finance the new challenge to Wall Street?

  1. scott

    I think this has been on the radar of the usual suspects who’s ties to Western finance are well known. But, Halal Finance has been growing and isn’t deluded with the nationalism and Occidental bigotries that were so hard hit in this last recession.

    This is a global recession, we keep hearing. Not so much, really, it’s a Western, a North-Western recession. It’s funny to me, the Islamic banks were buying up gold and silver during the boom years when it was so low. Now they would be smart to exchange that for more Western IOU’s. Collect enough of those, and as China has shown, you can dictate American policy.

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