The value of Islamic project finance deals being closed is projected to grow to $3 billion by 2012, representing up to 30 per cent of all major structured deals finalised in the region. The economic boom in the region fed by strong oil prices would drive the robust growth trajectory of the Islamic project finance market.
High rates of economic growth coupled with record balance payments surpluses were fuelling unprecedented liquidity in the regional banking market, fostering the growth in Islamic compliant borrowings for major projects, the Middle East’s premier business intelligence service, Middle East Economic Digest, revealed in the Islamic Project Finance Report it launched yesterday.
“As the economic boom continues in the GCC, interest in Islamic project finance and banking increases. There have been challenges in the past with the GCC courts and a shortage of qualified advisers but we now find that standards are improving and many Western banks are adding Islamic banking divisions,” pointed out Edmund O’Sullivan, Chairman MEED Events.
“Improvements in availability and quality of products will inevitably lead to greater integration of Islamic project finance in the GCC and other Islamic and non-Islamic countries,” he said.
Globally, there were 300 Islamic financial institutions in more than 70 countries with total assets at the start of 2007 put at a staggering $300,000 million. Figures for the first half of 2007 show that the balance sheets of the top 20 banks in the GCC grew by more than 30 per cent over the corresponding period in 2006. “The positive trends are expected to continue for the foreseeable future,” the report revealed.
The report provides insights into key trends in GCC project finance and the relationship with the Islamic finance sector in addition to an in depth analysis of how the Islamic finance sector works. Much of the impetus behind the development of sharia-compliant corporate borrowing products has come from banks and professional advisory firms that are non-Islamic.
The report also includes details of the challenges faced by the Islamic project finance sector and the increasing number of western banks adopting Islamic banking regulations within newly created divisions.