Islamic Bank of Asia sees shift in investor attitudes: Sub-prime crisis prompting growing interest in Islamic Finance
The Islamic Bank of Asia (IB Asia) is seeing an increase in investor interest for Islamic finance as the US sub-prime crisis continues. Two of the bank’s pre-eminent Shariah Board members have seen a steadily-growing stream of interest from Gulf Cooperation Council (GCC) investors, Muslim and non-Muslim, for Islamic banking products, as they seek new investment opportunities.
IB Asia Shariah Board members Shaikh Nizam Yaqouby and Dr. Mohammed Daud Bakar say that while changes in the global investment climate are driving demand for Islamic banking, it is the development of innovative Shariah-compliant products that will help grow the industry.
“Islamic Shariah scholars have led the way in innovation. Investors now demand more than just debt finance (lending and borrowing) in their products. They participate in the assets and this creates real economic value,” says Shaikh Yaqouby, an internationally-acclaimed Islamic scholar and teacher of Tafsir (a scientific study that focuses on the interpretation and explanation of the Holy Qu’ran) based in Bahrain.
He adds: “More investors – whether affected directly or indirectly by the sub-prime situation – are attracted to investment vehicles which are underpinned by an inherent immunity from risk. As Shariah-compliant banking forbids the purchase of debts, it is therefore one of the options that investors are turning to.”
Dr. Mohammed Daud Bakar, another IB Asia Shariah board member and the Chairman of the Shariah Advisory Council at the Central Bank of Malaysia, says: “The demand for Islamic investment vehicles in certain categories currently exceeds supply. As an example, the global Sukuk market is increasing at an astonishing average of 40% per annum, fuelled by record investor numbers turning to Islamic banking. The Sukuk allows investors to participate actively and bear the risks – which can be minimized but never eliminated; being inherent in all investments – alongside the rewards.”
IB Asia has four of the world’s most prominent Islamic scholars on its Shariah Board, well-versed in a variety of disciplines ranging from Islam, finance and Shariah law. Apart from Sh. Nizam and Dr. Daud, IB Asia’s Shariah scholars include Sheikh Dr Mohamed Ali Elgari and Dr Abdul Sattar Abu Ghuddah, both based in Saudi Arabia.
Vince Cook, Chief Executive Officer of IB Asia, says: “While market sentiment remains cautious, we still see a growing interest from global parties in tapping into the increasing flows of liquidity from the Middle East. Also, the robust levels of transparency and risk management inherent in Islamic finance make it less susceptible to the ongoing market turmoil, and hence a more attractive investment option.”
He adds that IB Asia’s ability to generate innovative Islamic financing structures that help Gulf investors gain access to Asia’s opportunities puts it in good stead to cater to the growing demand for Islamic finance: “With a long-term view toward broadening our product base, we are currently in detailed discussions with government organizations, regulators and other stakeholders in Asia and the Middle East to prepare for a Sukuk issuance later this year, market conditions allowing.”
Bolstered by a unique shareholding structure that includes DBS bank, a leading financial services provider in Asia and 34 prominent GCC shareholders, and based in Singapore, a world-renowned financial hub perched at the strategic crossroads of Asia, IB Asia is well-positioned to open up new investment opportunities in Asia for GCC investors.
In less than a year, IB Asia has focused on cross-border transactions securing a range of significant business with several prominent GCC companies, including three Kuwait-based companies – the International Leasing and Investment Company, the National Industries Group and the AREF Investment Group – and Barwa Real Estate Company based in Qatar.