Despite, or maybe because of the world’s economic travails, Islamic finance has continued to stride ahead, as investors seek alternatives to products that have let them down in the recent past.
According to Maris Strategies, assets in Islamic finance rose to $822bn last year, an increase of 29 per cent compared with 2008.
Much of this can be attributed to a growing Muslim population wanting to invest according to the guiding principles of their faith.
But non-Muslims are also attracted to Islamic finance. Gulf African Bank, for example, reported last year that 20 per cent of its customer base was non-Muslim.
Jo Divanna, managing director of Maris Strategies and a leading commentator on the subject, partly attributes this to a conscious effort by companies to widen their appeal by changing terminology.
He says: “Islamic finance is undergoing a rebranding towards western markets by reducing the use of the term Islamic or sharia and focusing instead on the concepts of ethical and green.”
“This is not to say they are lowering their standards,” he adds, but “simply redefining their image”.
Another explanation for the surge of interest is dissatisfaction with conventional finance in the wake of the global financial crisis. So, might the inherently prudent principles of Islamic finance have prevented lending to people who were likely to default, for example?
According to sharia law, the selling of loans is not permitted, nor is interest-bearing debt more generally – all factors that contributed to the crisis.
However, Iqbal Asaria, who teaches an Islamic finance elective at Cass Business School in London, dismisses the argument that the financial crisis could somehow have been averted had Islamic principles been more prevalent.
“The [crisis] was caused by a number of factors, including minimal attention to prudential regulation. These lapses will affect any form of finance – Islamic or conventional.”