Popularity of Islami banking

August 18, 2010

ISLAMI banking is gaining popularity across the world as the global financial turmoil seems to have had limited impact on it, according to recent media reports. The Islami banking system is based on Islamic Sharia’ah and not on ‘predictions’ which give it the advantage of having less external shocks like the recent global financial meltdown. The total GDP of the world is around $30 trillion where as the total credit market is $64 trillion. The gap is ‘prediction’. Islami finance industry has been in an expansionary phase in recent years and even the Vatican says banks should look at the rules of Islami finance to restore confidence among their clients at the time of global economic crisis.

As reported by AFP news agency from Singapore, assets held by the world’s 100 biggest Islami banks grew 86 per cent in 2008 from the previous year despite the financial turmoil that clobbered mainstream lenders. The Asian Banker, a magazine for financial professionals, has reported that the top 100 Islamic banks held assets totaling 580 billion US dollars last year, sharply up from 350 billion US dollars in 2007. In the same period, Asia’s 300 biggest banks saw their assets rise by a much slower 13.4 per cent rate.

‘Despite the financial turmoil in late 2008 that crippled so many large Western institutions, Islami banks have continued to grow in prominence and size’, the press report quoting the magazine said. Islamic finance has seen ‘an incredible surge in popularity’, based on stronger regulatory regimes and a better international understanding of its dynamics. Even two Islami banks in Britain made assets to the top 100. Islami banking fuses principles of Shari’ah or Islamic law and modern banking, and its funds are not investing in companies associated with tobacco, alcohol and gambling.