If we look back at 2013, it’s been a hugely successful, fast paced year for Islamic Finance. The UK announced plans to issue a sovereign sukuk and the total assets of Islamic banks grew by $500bn. 2014 is set to be no different.
Here are the predictions of Islamic finance expert Mr Muhammad Zubair Mughal, CEO of Al Huda Centre of Islamic Banking and Economics:
“Islamic finance will grow with rapid pace in the year 2014 and its volume will pass through US $ 2 trillion where Islamic banking keeps 78%, Sukuk 16%, Takaful 1%, Islamic Funds 4% and Islamic Microfinance has 1% share in the Islamic Finance industry. In the year 2014, Dubai and London will be in competition to be the global hub of Islamic Banking and Finance while Kuala Lumpur will also attempt to be in this contest but the Islamic finance industry can be grown more through synergizing approach and alliance with industry stakeholders rather than setting any competition.”
As we’ve seen in 2013, Islamic finance is spreading to a range of different countries. In 2014, it is expected that China and India will begin to take steps towards Islamic finance. As with all finance products though, the success of Islamic finance could be impacted by religious and political situations in Nigeria and Tunisia. The Arab Spring has also led to some recession of the Islamic finance industry in those countries.
However, some analysts warn of a bigger threat to Islamic finance in 2014. They warn of the same fate of the conventional system and that we must be wary not to see the problem of, ‘same guys, new suits’. Islamic finance is still a relatively new industry and its standards and controls have not fully evolved and become entrenched on an international scale. We often see the subversion of same rules as those working in Islamic finance try to build Islamic financial products on the conventional model without switching completely to an Islamic model.
There is also the worry that the same big companies that participated in the financial crisis of 2008 are still the consultants, lawyers, accountants and bankers in the Islamic sector. Despite these concerns, Standard and Poors predicts double digit growth for the coming two to three years. Zeynep Holmes, the regional head of Eastern Europe, Middle East & Africa at S&P also added that regulatory effort and the establishment of additional industry bodies will take centre stage in 2014. Currently, a large amount of Islamic finance contracts is drawn up using English law and lawyers, possibly due to a number of scandals in Saudi that led to mistrust so this effort by the Middle East to ‘bring Islamic finance home’ could be what we begin to see in 2014.