From left: Fares Mourad, Managing Director, Head Islamic Finance, at Bank Sarasin; Monzer Kahf, Professor and Programme Coordinator at Faculty of Islamic Studies; Sulaiman Yousif Salhi, Senior Executive Officer, and Rohit Walia, Executive Vice-Chairman and Chief Executive Officer of Bank Sarasin-Alpen during the launch of Islamic Wealth Management report at W Hotel yesterday. Shaival Dalal
DOHA: Despite a challenging market environment, Islamic finance made progress in 2011, supported by vigorous underlying trends. The industry saw growth in terms of volume, geographic reach and quality increase due to strong demographic growth and rise in the size of Islamic financial market, Bank Sarasin’s 2012 Islamic Wealth Management Report said.
In 2011, the sukuk market recovered from its 2008 shock, when many investors withdrew funds to invest in the developed world. A huge rise in yields rewarded the investor who was loyal to this market. The major achievement was that Muslim investors now have halal alternatives to conventional bonds. About $80bn of new sukuk issuance in 2011 marked substantial progress, resulting in a global sukuk market of $180bn, the Bank’s third report on the Wealth Management released here yesterday said.
With a positive 2012 outlook, the document said investors will have more opportunities than ever before. Depending on the global economy, the sukuk market is forecast to grow by 10 percent or more. This forecast is supported by sovereign issuers such as Indonesia, Saudi Arabia and even South Africa announcing that they are coming to the market.
“Although events in Europe are creating a challenging environment, the robust sukuk market bought issues to the table. In November alone, the volume was about $4bn; quite an achievement for a niche market. Market sentiment changed in December due to the large number of issuers in November and rumours that Dubai government related entities might reschedule their debts”.
The report claimed converting a business to Islamic business can increase the value of a company by 18-25 percent due to the scarcity of genuine Islamic investments. It’s market potential is massive, with global Muslim population expected to increase by 26 percent to 2030, to 2.2 billion, rivaling China and India in terms of market size. Muslims currently have a 7.7 percent share of global GDP which is expected to grow to 8.7 percent by end of 2016.
The Islamic financial market segments in India and China alone are larger than some countries’ populations, estimated at 140 million and 40 million respectively. Demographics are also compelling, with 43 percent of Muslims under the age of 25. In terms of services, the assets of Islamic banks and financial institutions worldwide are predicted to reach $1 trillion next year and $1.8 trillion by 2016.
On the Islamic equities’ performance in 2011, the report said while most Islamic indexes fell in 2011 many outperformed conventional indexes because of Islamic criteria screens out most financial stocks. For instance, the Dow Jones Islamic Market Pakistan Index, while down 1.06 percent, beat the conventional Dow Jones Pakistan Index by more than 16 percent. The report said options are limited by Sharia considerations, with futures not allowed and Muslim investors continuing to disdain hedge funds despite approval by many scholars.