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Banking on Faith – Islamic Banking and Investments – Executive Articles – Portfolio.com July 3, 2007

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Banking on Faith – Islamic Banking and Investments – Executive Articles – Portfolio.com

To some, the divide between the Muslim and Western worlds has never been wider. But for the European Islamic Investment Bank’s John Weguelin, the two sides have never been closer.

… As managing director of E.I.I.B., the West’s first investment bank to comply with sharia, Weguelin is a central player in Islamic finance’s transformation from exotic niche market to mainstream investment…

The cornerstone of the bank’s Islamic nature lies in its
transactions and ventures, which are guarded by its Sharia
Board—four Islamic scholars who vet funds and deals to make sure
they don’t contravene Koranic bans on earning interest and making
profit from alcohol, pork, or unethical activities. Before the bank
undertakes a new investment, emails between the sharia scholars and the
London office fly, allowing for what Weguelin says are ultimately
“very relaxed” meetings that occur once every six weeks.
“We’ve got one of the strongest sharia supervisory boards
in the business,” says Weguelin.

That’s a feat. Fast growth in the Islamic banking
industry—about 20 percent annually over the past few years, to an
estimated $500 billion—means that competition for top sharia
scholars with financial knowledge is stiff. “There are about 150
scholars who are globally accepted in the finance world,” says
Rushdi Siddiqui, director of the Dow Jones Islamic Market Index.
“About 20 of them are the rock-and-roll stars.” Suddenly,
Islamic scholars are becoming consultants for world-class players like Deutsche Bank,
which last year started a sharia-compliant mutual fund, and Credit
Suisse, which this spring launched Islamic banking services. E.I.I.B.
has snagged a clutch of leading sharia experts, including Sheikh Nizam
Muhammad Seleh Yacouby Yacouby, who also advises Citigroup, A.I.G., H.S.B.C., and others.

In
this brave new world, more-bullish analysts speculate that Islamic
banking could someday even overtake conventional banking. Both the
German state of Saxony-Anhelt and a Texas oil company have already
issued sukuks, or Islamic bonds. “Islamic banking is in its
infant stage, but it’s been born, it’s alive and kicking,
and maybe even crawling,” says Sheikh Yacouby….

Though conventional banks like
H.S.B.C. have set up sharia-compliant banking services, E.I.I.B., as
the only entirely Islamic investment bank based in the West, is at the
industry’s cutting edge. It’s a good place to be, insists
Weguelin: “Islamic banking is the fastest-growing sector in the
high-net-worth industry in the world at this time.” Already,
around 80 percent of investors in sukuks are non-Muslim, says Weguelin,
citing last year’s Dubai Ports flotation as an example of a sukuk
that attracted money from non-Islamic sources. “When you figure
that the Muslim population will be in the region of 30 percent of the
global population in the next 10 years and then you say that
there’s no reason conventional investors won’t buy the
products, then you can see the potential,” Weguelin says….

Europe, of course,
isn’t Weguelin’s final destination. He’s now eyeing a
variety of investments in the U.S. He admits, though, that it will be a
challenge, especially since Muslim investment in the States dropped
significantly after 9/11. But Islamic investors are starting to regain
interest in America, says Weguelin. “If you’re going to run
a diversified portfolio, you’re going to look at the U.S.”
And with plenty of wealthy, return-hungry investors of all faiths and a
growing Muslim population, Weguelin may find a ready and willing market. [Read full article]

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1. IPO - Initial Public Offering » Blog Archive » Banking on Faith - Islamic Banking and Investments - Executive … - July 3, 2007

[…] Fast growth in the Islamic banking industry?about 20 percent annually over the past few years, to an estimated $500 billion?means that competition for top sharia scholars with financial knowledge is stiff. ?There are about 150 …Read full story… […]


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