Islamic banking is thriving, even as it is becoming more standardized throughout the world, reports The Epoch Times (March 3). Recent surveys show there are 270 Islamic banks worldwide, holding more than $265 billion in assets.
The need for Islamic financial institutions to comply with Shariah laws means that they must face greater obstacles than conventional institutions and be exposed to greater risks. There is a trend toward standardization in order to make Islamic financial institutions abide by similar rules everywhere; the Islamic Financial Services Board (IFSB) was established in 2002 and has worked toward that goal.
On Feb. 14, it released risk management and capital adequacy standards for Islamic institutions, to be implemented by 2007, writes Heide B. Malhotra. One of the features of Shariah principles is to ban interest and usury, which includes unproductive and speculative activities. Moreover, the financial institution and the customer must share equal risk.
In Indonesia – the most populous, though not the most prosperous Islamic country in the world –the total assets of Islamic banking represent slightly less than $2 billion, accounting for 1.38 percent of the national banking’s total assets, Indonesian news agency Antara recently reported (Dec. 28).
There is an obvious potential for development, but one also notes reluctance to develop new products and services due to restrictions regarding compliance with Shariah law. For the past few years, an increasing number of Western banking corporations have also become interested in Shariah-compliant products: in January, following several other European banks, the German banking giant Deutsche Bank has announced that it would introduce such services in its portfolio, citing a a great growth potential. — By Jean-François Mayer
(The Epoch Times, http://english.epochtimes.com; Antara News,www.antara.co.id)