IslamicFinance.de

Policymakers around the world have upped the pressure on libra, the digital currency being introduced by Facebook, amid concerns it could heavily disrupt the global financial system. It appears to be a running theme from a number of regulators and lawmakers, who worry libra would compete with government currencies. That’s because Facebook is such an influential platform, with more than 2.4 billion monthly active users as of July 2019.

China’s Belt and Road Initiative is expected to spur further development in Islamic finance around the world. Many of the countries along the infrastructure belt are home to predominantly Muslim populations, including Central Asian countries such as Kazakhstan and Uzbekistan. The China-headquartered Asian Infrastructure Investment Bank had already signed a memorandum of understanding with the Islamic Development Bank to collaborate on various areas including Islamic finance development. Sukuk issuance had grown strongly in 2017, but Chinese issuers have actually pulled away since then. That’s been attributed to the complexities involved, particularly as standards differ across regulatory regimes with varying interpretations of Sharia compliance. Still, financial links between China and the Middle East continue to grow. The relationships have increasingly moved from just trade partnerships to joint ventures.

According to S&P Global Ratings, the outlook for 2018 is uncertain because of geopolitical risks and economic uncertainties. Sukuk issuance was strong last year with $97.9 billion, up 45.3% from the $67.4 billion issued in 2016. So-called "jumbo issuances" were seen in Saudi Arabia and other Gulf Cooperation Council (GCC) economies in 2017. Mohamed Damak, senior director at S&P Global Ratings, said the first two months of 2018 had been marked by a good performance for local currency issuance and a drop in foreign currency issuance. He added that 2018, as a whole, was expected to see a drop in sukuk issuance, with expectations for around $70-80 billion in total. There are a number of reasons for this, including central bank tightening, lower financing needs of GCC banks and geopolitical risks. Another reason for lower sukuk performance could be the slow progression of the standardization in the sukuk market.

Islamic finance has traditionally been dominated by Muslim-majority countries in the Middle East and Southeast Asia. It has transformed from a niche corner of global banking to a growing source of funding for the rest of the world. The government of Singapore was one of the earliest non-Muslim entrants into the space, followed by the United Kingdom, Luxembourg and Hong Kong, which issued their first sukuk in 2014. African nations such as South Africa, Nigeria and Ivory Coast have made legal and tax changes to make it easier for borrowers to issue sukuk. Islamic finance is seen as a more stable alternative to the conventional banking system and offers a more ethical approach to managing money. The industry's size is expected to expand further to $3.5 trillion by 2021 as countries and companies look for alternative funding sources.

Naushad Virji's firm Sharia Portfolio is a financial-planning practice. Virji, CEO of the firm, helps clients to calculate the right amount of their Zakat. He also constructs portfolios of individual stocks, mutual funds and bonds that adhere to Islamic law. And he researches mortgages that don't violate Islam's prohibition against interest and helps clients find suitable investments in their 401(k) plans. When he started his firm in 2003, he reached out to his own network as potential clients and soon found that the Muslims he knew didn't have much experience working with a financial advisor. There are more and more financial options for observant Muslims, choices that didn't exist just a few years ago.

Tirad Mahmoud, chief executive of Abu Dhabi Islamic Bank (ADIB), believes the banking industry is on the cusp of a historic transformation that will see a convergence between conventional and ethical banking. Mahmoud argues Islamic banking is only part of a larger move towards ethical banking in the post-crisis world. Earlier in April, ADIB acquired the retail operations of Barclays in the United Arab Emirates for a price tag of $177 million, giving it access to expatriate customers. The purchase will see 110,000 accounts transferred to Sharia-compliant accounts. ADIB has posted a 20.4 percent increase in first-quarter net profit, driven by higher lending. Its stock is up over 40 percent so far this year, outperforming the benchmark Abu Dhabi Securities Exchange (ADX).

The combined wealth of the world's richest 85 people is now equivalent to that owned by half of the world's population according to a new report from Oxfam titled "Working for the Few". The global aid and development organization detailed the extent of global economic inequality created by the rapidly increasing wealth of the richest. According to the report, 210 people have become billionaires in the past year, joining a select group of 1,426 individuals with a combined net worth of $5.4 trillion. This massive concentration of economic resources in the hands of fewer people presents a significant threat to inclusive political and economic systems. Oxfam is calling on the global political and business leaders attending the World Economic Forum in Davos to take steps to turn around the rapidly exacerbating inequality.

The Egyptian cabinet last week approved a draft law that would allow the government to issue Islamic bonds. The bill divides government assets into “publicly owned by the state" and "privately owned by the state". Only the first type of asset is allowed for sukuk. However, the bill does not describe the two types, a fact that is already causing controversy. The bill is still to be reviewed by the upper house of parliament and religious scholars at the Al-Azhar university.

Experts are expecting further drop in Sukuk isssuance in 2009. Local currencies help to support the markets, K. Salman Younis, head of Kuwait Finance House's Asian operations was cited.