Islamic finance goes West: How Brunei can participate

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Arno Maierbrugger
By Arno Maierbrugger

The 9th World Islamic Economic Forum (WIEF) held in London on October 29 to 31 was the first ever such event in the non-Muslim world and is seen as a stepping stone for the emancipation of Islamic banking in a conventional market environment.

The event has been strongly supported by Malaysia as the largest Islamic finance market worldwide – it was even opened by Malaysia’s Prime Minister Najib Razak, and this indicates growing bilateral Shariah finance business between both countries in the future.

UK Prime Minister David Cameron at the launch said that London has plans to become a center of Islamic finance in the western world, adding that the UK hopes to offer a £200 million Islam-friendly bond as early as 2014 as the first non-Muslim country to do so.

And at the WIEF meeting, it could clearly be seen which Muslim countries are attracted by the idea to do Shariah business on the thriving London financial market. Among those at the event were His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam besides King Abdullah of Jordan, Afghan president Hamid Karzai and Prince Salman bin Hamad Al Khalifa, Crown Prince of Bahrain. Also present were a number of central bank governors and representatives from some of the world’s richest sovereign wealth funds.

Brunei has traditional ties with Britain as its former de-facto colonial power, and it is no secret that wealthy Bruneians have strong business interests in the UK. Thus, the Islamic finance market there could be the next big thing for Brunei.

For example, the value of sukuks already listed on the London market has reached $34 billion over the past five years with nearly 50 bonds quoted by the London Stock Exchange. Shariah-compliant funds have already been used to fund some of the capital’s largest developments, including the Shard and the Olympic Village, and 22 banks currently offer Islamic financial products and services in the UK, more than any other Western country, with the number expected to grow further.

For Brunei banks, a tie-up with London Islamic banks could be a great way to set foot on London’s Shariah finance market, not only to breathe life into the somehow dormant domestic Shariah banking market, but also to open the floodgates to an investment hub in the West that most Bruneians would choose anyway.

The challenge is, however, to design new Islamic financial products for the Western markets that change the perception that Islamic banking is purely about religion. In Turkey, for example, they call it “participation banking” which turned out to be a great success.

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

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Reading Time: 2 minutes

By Arno Maierbrugger

The 9th World Islamic Economic Forum (WIEF) held in London on October 29 to 31 was the first ever such event in the non-Muslim world and is seen as a stepping stone for the emancipation of Islamic banking in a conventional market environment.

Reading Time: 2 minutes

Arno Maierbrugger
By Arno Maierbrugger

The 9th World Islamic Economic Forum (WIEF) held in London on October 29 to 31 was the first ever such event in the non-Muslim world and is seen as a stepping stone for the emancipation of Islamic banking in a conventional market environment.

The event has been strongly supported by Malaysia as the largest Islamic finance market worldwide – it was even opened by Malaysia’s Prime Minister Najib Razak, and this indicates growing bilateral Shariah finance business between both countries in the future.

UK Prime Minister David Cameron at the launch said that London has plans to become a center of Islamic finance in the western world, adding that the UK hopes to offer a £200 million Islam-friendly bond as early as 2014 as the first non-Muslim country to do so.

And at the WIEF meeting, it could clearly be seen which Muslim countries are attracted by the idea to do Shariah business on the thriving London financial market. Among those at the event were His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam besides King Abdullah of Jordan, Afghan president Hamid Karzai and Prince Salman bin Hamad Al Khalifa, Crown Prince of Bahrain. Also present were a number of central bank governors and representatives from some of the world’s richest sovereign wealth funds.

Brunei has traditional ties with Britain as its former de-facto colonial power, and it is no secret that wealthy Bruneians have strong business interests in the UK. Thus, the Islamic finance market there could be the next big thing for Brunei.

For example, the value of sukuks already listed on the London market has reached $34 billion over the past five years with nearly 50 bonds quoted by the London Stock Exchange. Shariah-compliant funds have already been used to fund some of the capital’s largest developments, including the Shard and the Olympic Village, and 22 banks currently offer Islamic financial products and services in the UK, more than any other Western country, with the number expected to grow further.

For Brunei banks, a tie-up with London Islamic banks could be a great way to set foot on London’s Shariah finance market, not only to breathe life into the somehow dormant domestic Shariah banking market, but also to open the floodgates to an investment hub in the West that most Bruneians would choose anyway.

The challenge is, however, to design new Islamic financial products for the Western markets that change the perception that Islamic banking is purely about religion. In Turkey, for example, they call it “participation banking” which turned out to be a great success.

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

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