Mukhtar Hussain, Deputy Chairman, HSBC Bank Middle East – DIFC Branch

After opening the first-ever Sibos session on Islamic finance with a reading from the Qu’ran, moderator Mohammed Paracha, Chief Executive Officer, Al Salam Europe, told his audience, “The past 12 months have been tough. Levels of debt have been too high, and we have seen the result of financial models that relied on too much leverage.”

The Qu’ran creates a framework of principles for financial transactions, Paracha explained, and one principle is that debt is disliked, as is the charging of interest. “Other key principles of Islamic finance are that we should not speculate, and that there should be certainty in our financial arrangements,” said Paracha. Islamic financial transactions are asset-backed by nature, and they occur in the real economy. “We are talking about transactions to help society, to build roads and infrastructure, to finance assets,” said Paracha.

Shaykh Yusuf Talal DeLorenzo, Chief Shariah Officer, Shariah Capital

But Islamic finance did also represent an opportunity for ‘conventional’ financial institutions that went beyond road-building.

With the impact of the credit crunch on non-Islamic practices, explained Paracha, the “playing field has been leveled” and there is now a trend towards greater mobilisation of Islamic and conventional finance side by side. “The opportunity to deploy Islamic finance in areas such as equities, venture capital, the debtcapital markets are all there,” said Paracha. If there is a trend for Islamic and conventional finance to mobilise together, perhaps the two are not so different after all? “While Islamic finance is a Muslim thing, at the same time it is very much open to everyone, just as all finance is,” observed Shaykh Yusuf Talal DeLorenzo, Chief Shariah Officer, Shariah Capital. “At its core, Islamic finance is prudent and sound business. That’s the message that people need to understand.” DeLorenzo went on to make a thought-provoking distinction: Islamic banking’s prohibition on interest might be better interpreted as a “prohibition of disinterest”, in that another key principle is partnership and the sharing of loss as well as gain.

“The opportunity to deploy Islamic finance in areas such as equities, venture capital, the debtcapital markets are all there.” Mohammed Paracha, Chief Executive Officer, Al Salam Europe

Money may be a measure of value, but it has no value in itself. “My lovely dollar bill is just a dirty piece of paper,” said DeLorenzo. Then Mukhtar Hussain, Deputy Chairman, HSBC Bank Middle East – DIFC Branch, returned to the similarities between Islamic and conventional finance. “If you take Islamic principles and set them beside the principles that many banks, including HSBC, hold to be true, you can potentially see a correlation between them,” said Hussain. This correlation had enabled “true, demand-led growth” in Islamic finance. Indeed, industry analyses tend to suggest that over 50% of the 1.5 billion Muslims across the world would opt for competitive, well-delivered Islamic alternatives to conventional financial products.

Already, supply is growing to meet this potential demand. “From the perspective of those who want to participate in Islamic finance, the reason to do so is the growing asset pool,” said Hussain. Depending on the definition used, Islamic assets now stand at between USD 700 billion and USD 1 trillion, with a revenue pool of USD 50 billion and a profit pool of between USD 15 and USD 20 billion. “That is not small,” said Hussain.

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