Effects of Islamic Banking on International Lending

In mid-November of 2009, The Economist wrote an article interacting with France's sudden interest
in Islamic banking. The irony however of such an article is that France has been very intolerant of
Muslim dress in public places in recent years as the nation holds dearly to their secularist identity.
Islamic bank is almost the term du jour for banking institutions and financiers alike these days,
especially since Islamic banks hold huge amounts of us dollars in liquid assets -and all the while the
world's banks are struggling from an acutely hard financial crisis.

Moin Siddiqi estimated in the "The Islamic Dimension" that the Islamic Banking sector has expanded
at a quick pace of between 15% and 22% annually in the past decade. In fact, there are presently (as
of 2006) 250 Islamic mutual funds with $300bm worth of assts under management and 300IFIs
holding over $250bn deposit. Furthermore, $200bn in resources are managed by dedicated Muslim
'windows' or subsidiaries of conventional banks.

Established on the dimensions of that sector many international funding and investing organizations
have made it a policy to not get involved in such investments. Therefore the question is: Why?
You will find two big arguments against Islamic banking: first, it is interest-based in the end, or well-
hidden; and secondly, that it has acted for decades as a front side for funding terrorist organizations.
Interest payments are how lending institutions make their money and never being able to acquire
interest credited to religious beliefs or questioning the end use of this interest is an extra concern for
traders to take into account in the risk of the investment.

It has been written that "the money considered as interest in a standard bank transaction is instead
designed into the deal agreement in another way. Some Muslims consider Islamic banks to be
interesting in legal trickery to hide the fact that they charge and pay interest. Most economical
experts would probably agree".

This is certainly appealing to financial institutions of all sorts because of such legal exposure they
face. Britain has recently been at the forefront of 'narrowing of the gap' which would make it easier
for financial organizations outside of the Muslim world to easily fund loans to such groups.

But others, such as France, have to take a real hard look at their own group of values and see if
Islamic bank products and 'accommodating of laws' is reconcilable with this. France has eliminated
the tax obstacles and improved upon the legal framework, certainly, but it has not prevented
protests and serious public debate about the issue itself. Middle Far eastern governments may now
feel more empowered that they can rely on their own functions rather than borrowing Western
banking systems. At the same time, it highlights the need for standardization and rules of businesses
in any consulting firm, especially where scholar-review is concerned.
Islamic banking Jobs has been making inroads into Western market segments. For instance, we at
Capital Corp Merchant Bank| have seen applications depending on such funding conditions increase
almost two-fold. By that same token, there has even been non-Muslim demand for Islamic financing
products as it allows a greater range of investment products, especially for profile management
groups. Such personal examples are large demands for "interest free" lending options.

But without education on cultural gaps and indeed the gaps between the Islamic and Western bank
structures for all talking to firms, a constructive conversation cannot start. In truth, without
education (on both sides), Huntington's Clash of Civilizations theory is all but inevitable.

And yet, as the Muslim world asserts itself economically and that the capitalist Western sees the
good thing about this new exotic form of banking, a hybrid international economical banking model,
juxtaposing the two, may yet dawn. So, overall my advice would be to not become "stuck" in old
ways of doing business and allow you to better understand how mutually beneficial relationships
can come to fruition from our Islamic neighbours.