BLME to cash in on Islamic products and services: Business 24-7

By Shuchita Kapur on Thursday, February 12, 2009

With the launch of it Shariah-compliant private banking business, Bank of London and Middle East (BLME) aims to extend its wealth management division. The move comes at a time when faith in conventional banking system has shattered.

The new business of the bank will capitalise on the demand it has seen for a dedicated Shariah-compliant wealth management offering and will serve high net worth individuals, who are increasingly concerned about preserving their wealth and will be looking for counsel and best-of-breed services and solutions.

"And as a Shariah-compliant entity, this business of the bank will have a moral responsibility towards the clients. We have a moral responsibility to provide clients with all the information about the asset class/product they are investing in, its risks and potential returns. As a private banker, we are a trusted advisor to our client," Adrian Gayler, the Head of Private Banking at BLME told Emirates Business.

The bank made pre-tax profits of £1,734,888 in the six months to June last year. Pre-tax profits for the start of the year are more than five times greater than the £332,389 made during the bank's inaugural period when it was setting up operations between August 2006 and December 2007.


Islamic finance has not done too well last year and outlook for 2009 is also not too positive. So what makes you launch this business at such a time?

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Can Islam Save The Economy?: RD

By Nathan Schneider

In the midst of a global financial crisis one sector has yet to suffer the fate of the rest. Islamic finance, or Sharia-compliant banking, offers strict moral guidelines for dealing with money. Trading debt and risky speculation are off-limits, as is investment in immoral enterprises like gambling, prostitution, and war profiteering. It might be time to get the muftis on the phone.

Governments worldwide are struggling to manage the global financial crisis, with no end to the downturn in sight. But at least so far, one sector has been unscathed: the $1 trillion-and-growing business of Sharia-compliant banking.

That’s right, Sharia. The same combination of medieval Islamic law and modern post-colonialism that makes the terrorist clique supposedly so hateful of Western freedoms. Where finance is concerned, most muftis—Islamic religious scholars—agree that God prohibits charging any amount of interest on loans. Trading debt and risky speculation are off-limits too, as is investment in immoral enterprises like gambling, prostitution, and war profiteering. Transactions should be highly transparent and risk, as well as return, should be shared by all parties. You can’t trap people into owing more than they can pay. Basically, most everything that caused the current mess isn’t allowed. “Given their constraints, they actually don’t hold any conventional debt or conventional mortgages,” explains Samuel Hayes, emeritus professor of investment banking at Harvard. “They don’t have any of these derivatives or outright subprime loans. There’s no doubt that they have weathered this better than the conventional banks.”

For a world in need of fast, creative solutions to a cascading crisis, might this financial subculture offer a way out? Duke University economist Timur Kuran calls for caution. “I think it’s going to be a year or two before we have enough data to really know if it is the case that the banks are doing better and what explains it.” One way or another, says Bill Maurer, an anthropologist at UC Irvine who studies alternative economies, “this is a really interesting moment for Islamic banking.”

Sharia-compliant banks began appearing in the 1970s, but the concept dates to mid-century in South Asia and the Middle East, as Muslims newly independent from European rule sought to create an Islamic identity that would permeate all aspects of life, public and private. The first banks were small partnerships and development initiatives. In 1975, the Islamic Development Bank was founded by 23 Muslim countries (now 56), combining a World Bank-style mission with interest-free loans to member governments. It lent legitimacy and visibility to the approach. That decade’s oil boom gave a jump start to a new crop of commercial Islamic banks, particularly in the Persian Gulf states. By the ’80s, Pakistan, Sudan, and Iran were making efforts to Islamize their entire economies.

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Islamic finance sector has room to grow: The Star

By Aziz Tayyebi

ISLAMIC banking has, to a large extent, been shielded from the credit crisis which has devastated conventional banking and finance.

As such, many proponents of Islamic banking, such as Deputy Prime Minister and Finance Minister Datuk Seri Najib Tun Razak, have said the principles of Islamic finance could provide concrete and realistic measures to tackle the financial crisis.

However, the Islamic finance industry still has some way to go before it can be a serious alternative to conventional finance and banking. While Islamic finance is growing at a rate of 5%–10% per year, it still only constitutes a small proportion of the global financial services sector, with a market valued at between US$500mil and US$1bil.

For Islamic finance to take a greater share and to expand in other jurisdictions, it needs to focus on a number of key issues and challenges, such as enhanced risk management and product development, syariah standardisation and human capital development. Critically, many risk management tools, such as complex derivatives, are not available to Islamic institutions.

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