Do you recognise the headline? I imagine many will. "Let's bank the Muslim way?" was a slogan that appeared on a protestor's placard last month. The image has appeared in many places on the internet and in print around the world. The ‘Occupy Wall Street' movement started outside the New York Stock Exchange, spread to cities across the US and indeed to financial centres elsewhere, notably the City of London. The movement started as a modest protest in New York's financial district by demonstrators opposed to the apparent greed of bankers.
Will this protest movement actually change anything? Frankly, almost certainly no but is there something satisfying about seeing such a call? I guess there is. Not least for the implicit suggestion in the placard that Islamic banking will be understood by the potential viewers of the protest and of the image, where it has been reproduced, to be a recognised alternative to conventional finance. Indeed we have not one but two major reports recently published on the prospects for Islamic banking: Ernst & Young's annual World Islamic Banking Competitiveness Report and Deutsche Bank Global Market Research's Global Islamic Banking - No longer unconventional. You can read in-depth commentary on what both had to say elsewhere in this issue.
Suffice to say at this point that Deutsche Bank's researchers note that over 2006-2010, Islamic banks have outgrown conventional banks by 55 per cent in loan growth and 59 per cent in deposit growth on aggregate. This growth is set to continue with Islamic banking assets rising to $1.78 trillion by 2016. Ernst & Young's report is a touch more cautious, forecasting that Islamic banking assets will reach $1.13 trillion next year. For the record, Deutsche Bank's forecast for 2012 is $1.22 trillion.
So let me return to "Let's bank the Muslim way?" As Deutsche Bank's report says, "That every person on the planet may be a candidate for Islamic finance may be stretching the facts, but it is conceivable that, other things being equal, every Muslim could be a customer." As a prospect for Islamic banking this is surely encouraging but (you knew there had to be a ‘but') what is Islamic banking? What is ‘the Muslim way'? There isn't one, there are several!
Will the growth of Islamic banking be derailed by the multiplicity of interpretations and practices? Derailed? No I don't believe so, but will opportunities be missed and will growth be slower than it could have been if the challenges facing regulators and financiers are not addressed? Almost certainly, yes! I would draw your attention to another article in this issue, our review of my friend Amr Mohamed El Tiby's book Islamic Banking: How to Manage Risk and Improve Profitability. As a Vice President of a UAE-based bank, he is not an ‘ivory tower' academic but is active in the business of banking. So, "Let's bank the Muslim way?" Indeed, let us do so. But can we first agree on what it is?
Robin Amlôt, Managing Editor CPI Financial