Global Islamic financing to double by 2015

NEW DELHI: Global Islamic financing is set to double in size between
2011 and 2015 with the sector increasingly viewed as a credible
alternative to conventional finance following the global financial
meltdown.

Hence, Standard and Poor's (SandP) expects the US$1
trillion global Islamic finance industry to grow 20 per cent over
2011-2015, doubling in size over the period.

"Issuers and
investors have realised that the risk-reward balance in both
conventional and Islamic finance are not fundamentally different,"
Standard and Poor's (SandP) Managing Director and Regional Head, Middle
East Stuart Anderson said in a statement.

The global prospects
for the Islamic finance industry will be the subject of a conference to
be hosted by SandP in Dubai on Sept 25, 2012.

Titled "The
Globalisation of Islamic Finance: Connecting the GCC with Asia and
Beyond", SandP's Islamic finance conference will explore how enhanced
links between the member countries of the Gulf Cooperation Council
(GCC) and Asia can drive greater convergence and globalisation in the
industry.

According to SandP, Islamic finance growth is
currently led by member countries of the GCC region comprising Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates as well
as Asia.

Young, fast-growing Muslim populations; robust
macroeconomic environments; and large infrastructure projects that
require financing are the main drivers of this increasing growth.

"Malaysia leads the global industry while Saudi Arabia leads in the GCC," it said.

Over the last few years, the industry has taken major strides to achieve a broader consensus on Islamic banking structures.

"We
have also seen stronger and more active support from domestic
authorities, particularly through the creation of regulatory and tax
frameworks, ensuring a level playing field between conventional and
Islamic instruments," said Anderson.

A key development
expected to drive globalisation and expansion of Islamic banking
outside Asia and the GCC is the increasing attractiveness of sukuk
among global investors.

At a time when conventional banks'
appetite for term loans is declining, SandP believes that sukuk could
become a key-funding source.

Sukuk issuance looks set to cross
the US$100 billion threshold in September 2012, and is projected by
SandP to grow 25 per cent over 2012-2015 to reach about US$200 billion
a year in 2015.

Malaysia, Indonesia, and the GCC are expected
to account for a combined 85 to 90 per cent of issuances mainly to
finance infrastructure-related projects.

As of September 17
this year, new GCC issuances had totalled US$19.9 billion across all
asset classes compared with US$19.4 billion of new issuances in all of
2011.

Asia, meanwhile, has seen sukuk issuance worth US$57.9 billion year-to-date, compared with US$64.9 billion in 2011.

In
terms of number of issuances, the GCC accounted for about 50 issuances
and Asia for 430 issuances so far this year compared with 44 and 437
respectively in 2011.

A recent SandP report sees growing
infrastructure Sukuk issuances by GCC companies in Malaysian Ringgit
providing a significant impetus to the development and globalisation of
the Sukuk market, it added.

BERNAMA