© 2010 IFAAS. All rights reserved. THE LANDSCAPE OF ISLAMIC FINANCIAL INDUSTRY Mohammad Farrukh Raza 4th Biennial International Business, Banking & Finance Conference University of West Indies, Trinidad - 24 th June 2011 Managing Director – IFAAS – UK, France & Bahrain ©2011 IFAAS. All rights reserved.

1980’s Growth started in Islamic countries 1960’s First contemporary experience in Egypt 2000 Innovation and internationalisation  The underlying principles of Islamic finance have existed for centuries.  They were widely practiced in various forms of business until the advent and dominance of modern interest-based financial system.  The Islamic economic system had its renaissance in form of modern Islamic finance in 1960’s and since then its appeal is capturing varied and growing audiences.

WHAT IS ON OFFER TODAY?  Banking  Retail  Investment  Corporate & Commercial/SME  Sukuk (Asset based Islamic securities – sovereign & corporate)  Asset Management  Equity Funds  Real Estate Funds  Exchange Traded Funds  Takaful (Islamic insurance & reinsurance)  Structured & Project Finance (infrastructure, aviation, shipping, real estate etc)  Private Equity, Venture Capital & Syndication  Microfinance

THE GLOBAL ISLAMIC FINANCE MARKET The assets of Islamic financial industry have doubled in 4 years and the sharp growth trend continues despite the market shocks. Global Islamic Finance Report 2011 has estimated the current size of Islamic finance industry to be US$1.4trillion with a potential to reach US$4trillion in a few years with current rate of growth

ISLAMIC FINANCE IN THE EAST  The majority of Muslim countries have rapidly growing Islamic financial markets  Malaysia and the GCC countries are leading the way in rapid transition to Islamic finance  A number of emerging economies and developing countries are entering into Islamic Finance  Several non-Muslim countries like the UK, Luxembourg, France and South Africa have already built a significant edge and many others like Japan, Brazil, Russia, Australia, China and India are joining the race  The main focus of this presentation will be on Islamic Finance in the West due to the relevance with Trinidad & Tobago and the CARICOM region

ISLAMIC BANKING IN THE WEST Banks offering Islamic products & services in western countries Banks with Islamic offering in the UK

SUKUK (ISLAMIC BONDS/SECURITIES)  London Stock Exchange has 31 Sukuk listings worth of US$19bn  Luxembourg has 16 Sukuk listed worth of US$7bn  Nasdaq Dubai has 16 Sukuk listings for US$11bn  GE Capital was the first US corporate to issue a Sukuk  World Bank IFC issued a US$100M Sukuk  First French corporate Sukuk of €1bn to be issued in 2011

ISLAMIC FUNDS & INDICES  Dow Jones Islamic Market Indexes  FTSE Islamic  S&P Shariah Indices  MSCI Islamic Global Indices Source: Ernst & Young

INTERNATIONAL KEY PLAYERS

WHY THIS GROWTH IN THE WEST? Political/strategic drivers  Strategic positioning of market places/competition  Fostering existing and establishing new trade links  New business opportunities  New and fresh capital, investments and funding channels  Diversification  Financial inclusion Commercial drivers  Fulfilling customer demand/new customer acquisition  Competitive advantage  Product, asset, risk and income diversification  Customer loyalty/retention

WHY THIS GROWTH IN THE WEST? (CONT’D) Technical drivers  Different way of doing business  Resilience of the model and structures  Different type of risk with competitive returns  Access to new liquidity  More conservative approach means more robustness Moral drivers  Equitable, fair and sustainable alternative  Universal values in common with the humanity  Ethical appeal for Muslims and non-Muslims alike  Supports real economy and creates new opportunities  Does not discriminate anybody

CASE STUDY - FRANCE  Strong political will driven by the finance minister  Strategy to catch up with the UK in terms of Islamic finance  Aim to position Paris as the Islamic financial hub in the west  Target of raising €100bn of fresh capital  Teamwork between all stakeholders propelled by Paris Europlace Commission for Islamic Finance  No regulatory hurdles  Majority of tax issues resolved by way of gradual tax reforms introduced in the financial acts  2 applications for new Islamic banks in progress  First corporate Sukuk of €1bn anticipated later this year  First retail banking product launched last week  Some investment and asset management products already available

RELEVANCE TO TRINIDAD & TOBAGO  Strongest economy in the region  Potential for becoming the regional financial hub with a bigger, diversified and comprehensive offer  Attracting new inward investments from cash rich countries  Possibility of funding major infrastructure projects  Access to new markets  Domestic primary market of a sizeable local Muslim community  A real alternative for the wider community  Opportunity of delivering something new, different and good to all Caribbean communities regardless of faith

CHALLENGES  Lack of awareness amongst the stakeholders and customers  Myths about Islamic finance:  It’s too difficult and complicated  It’s only for Muslims  It promotes terrorism  There is no demand for it as all Muslims are already banked  Regulatory and taxation issues  Human capital  Institutional questions:  Do we really need it?  What if it doesn't work?  How do we get it right?  What is my exit strategy?  Where can I get the right help from?