1. Annual Islamic Finance Conference July 3 2013, Mombasa, Kenya Global Trends In Islamic Finance

2. Overview  Shameless Advertisement  Trends (7 Dichotomies)  Questions  Bonus Slides? –More Dichotomies –Ugly Statistics

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6. Dichotomies -Mutually Exclusive -False Dichotomy -Top 7 – Here they come! Source: Wikipedia

7. # 1  Prophet vs Profit –Why do we participate in Islamic Finance? –Why do others participate in Islamic Finance? –Does everyone have the same motivation?

8. # 2  Islamic vs Participatory –How should Islamic financial institutions be identified? –Does a rose by any other name smell as sweet? –Islamic? Participatory? Cooperative? House? Ethical? “Bank”?

9. # 3  Apple vs Halal Foods –Intra vs Extra-investment? –Halal Foods 560 b per year –Islamic Finance valued at: 1.8 t –Dow Jones Industrial Market Capitalization 4.4 t; Nasdaq 5.5 t; S&P 500 14.9 t –Nairobi Stock Exchange Market Capitalization 1.7 t –Apple Market Capitalization: 372 b; Google 292 b

10. # 4  Inter vs IntraBenchmarking –LIBOR? vs IIBR? –IIBR must always be higher than LIBOR?

11. # 5  Growth vs Profit –Growth rates of 15% per annum for years –ROE was 12% in Islamic Banking vs 15% in Conventional –Islamic Bank Challenges Subscale Operations Asset Quality Negative Operating Income Weak Risk Culture Source: E&Y Competitiveness Report

12. # 6  SEA vs Gulf –Who will influence global Islamic markets the most? –Who speaks for Islamic Finance? –Who sets the standards? –Who will train the next generation of scholars? –Who will Africa follow? Or will Africa forge its own identity?

13. # 7  Data vs Relationship –How are decisions made in Islamic Finance? –How are decisions made in places where Islamic Finance is practiced?

14. Break Questions? Joe Nehila Content Development jnehila@factset.com *Were they true or false dichotomies?

15. Bonus - Dichotomies  Windows vs Fully Fledged Banks  Core vs Varied Offerings  Niche vs Alternative  Retail Banking vs Investment  Lower Class vs High Net Worth  SME vs Micro

16. Bonus – Dichotomies 2  Informal vs Formal Systems –Not just informal economy, Cooperatives, Credit Unions, SME Banks, Microfinance Banks, etc.  Mitigation vs Contract Law  Centralized vs Disbursed Authority  Top Down or Bottom Up

17. Bonus - Stats  2010 new equity = $387 b  Most from Emerging Market (60%)  Global Stocks $212 t (2010)  $96 t foreign investments Source – McKinsey, Aug 2011 Mapping Global Capital Markets

18. Bonus - Stats  Africa on the Map? –“Rest of World” –Egypt Only –GIFR Kenya 22 (down from 17) UK 12; US 15 Sudan 9; Egypt 14; SA 21; Algeria 27, Tunisia 28; Nigeria 32, Senegal 36; Gambia 42, Mauritius 43 Source – GIFR 2013; E&Y Competitiveness Report

19. Bonus - Stats  Banking –Bahrain, $47b vs $13b (27%) –Egypt, $215b vs $8b (3.8%) –Malaysia $579b vs $106b (19%) –Indonesia 4% –Kuwait 33% –Pakistan 6% –Saudi Arabia 49% –Turkey 5% –UAE 17% Source –E&Y Competitiveness Report

20. Bonus – Math Problem  Problem –$212 t total finance value –$2 t Islamic value –$210 t conventional value –.9% value Islamic to Conventional –CAGR Islamic 20% –CAGR conventional 1.5% How long will it take to: 5% 7.5% 10% 20% 50% Source –E&Y Competitiveness Report; GIFR, McKinsey Capital Markets, Friendliness

21. Bonus – Math Solution  Solution 5%10 Years 7.5%13 Years 10%15 Years 20%19 Years 50%24 Years Realistic (2.75% Conventional, 15% Islamic Growth) 5%15 Years 7.5%19 Years 10%21 Years 20%28 Years 50%36 Years

22. Bonus – Math Prediction  Prediction - 1.6 billion Muslims, 23% of world population -Varying levels of adherence -Attractive to non-Muslims -Growth Rates: Islamic 15% 7 years, 10% 10 years, 7% 15 years, 5% thereafter Conventional: 2.5% 2 years, 3% 3 years, 5% 4 years, 3.5% thereafter 5%34 Years (World Takes Notice) 7.5%62 Years(Significant Waypoint) 10%83 Years(Important Achievement) 12.5%98 Years(Target) 15 %110 Years(Realistic Objective) 20%130 Years(Stretch) 50%194 Yeras(*Unlikely unless rebranded as an alternative and ethical)