Deutsche Bank predicts Islamic finance boom

Analysts at Deutsche Bank, led by Ryan Ayache, have predicted in a report that global Islamic banking assets could reach $1.8 trillion by the end of 2016 – up 90% on the $939bn of assets in 2010.

The analysts argued that Islamic banks would benefit from the regulatory burden on banks in developed markets, such as Europe and the US, which will curtail bank lending. They also argued that there is growing awareness and acceptance of Islamic finance and sharia-compliant products.

Sharia-compliant bonds – known as sukuk – currently make up about 1% of global debt issuance, according to Dubai-based Ryan Ayache, who was the lead author on the Deutsche Bank report.

There has been an uptick in sharia-compliant bond issuance this year, according to Dealogic. The total value of Islamic debt issued globally in 2011 is close to breaking a post-2007 financial crisis high, with $17.3bn via 73 transactions having been priced for the year to November 14.

In 2009, just over $18bn worth of Islamic bonds were issued globally through 72 deals, while deals worth a total of $27.2bn via 100 transactions were priced in 2007.

There has been scepticism to sukuks in the past, as they are a new asset class, but the report argued that international standards, supervision and accounting methods are being brought to Islamic banks – meaning the level of harmonisation between Islamic and conventional banking regulation is eroding barriers to entry and enabling more participants into the field.

The report said: “The awareness and availability of Islamic banking is greater today than ever before.”

It added: “Companies such as GE have already tested the Sukuk market , and the existing ownership of global blue chips by certain sovereign wealth funds may create a viable pipeline for future issuances in the short and near term.”

source : efinancial news

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