The Big Debate: Will Islamic finance succeed in the West?

With assets in the Islamic finance industry expected to reach $1 trillion (Dh3.67 trillion) by 2010, there is no doubt why Western countries are actively pursuing a slice of the cake.

Shariah-compliant financial products are fast becoming mainstream in the European market due to an increasing demand from Muslim and non-Muslim investors. The United Kingdom has been in the forefront of this latest financial development where the number of Islamic banks has more than doubled over the past 12 months.

Even in secular France, the government is set to introduce fiscal and legal adjustments to allow Islamic finance in their banking system, giving local institutions the opportunity to issue sukuk (Islamic bonds) and other facilities, especially those related to real estate transactions. A timely decision particularly since Islamic finance has been immune to the global sub-prime crisis and less affected by the credit crisis.

International banks like HSBC, Barclays, Standard Chartered and UBS have also either established or are in the process of finalising Shariah-compliant products for their European market.

Islamic finance’s attractiveness, both to Muslims and non-Muslims alike, lies in its principle. According to independent Swiss-based website Religioscope (www.religion.info), Islamic finance is based on the sharing of profits and losses and prohibits any source of ‘haram’ or unjustified enrichment, including collection and payment of interest or ‘Riba’. 

But the site also pointed out that the greatest challenge faced by the sector is the standardisation of the Islamic finance system. Quoting a source, the website said Islamic banks need to harmonise their accounting systems and create standards that are accepted by international institutions.

What do you think? Will the West continue embracing Islamic finance? Have your say by submitting a comment below or sending an email to online@emirates247.com. The best comments will be published in Emirates Business on Sunday, August 10.