JEDDAH, 13 December 2004 — A number of Islamic bankers in the Gulf region plan to establish a large Islamic bank with a capital of $2 billion, according to Saleh Kamel, chairman of Dallah Al-Baraka and the Council of Islamic Banks and Financial Institutions.
Kamel did not say where the new bank would be based but he pointed out that many countries have expressed their readiness to host it. “The founders intend to establish the bank in a free economy, having a sound financial base,” he told Al-Eqtisadiah, a sister publication of Arab News.
The billionaire Saudi businessman expects an announcement on the launch of the bank in June next year at the annual conference of the Jeddah-based Islamic Development Bank. He indicated that the bank’s capital could grow to as much as $200 billion.
It is not clear whether the new financial institution would act as an Islamic central bank. Kamel pointed out, however, that the absence of a central bank had restricted Islamic banks’ lending and credit services. “The new bank will not compete with existing Islamic banks and attempt to attract their clients. In fact, it will support them,” he explained. He said the Union of Islamic Banks had spent about $100 million to clear the doubts of Western officials concerning Islamic banking.
Islamic Shariah imposes a series of restrictions on banking activities and these include a ban on charging interest for loans and prohibiting clients’ money from being invested in companies linked to things such as alcohol, tobacco and pornography.
The idea of Shariah-approved finance first emerged in Egypt at the beginning of the 1960s and was further developed in Saudi Arabia and the United Arab Emirates. “Islamic banking today is an industry that is still evolving,” said Iqbal Khan, head of Global Islamic Finance at HSBC Amanah Finance, part of the banking giant HSBC.
“The industry manages approximately $180 billion today, growing at approximately 15 percent per annum,” he said. Economists have estimated that there are about 270 Islamic financial institutions around the world with assets of some $210 billion.