Future ‘extremely bright’ for UK’s Islamic finance economy

Future ‘extremely bright’ for UK’s Islamic finance economy
Experts in the UK expect the global Islamic finance industry to ultimately continue to see growth move in an upward direction. (File/Shutterstock)
Short Url
Updated 27 November 2020

Future ‘extremely bright’ for UK’s Islamic finance economy

Future ‘extremely bright’ for UK’s Islamic finance economy
  • London’s unique position as a finance and technology hub has it perfectly placed to capitalize on a domestic and global boom in demand for Islamic finance
  • UK’s Islamic finance economy and customers will benefit greatly from London’s dominance in the world of fintech

LONDON: London is perfectly placed to continue its rise as a global centre for Islamic finance in the coming decade, and the dual challenges posed by Brexit and the coronavirus (COVID-19) pandemic are unlikely to derail that ascension, according to experts and industry insiders.

It has been a hard year for the global financial markets. The pandemic’s emergence saw 30 percent of global equity wiped out in a matter of weeks in March, and the recovery since then has been marred by intermittent shocks and an atmosphere of deep uncertainty. The world of Islamic finance was no exception to this hardship.

According to Salaam Gateway’s annual State of the Global Islamic Economy report, released this month, global Islamic finance assets were valued at $2.88 trillion in 2019, with roughly $6 billion of Shariah-compliant assets held in the UK — the most in the West. However, globally, “due to the impact of the COVID-19 crisis, the value of Islamic finance assets is expected to show no growth in 2020,” despite consistent growth of a minimum of three percent in previous years.

Many in the UK fear the devastating economic impact of an ill-timed separation from the European Union’s free trade area, just as the country plots its long and difficult recovery from the pandemic, will compound the economic misery after a year of job losses, lockdowns and costly government bailouts.

But despite the near-term challenges, Martina Macpherson, senior vice president of partnerships and engagement at Moody’s ESG Solutions Group, told Arab News that she expects the global Islamic finance industry to ultimately continue to see growth move in an upward direction.

“Islamic finance (will) continue to expand in the next decade across regions and asset classes,” she said. “From a market of just $200bn in 2003, the Islamic Finance sector is expected to grow to over $4trn in assets by 2030.”

Thanks to London’s unique position as a finance and technology hub, Youness Abidou, CEO of Shariah-compliant property investment firm Nester, told Arab News, the city is perfectly positioned to be a key beneficiary of the explosive growth of this industry in the coming decade.

The British capital, he said, has “arguably the perfect mix to support investment into innovative growth whether that be fintech (financial technology) or Islamic Finance. Interestingly, London is considered a hub for both these sub sectors, yet uncertainty lies ahead … the true impact of Brexit remains unknown.”

However, he continued: “I believe true free market economics will prevail. There is a growing demand for Islamic finance products. Innovation in the sector is necessary and so supply has to catch up.”

Abidou explained that London’s fintech sector, in particular, is central to London’s Islamic finance future. Fintech, he said, “continues to challenge the ethics of traditional banking, a fundamental principle of Islamic finance, and so coupling Islamic finance with fintech will drive innovation and growth of products to a wholly under-serviced population.  

Peter Cunnane, national and international strategy lead at Innovate Finance, echoed these views to Arab News, hammering home the importance of the British capital’s burgeoning fintech scene for the UK’s future in a post-Brexit, post-pandemic world.

“The UK fintech ecosystem provides global leadership and knowledge, not just in the broad range of products and services offered by our businesses but also through our deep pools of expertise, and our international connectivity which in turn strengthens our domestic industry. 

“This expertise comes particularly to the forefront during times of crisis,” he added.

One of the most important factors that has allowed the UK to ascend to such an imposing position in the world of Islamic finance is the top-down support the sector has been receiving from the government for years, Samina Akram, managing partner at Samak Ethical Finance, told Arab News.

“Our government’s and our regulator’s commitment and support has been at the heart of the development of the UK Islamic finance sector. The UK was the first member of the EU to authorise Islamic banks, and has been providing Islamic financial service for over 30 years. Over the years our sector has attracted business, capital and investment into the country,” she said.

But after the pandemic, and when the dust clears from Brexit, she argued that not only will Islamic finance stand to gain from the city’s infrastructure and human capital, but the unorthodox approach it takes toward investment — one answerable not only to financial returns but to a set of moral principles — is going to be an increasingly compelling argument that will draw all types of investors, not just Muslims, to invest ethically.

“COVID-19 has slowed us down as humans and is forcing us to reflect,” she said. “What type of future do we want to create for our next generation? What type of impact can I personally make on the world and the planet? These personal and meaningful questions are having major implications on our financial decisions.” And when people ask those questions, she explained, the world of Islamic finance stands to gain.

Akram continued: “At the heart of Islam lies cooperation, transparency and fairness. In essence, it aims to establish a just society, so everyone has a chance of leading a dignified life. This style of ‘finance of empowerment’ is appealing to Muslims and non-Muslims alike.” 

She added: The future is looking extremely bright not just for the UK Islamic financial system, but the global Islamic financial system.”

EU poised to unveil green investment list

EU poised to unveil green investment list
Updated 5 min 27 sec ago

EU poised to unveil green investment list

EU poised to unveil green investment list
  • Bloc aims to become carbon neutral by 2050 and mitigate climate change

BRUSSELS: The European Commission will next week present the first part of a “green taxonomy” list of energy sources and technology to be labeled as sustainable investments, but a question mark hangs over the inclusion of natural gas.

The classification system, to be published on Wednesday, is mandated under a 2019 agreement between member states and the European Parliament meant to define durable economic activities and green finance.

It seeks to define what the EU would deem as sustainable as it moves toward a goal of Europe becoming carbon neutral by 2050, with criteria focusing on mitigating climate change or preparing for it.

A second commission proposal is to follow later this year covering four other subjects — protection of water and marine resources, the circular economy, preventing pollution and biodiversity — all part of the EU’s “Green Deal” to reach that ambition.

For an investment to be considered “green” it has to meet one of these objectives without hurting any of the others.

The proposal is to become a “delegated act,” meaning it becomes law unless member states or the European Parliament reject it.

But a leak of the commission’s taxonomy list last month raised an outcry from NGOs, experts and MEPs, in particular over the inclusion of gas as a partially sustainable energy source.

Nine experts the commission consulted threatened to break off cooperation over the perceived “greenwashing,” according to a letter sent to the commission and seen by AFP.

The commission plan, according to the leak, is to have gas-fueled power stations labeled as “green” as transitional facilities up to 2025 where they replace ones using coal. One of the experts signing the letter, Sebastien Godinot, economist at the environmental protection NGO WWF, said that would give a “blank check” to gas operators and risk a long-term dependence on fossil fuels.

“This proposal could potentially create a direct incentive to build even more gas co-generation plants than already planned,” Godinot warned.

A Green MEP from the Netherlands, Bas Eickhout said: “A gas-fired power plant built now is there to stay for 40 years. So brings you way over the 2050 deadline.”

As a result, “we are going to object” to the commission proposal, based on the version leaked in March, Eickhout said.

Several sources said that the governments of Austria, Denmark, Ireland, Luxembourg and Spain had written a joint letter to the commission to voice their objection to including gas in the taxonomy.

Godinot noted that, while natural gas releases less carbon dioxide than coal, it also emits methane, considered a worse greenhouse emission.

Other points of discord are the commission’s approach to forestries and logging, seen by some as not rigorous enough, and it automatically classifying bioenergy as durable even when the biomass it uses comes from dedicated farmland.

A French news website, Contexte, said on Thursday that the commission has been forced to revise its document and could revert to an ordinary legislative process that would be much longer.

The commission did not confirm that. An EU source said the text it is to present is “still in development” and stressed how technical it was.

“Right now, we’re talking about a general approach to gas. Further analyses are needed,” the source said.

Egypt, Sudan airlines sign MoU to boost ties

Egypt, Sudan airlines sign MoU to boost ties
Updated 11 min 8 sec ago

Egypt, Sudan airlines sign MoU to boost ties

Egypt, Sudan airlines sign MoU to boost ties
  • The partnership aims to transfer Egyptian expertise in the aviation sector to Sudan

CAIRO: Egypt’s national carrier EgyptAir has launched a strategic partnership with Sudan Airways to strengthen aviation ties between the two countries.

Egyptian Civil Aviation Minister Mohamed Manar and Khaled Al-Sheikh, deputy Sudanese ambassador to Egypt, attended the memorandum of understanding (MoU) signing ceremony.

Amr Abu El-Enein, EgyptAir chairman and CEO, and Sudan Airways Director General Yasir Timo signed the MoU.

The Egyptian minister highlighted the importance of the strategic partnership between the airlines and their role in enhancing trade exchange between the two countries. He said the MoU is part of Cairo’s strategy to strengthen bilateral ties in a range of fields, including aviation.The partnership aims to transfer Egyptian expertise in the aviation sector to Sudan.

Manar said the MoU includes training of employees with the Sudanese flag carrier, and helping the country modernize its aircraft fleet by managing network planning, developing maintenance operations, and providing advisory services in quality control and technical approvals. Under the agreement, Egyptian experts will train Sudanese officials in aviation security, ground services and other technical aspects.

The MoU also seeks to increase air traffic between the two countries, leading to increased economic opportunities for both.

A joint working group will have regular meetings to follow up on projects and contracts.

Timo also expressed his happiness at signing the MoU with EgyptAir, due to its expertise, human cadres and technical capabilities.

Musk’s SpaceX wins $2.9bn moon lander contract

Musk’s SpaceX wins $2.9bn moon lander contract
Updated 23 min 20 sec ago

Musk’s SpaceX wins $2.9bn moon lander contract

Musk’s SpaceX wins $2.9bn moon lander contract
  • NASA says the spacecraft will carry two American astronauts in 2024

WASHINGTON: NASA awarded billionaire entrepreneur Elon Musk’s space company SpaceX a $2.9 billion contract to build a spacecraft to bring astronauts to the moon as early as 2024, the agency said on Friday, picking it over Jeff Bezos’ Blue Origin and defense contractor Dynetics Inc.

Bezos and Musk — the world’s first and third richest people respectively, according to Forbes — were competing to lead humankind’s return to the moon for the first time since 1972.

Musk’s SpaceX bid alone while Amazon.com founder Bezos’ Blue Origin partnered with Lockheed Martin Corp., Northrop Grumman Corp. and Draper. Dynetics is a unit of Leidos Holdings Inc.

“NASA Rules!!” Musk wrote on Twitter after the announcement.

The US space agency awarded the contract for the first commercial human lander, part of its Artemis program. NASA said the lander will carry two American astronauts to the lunar surface.

“We should accomplish the next landing as soon as possible,” Steve Jurczyk, NASA’s acting administrator, said.

“If they hit their milestones, we have a shot at 2024,” Jurczyk added.

NASA said SpaceX’s Starship includes a spacious cabin and two airlocks for astronaut moon walks and that its architecture is intended to evolve to a fully reusable launch and landing system designed for travel to the Moon, Mars and other destinations in space.

SpaceX also responded on Twitter, writing: “We are humbled to help @NASAArtemis usher in a new era of human space exploration.”

SpaceX will be required to make a test flight of the lander to the moon before humans make the journey, NASA official Lisa Watson-Morgan told reporters.

NASA had been expected to winnow the lunar lander contest to two companies by the end of April, but instead it picked only SpaceX, a move that deepens their cooperation. On Thursday, NASA said it would send its crew to the International Space Station aboard a SpaceX rocket on April 22.

The agency aims to create regular service to the moon and said it will have a separate competition for that contract.

NASA said in a news release that SpaceX’s HLS Starship, designed to land on the moon, “leans on the company’s tested Raptor engines and flight heritage of the Falcon and Dragon vehicles.”

Brazil needs $10bn a year in aid for carbon neutrality by 2050

Brazil needs $10bn a year in aid for carbon neutrality by 2050
Updated 31 min 31 sec ago

Brazil needs $10bn a year in aid for carbon neutrality by 2050

Brazil needs $10bn a year in aid for carbon neutrality by 2050
  • Deforestation in Brazil’s portion of the Amazon rainforest has skyrocketed under Bolsonaro

BRASILIA: Brazil’s Environment Minister Ricardo Salles told Reuters on Friday that Brazil would need to receive $10 billion annually in foreign aid in order to reach economy-wide net zero carbon emissions by 2050, instead of 2060 as currently planned.

Salles has regularly called for the international community to pick up part of the check for reducing Brazil’s carbon emissions, which predominantly come from deforestation.

His call for $10 billion a year in aid comes as Brazil negotiates a separate potential deal with the US to rally foreign funds to fight soaring deforestation in the Amazon rainforest.

Salles said he does not expect a deal to be announced at next week’s US Earth Day summit, but that talks with the US would continue.

“There is not and was never the objective of negotiating some kind of deal to deliver on April 22,” Salles said in an interview.

Reuters reported on Thursday that a potential deal had reached an impasse, with Brazil demanding funding up front to increase efforts to fight deforestation while the US demanded results before opening its purse strings.

“We understand their logic, but they need some understanding that Brazil already has a lot of results,” Salles said.

He cited the fact that most of Brazil’s forest is preserved, which means emissions from the carbon they contain has been avoided.

Deforestation in Brazil’s portion of the Amazon rainforest has skyrocketed under Bolsonaro, hitting a 12-year high in 2020 with an area 14 times the size of New York City being destroyed, government data show.

Salles said just $1 billion per year out of the $10 billion would enable Brazil to reach zero illegal deforestation ahead of the existing 2030 target.

About one-third of that money would go toward contracting more environmental agents, probably drawing from the ranks of the national military police, Salles said.

The other two-thirds would be used to invest in sustainable development of the Amazon region, he said.

Vice President Hamilton Mourao, who Bolsonaro has put in charge of Amazon policy, said on Friday that reaching the 2030 target would require a 15-20 percent reduction in Amazon deforestation every year until then.

Mourao said the government is studying extending a military deployment to protect the Amazon if destruction does not come down that much by July.

The expensive military deployment is set to finish at the end of this month, having failed to restore deforestation and fires to levels prior to Bolsonaro taking office.

WEEKLY ENERGY RECAP: Economic indicators robust as global oil stocks continue to fall

WEEKLY ENERGY RECAP: Economic indicators robust as global oil stocks continue to fall
Updated 15 min 15 sec ago

WEEKLY ENERGY RECAP: Economic indicators robust as global oil stocks continue to fall

WEEKLY ENERGY RECAP: Economic indicators robust as global oil stocks continue to fall
  • The IEA forecast dramatic changes in global oil markets in the latter half of this year

Oil prices made the first weekly gain after three consecutive weeks of decline, despite the rising number of COVID-19 cases and additional travel restrictions.

The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have both improved their oil demand outlook after huge draws in oil inventories in member states of the Organization for Economic Co-operation and Development (OECD), backed by a recovering global economy that is greatly supported by unprecedented monetary and fiscal stimuli.

On the week closing, oil prices rose to a one-month-high: Brent crude rose to $66.77 per barrel, and West Texas Intermediate rose to $63.13 per barrel. Trading above $60 per barrel for both benchmarks, and with Brent crude prices at an average of nearly $61 in 2021 so far, represents a huge recovery one year on from “Black April,” when the pandemic caused the largest oil demand shock in history.

Both the IEA and OPEC monthly oil reports came with huge drops in commercial oil inventories in OECD countries for the seventh consecutive month in February. They reported a massive drop in global oil inventories that built up during last year’s COVID-19 demand shock for the data gathered for February. This entailed a further drop in global oil inventories in the coming months.

The IEA reported that OECD industry inventories fell by 55.8 million barrels in February to 28.3 million above the 2016-2020 average. OPEC reported that OECD commercial inventories fell by 44.9 million barrels in February to 30.8 million above the latest five-year average, and 42 million above the 2015-2019 average.

The economic indicators are more robust as global oil stocks continue to fall. Therefore, both OPEC and the IEA hiked the world oil demand forecast as economic recovery gains pace.

The IEA forecast dramatic changes in global oil markets in the latter half of this year, as nearly 2 million barrels per day (bpd) of extra supply may be required to meet expected demand growth, even after factoring in the announced ramp-up of OPEC+ production as the summer high-demand driving season is rapidly approaching.

The IEA’s global oil demand in 2021 is forecast to reach 96.7 million bpd, up 5.7 million bpd from 2020 despite weaker-than-expected data for the first quarter.

OPEC’s global oil demand growth in 2021 is expected to increase by about 6 million bpd, representing an upward revision of only 100,000 bpd from last month’s report. Though this is a tiny revision, it marks an upward change from previous months of lower demand forecasts because of continued lockdowns.

However, OPEC’s cautious approach remained intact when considering the fragile and uncertain oil demand recovery that would require vigilant monitoring of market developments, which include the possibility of rising sovereign debt in most economies, and a potential further rise in inflation that may tighten monetary policies.

The latest figures from the Commodity Futures Trading Commission on April 13 showed that long positions on crude oil futures on the New York Mercantile Exchange numbered 645,593 contracts, down 9,735 from the previous week (1,000 barrels for each contract). It is the fifth consecutive weekly drop in positions.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalfaeq