MANAMA, 8 December 2003 — On the occasion of the Islamic Financial Services Board meeting and the World Islamic Banking Conference, Solidarity Islamic Insurance and Assurance Co. held a reception in the Ritz Carlton Hotel. Leading names in the global Islamic banking and Takaful industry were among the guests. It is important to note that one year ago Bahrain was the pioneer in Islamic finance, whereas now the island nation is at the center of the fastest growing global finance movement.
“This is a $400 billion industry and everyone wants a part of it,” said Esam Y. Janahi, CEO, Gulf Finance House. “We are expecting a growth potential in double digits. There has been a huge change in mindset. More and more financial institutions want to be a part of the Islamic finance movement. Bahrain started it all though and it remains the hub. Bahrain has developed the standards, training and needed direction to drive Islamic finance forward and it will continue to do so.
The Islamic finance pie is becoming bigger especially now that the US is coming onboard. The global growth of Islamic finance bodes well for both individuals and institutions.”
Not surprisingly, one of the most influential regulators in the Islamic finance industry completely agreed with that sentiment. Dr. Khalid Abdulla Ateeq, executive director, banking supervision, Bahrain Monetary Agency stated that Bahrain is now hosting about 26 Islamic financial institutions and two Takaful or Islamic insurance companies. He expects these numbers to rise.
“Insurance is big business here. There are 145 registered insurance companies in Bahrain. With the interest in Takaful, it would be illogical to believe that there would not be expansion in this sector and we welcome it,” he said. “As the regulating body in Bahrain, BMA is fully up-to date with all international regulations. We are also constantly reviewing all the latest white papers and studies on the issue in order to continue to formulate and maintain best practice standards which act as guidelines for all international regulators in the area of Islamic finance.”
Prominent among the hosts at the reception, chairman of the executive committee for Solidarity’s board, Khalid Abdulla-Janahi claimed to be delighted with the growing competition in the area of Islamic finance. “In order to do well, we need competition,” he said. “Increasing competition means increasing interest and attention to Takaful. Increasing attention brings additional resources and clients forward.”
With over $100 million in capital assets, Solidarity is poised to become the largest insurance company in Bahrain and the largest Takaful company in the world. Mumtaz Khan, chairman and CEO, Emerging Markets Partnership let slip exactly how that move will be made. In coming months, Solidarity is to raise an additional $100 million in capital assets. A strategic global partner has already committed to sixty percent of that amount.
“Given a choice, Muslims will always select Islamic financial instruments,” said Khan. “More and more Islamic financial products are coming on the market and the industry has taken up the challenge to broaden and deepen the scope of Islamic banking and Takaful. A quantum leap has been taken in the last year. The narrow definition of Islamic finance has been thrust aside by those in the global banking industry who recognize the wide interest in and potential of financial instruments created within the standards of Islamic banking and Takaful.”
The future may be rosy for Islamic finance but difficulties remain. Take the case of Shamil Bank, a subsidiary of the Dar Al-Maal Al-Islami Trust, one of the world’s leading Islamic financial institutions. Shamil Bank has paid up capital of $230 million and assets under management of some $2.5 billion.
In September, the bank opened a new headquarters in Bahrain. Despite the prominence of Saudis in this Islamic bank both as investors and management, Shamil Bank has been unable to secure a banking license to operate in Saudi Arabia.
“All conventional Saudi banks have Islamic windows,” said Dr. Said S. Al-Martan, chief executive, Shamil Bank. “We wanted a banking license for Saudi Arabia years ago but it hasn’t happened. I personally believe Shamil Bank should have branches in Saudi Arabia. Prince Mohammed Al-Faisal is our chairman. Ninety-five percent of our shareholders are Saudis. Our market is largely in Saudi Arabia, but we can’t legally operate there.”
“In Saudi Arabia at the highest levels there is talk about WTO (World Trade Organization) and major change in the business climate and a new openness,” Al-Martan continued, “but the regulations still are not flexible. I believe it is time for Saudi Arabia to discard antiquated attitudes in order to prosper in the new world of global business.”
