Islamic finance in the US is mainly limited to asset management, home financing, Shariah compliant investing and a few experiments in Sukuk and Takaful. Islamic finance has not taken off in the mainstream finance sector and remains a niche and small sector in relation to the conventional finance industry. So far, mainly native and immigrant Muslims partake in the Islamic finance industry in the US with a Muslim population expected to reach 6.2 million by 2030 or 1% of the population of the US.
Review of 2020
There are 25 Islamic financial institutions operating in the US including University Bank’s subsidiary, University Islamic Finance Corporation (UIFC); LARIBA/Bank of Whittier; Devon Bank; and Guidance Residential, among others.
UIFC has expanded in Shariah compliant commercial finance for professional offices, multi-family properties, retail and non-profits. In October 2020, UIFC closed a total of US$113 million in home mortgage financings following the introduction of its home partnership and commercial real estate financing product to all 24 states in the US.
Other banks that provide Shariah compliant financial services in the US include Broadway Bank of Chicago, Lincoln State Bank, Cole Taylor Bank and RomAsia Bank while two of the largest providers of Shariah compliant business financing in the US are Zayan Finance and Anchor Finance Group.
Islamic investment firms include Arcapita, Azzad Asset Management (Azzad Funds) and Allied Asset Advisors (the Iman Fund). Azzad Funds has two mutual funds: the Azzad Ethical Income Fund and the Azzad Ethical Mid-Cap Fund.
Codexa Capital focuses on connecting asset management firms with funds located in Muslim-majority countries. It also connects firms needing capital with Shariah compliant sources of financing either through arranging financial transactions or by providing capital introduction. Codexa Capital also provides asset advisory and investment research services relating to mitigating the implications on diversification and asset allocation of excluding financial services companies, and the geographical concentration of Sukuk as an asset class within the GCC and Southeast Asia.
Zeus Capital Advisors provides structuring advice on Shariah compliant real estate, investment services such as domestic investments and the banking application process.
US-based exchange-traded fund (ETF) Falah Capital’s Falah Russell–IdealRatings US Large Cap ETF is a Shariah compliant index-linked ETF listed on the US stock exchange. The fund seeks to track the Russell–IdealRatings Islamic US Large Cap Index, which is a Shariah compliant version of the well-known Russell 1000 Index. The ETF offers investors access to 443 US large cap companies held within the index that meet strict Shariah investment guidelines.
The US can consider developing a standardized dispute resolution contract for the Islamic finance industry as well as producing an online dispute resolution system for the Islamic finance sector. In addition, the US should consider issuing a pandemic Sukuk facility to fund the federal COVID-19 relief stimulus packages to assist SMEs and the low- to medium-income-earners.
Although there are quite a number of Islamic finance activities in the US in terms of asset management, Shariah compliant investing and Islamic home finance, the US is clearly absent from the world of Sukuk or Islamic bonds and Takaful.
Above and beyond Goldman Sachs, General Electric and East Cameron Gas, US companies, institutions and the government have steered clear of using Sukuk as a wealth creation tool and/or fundraiser for business and government purposes.
There is also a potential role for the US in harmonizing dispute resolution contracts and preparing an online dispute resolution system for the Islamic finance industry. For instance, the US can introduce an Islamic finance contract with a built-in online contractual dispute resolution system, which would be attached to all Islamic finance contracts in the world. Hence, Islamic finance dispute resolution would not only be streamlined and harmonized, but it would also be put entirely online.