Predictions are usually problematic and the years since the global financial crisis of 2008 have seen even greater uncertainty. The most realistic approach is to expect the unexpected!
Although Islamic finance is correctly viewed by many as a sound business proposition it has always been driven by politics. The hopes that the Arab Spring might bring new opportunities for Islamic finance look like being disappointed once again in 2013 as the economies of Egypt and Tunisia deteriorate further and Syria enters a period of even greater chaos. Despite Bahrain’s sectarian divisions it has been able to maintain its position so far as a regional hub for Islamic finance, but investors remain cautious and much of the new business has been diverted to Dubai.
Islamic capital market offerings should enjoy their best year ever, especially with the momentum in Sukuk issuance of the last two years. Malaysia will continue to occupy the number one ranking, but a significant increase in GCC issuance is likely. High oil prices will sustain GCC government spending on infrastructure and this will provide new opportunities for the real estate and construction sector. As equity markets rise in 2013 Islamic funds will attract more investors, especially in Saudi Arabia where a high proportion of family savings are channeled into funds. Retail Islamic banking will continue to expand in the GCC and South East Asia, with record deposits and financing.
In summary, despite political uncertainty, 2013 promises to be a good year for Islamic banking and finance, with rising profits and dividend pay-outs. The more favorable global financial environment should more than offset any economic uncertainties in the Middle East.
RODNEY WILSON
Emeritus Professor, Durham University, UK and Visiting Professor, INCEIF, Malaysia
Two thousand and thirteen is set fair for the Islamic finance industry to put the past behind it and make a new start with a new, and optimal, generation of genuinely Islamic instruments and products.
These will not be based upon a system of debt, deficit and absolute property rights, but rather upon consensual framework agreements for the sharing of risk and reward and instruments based directly upon the capacity of individuals to provide goods and services and the use value of productive assets.
Such Shariah compliant ‘peer to peer’ credit (which is not the same as P2P debt facilitated by services such as Zopa) and ‘peer to asset’ investment products, will out-compete existing financing and funding: firstly because rent-seekers are not paid something for nothing (such as money for the use of money), and secondly, because it is in everyone’s interest to have a smaller percentage of something than 100% of nothing.
In other words, Islamic finance can look forward to a renaissance.
CHRIS COOK
Principal, Partnerships Consulting