International experts from the Islamic financial sector gathered
this week in
London, convinced the current financial turmoil could prove beneficial to Shariah-compliant investment although some figures caution that all forms of finance will be hit.
The Islamic Finance and Trade Conference 2008 also
London’s commitment to being a world leader in the Islamic banking sector.
With a market of $13 billion sukuk trading in
UK Islamic banks and 20 conventional banks with Islamic banking divisions,
UK has positioned itself to be a world leader. The Treasury, anxious to attract finance from the
Middle East, confirmed that they are considering launching the world’s first sovereign sukuk. Sukuk is a term describing the Islamic equivalent of bonds. These are structured to as to avoid the ban on interest under Shariah law.
The project of Islamic banking has been heavily endorsed by the
current UK Labour-led government. The Prime Minister, Gordon
Brown, who was an attendee at the previous year’s event, sent his
apologies as did the current finance minister, Alistair Darling.
UK ministers addressed the conference. Both leaders of the two opposition parties sent in further messages of support.
Strong arguments were made for radically reshaping the world’s financial architecture, both by Muslims and non-Muslims.
Anne Pettifor of Advocacy International demanded that conventional bankers should follow Islamic financial ethics and prohibit interest, “Making money from money means you don’t have to engage in land and labour. It’s the most effortless activity.” Iqbal Khan, CEO of Fajr Capital, suggested that the turmoil was due to conventional models decoupling the financial economy from the real economy. “Had this linkage been here, perhaps we could have avoided this crisis in the Western World,” Mr Khan said.
However, the banker and former Pakistani Prime Minister Shaukat Aziz warned that the economic fallout was not limited to the conventional sector. Islamic banks are likely to face testing times as their refusal to take on bonds has meant that they have invested heavily in real estate. The fall in property prices is likely to have a significant impact.