A new report released today by management consultancy Arthur D. Little entitled “Islamic Finance Comes of Age” has identified a surge in activity around Islamic finance as a promising opportunity for the global financial services industry as it emerges from the current recession. With Islamic finance assets currently standing at $800 billion, Arthur D. Little expects this figure to surge to as much as $4 trillion in the next six years, representing a major opportunity for Western financial institutions looking to develop new partnerships and global markets. A global market overview Arthur D. Little’s latest report investigates 10 capital markets in selected Islamic countries, each of which offers the Western investor different opportunities, due to their varied levels of market maturity and sophistication. Arthur D. Little groups the 10 markets into three clusters, helping financial players to identify the best strategies for entering each Islamic finance market. The full report includes a detailed analysis of the current state of development in all 10 capital markets.
- The Big Four – The Kingdom of Saudi Arabia (KSA), Kuwait, the UAE, and Malaysia have highly developed capital markets, which are supported by both government and private sector initiatives to promote financial education and diversify the range of available financial products. For instance, KSA and Kuwait hold the largest concentrations of Islamic financial assets of 40% and 21% respectively.
- The Challengers – Qatar, Bahrain, and Oman are rapidly growing Middle Eastern economies, and market growth as well as a range of government incentives has meant that these emerging players are quickly climbing the global Islamic finance ranks.
- The Newcomers – Morocco and Tunisia authorized Islamic finance markets in 2007, while in Egypt Shariah-compliant products were only recognized last year. Despite this, the new players have government backing, and in the cases of Tunisia and Egypt, policy makers are doing what they can to encourage the inflow of investment. This is not the case in Morocco, however, where regulation remains tight.
However, despite the tremendous progress it has made in recent years, the MENA capital markets still face many challenges:
- Vulnerable to sector-specific shocks – fluctuations in the property or oil industries, for example, will affect MENA finance disproportionately
- Inflation – many of the major players in Islamic finance do not have robust inflation-fighting policies in place
- Legal, institutional, and regulatory environment – despite progress, many Islamic finance markets still operate with relatively new or incomplete regulatory and compliance regimes in place that risk the transparency and smooth operation of capital markets
“Islamic Finance Comes of Age” is now available for download at www.adlittle.com/islamic_finance
Notes for EditorsAbout Arthur D. Little Arthur D. Little (ADL), founded in 1886, is a leading global management consulting firm that links strategy, innovation and technology to master complex business challenges while delivering sustainable results to our clients. Arthur D. Little has a collaborative client engagement style, exceptional people and a firm-wide commitment to quality and integrity. ADL is proud to serve many of the Fortune 100 companies globally in addition to many other leading firms and public sector organizations.
Further InformationFurther information from: Gerrit Seidel
Arthur D. Little
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