Thomas P.M. Barnett :: Weblog

ARTICLE: “Adapting Finance to Islam: Banks and Nations Rush to Compete Under Koranic Law,” by Wayne Arnold, New York Times, 22 November 2007, p. C1.

ARTICLE: “Islamic banking held back by lack of scholars,” by Roula Khalaf, Financial Times, 19 November 2007, p. 3.

I love these two pieces: Islamic banking is now so big and so attractive globally, that you get non-Muslims buying in because it’s like this new form of socially-responsible investing, like buying a kosher hot dog because you trust the credentialing process!

An estimated 300 Islamic banks hold half a trillion in assets. About 7-8 years ago, when Malaysia started pushing this crazy notion, there was no Islamic finance to speak of. Now it grows at more than 10% a year, and you’ve got Citigroup, HBC, Deutsche Bank and Asian giants all chasing this pie.

Says Khawaja Mohammad Salman Younis, managing director in Malaysia for Kuwait Finance House, “This is an industry on its way from a niche industry to becoming a truly global industry.”

Somebody please pass out a Nobel Peace Prize to whomever dreamed this up in Malaysia way back when, because this financial instrument will likely outweigh—in strategic importance—all the combined kinetic operations of the U.S. military in the long war.

No doubt, what drives this process now is sheer greed, which is okay by me (beats radical ideology any day): everyone wants to tap the $1.5T sloshing around in the Middle East, thanks to the Asian-fueled energy boom, which this time is being spent at home and in Asia vice Europe and the U.S. (like in the 1970s).

So now we face the new problem: a shortage of credentialed Islamic scholars to approve new instruments and deals. Only about 200 or so of these guys (I assume all are guys) exist, and guess what? They don’t want to expand their ranks. Seems like they enjoy all the fees they’re racking up (go figure). Some insiders say as few as 12 or as many as 50 Islamic scholars really control the vast bulk of the deals right now: “It’s like having a whole industry with one regulator that has a staff of 50.”

That to manage a global flow of $750b. Keep the fatwas (not always negative decisions, mind you) coming, I say!