gateway to islamic finance interview - Institute of Islamic Banking ...
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gateway to islamic finance interview - Institute of Islamic Banking ...

NEWHORIZON Rajab–Ramadan 1429


murabaha.’ SAMA also actively participates

in various initiatives by the IFSB, for

example, in canvassing opinion for the new

exposure drafts. The regulator also requires

each bank to submit an Islamic banking

assets and liabilities return to allow it to

monitor the growth of the industry.

Alqahtani describes the growth of Islamic

finance as ‘phenomenal’, on both regional

and global scale, and does not see it slowing

down any time soon. ‘In fact, Shari’ah finance

is becoming mainstream.’ The industry

welcomes Muslims and non-Muslims alike,

he observes, as it is ‘an alternative to

conventional banking regardless of what the

client’s religion is’. ‘This is one of the major

unique points of Islamic finance – it is open

for any belief, while conventional banking

does conflict with many teachings and

principles besides Islam.’ In his opinion, it was

this conflict that lead to the development of

socially responsible investment.

Also, the equity-based nature of Islamic finance

translates as investment into communities by

developing industries and creating jobs.

‘Shari’ah is a great advocate of keeping

liquidity in circulation, ensuring the welfare of

the community regardless of its geographical

location or religion, not to mention taking risk

and sharing profit and loss, which is essential

for the prosperity of the economy with longlasting

effects,’ states Alqahtani.

Alongside the growth of the domestic Islamic

banking market, major Saudi banks have

been gaining a strong foothold in the

international arena. SABB is now

incorporated under the HSBC Amanah

umbrella and Samba Financial Group became

the first Saudi bank to open a branch in the

UAE (the bank also has an office in the UK

and a subsidiary in Pakistan, Crescent

Commercial Bank Ltd). Al Rajhi Bank,

already a household name in Saudi Arabia,

has an established presence in Malaysia.

International banking is high on Riyad Bank’s

agenda, with its branches strategically located

in the UK, US and Singapore.

And now the most recent addition – Alinma

Bank, created by the Saudi government. It is

described as the largest Shari’ah-compliant

Arab bank, and is set to rival the existing

‘heavyweights’ in the country and the region.

‘The creation of the Alinma Bank is a

testimony to the country’s commitment to

the Islamic banking system,’ states

Alqahtani. The bank is scheduled to open in

the second half of the year, with 15 branches

across the country. It will offer a range of

Islamic products and services, including the

arrangement of project financing.

Alinma has already caused waves in the

business world, when its $2.8 billion IPO

became the largest one ever in Saudi Arabia.

Postponed several times, the event was

finally held in April this year on the Saudi

Stock Exchange. The government was

selling off 70 per cent of the bank’s shares,

retaining a 30 per cent stake (controlled by

the Saudi Arabian General Investment Fund,

the Saudi Arabian General Retirement Fund

and the Saudi Arabian General

Organisation for Social Insurance). After the

ten day subscription period, the number of

subscribers stood at a remarkable 8.8 million.

Mosque by the Jeddah Corniche, Jeddah

This IPO helped Saudi Stock Exchange to

secure the second position in the list of

world’s busiest markets for IPOs, surpassing

London and only yielding to New York Stock

Exchange, which came on top with $19.7

billion listing of Visa. The total of Saudi

bourse IPOs in 2008 grew more than

threefold compared to the previous year. In

the first five months of 2008, it notched up

$8.5 billion, benefiting from a number of

high-profile deals alongside Alinma, including

$1.87 billion listing of Zain Saudi Arabia

(mobile phone company) and $1.2 billion

float of the afore-mentioned PetroRabigh.

With such large stock market capitalisation,

coupled with high demand for Shari’ahcompliant

products and services (especially

project finance), huge amounts of wealth

and a strong economy, as well as the

obvious central positioning in the Muslim

world and the presence of the IDB, Saudi

Arabia has all the right ingredients to

achieve the status of the global Islamic

finance centre. IIBI 29

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