sPECIal 2008 rEPort

sPECIal 2008 rEPort

Islamic Banking

Islamic banking is steadily moving into the mainstream of conven

tional financial systems and has remained largely insulated from the global credit crisis. It is expanding not only in the Muslim world, but

also in other countries where Muslims are a minority, notably britain, France, the us and even Japan. the industry has grown at a prodi

gious rate of 15-20% annually over the past decade; a trend that is likely to continue as the economic and construction boom in the

Middle East and asia regions will boost the value of shariah assets.

Text and tables by economic analyst Moin Siddiqi

The Middle easT November 2008 35

The Middle easT November 2008 35 busINess & FINaNCe

Gulf set to Weather financial storm by Pamela Ann Smith

52 The Middle easT November 2008

Investors in the Gulf, both public and private, are looking more closely to home following the unprecedented financial turmoil that sent global stock markets plunging last month despite efforts by the US and Europe to bail out their stricken banks. International economists, analysts and commentators increasingly agree that while the six oil-rich members of the Gulf Cooperation Council (GCC) are unlikely fully to escape the negative effects – as the plunge in local markets after Ramadan revealed – the region is far better placed than other emerging-market economies to withstand the projected global downturn. Moves to coordinate government policies across the region in the coming weeks could also help to insulate the region from further fall-out, as could further action by the US and European central banks to restore faith in their financial systems and economies, they say. “The Gulf is relatively insulated, although not immune, to the crisis engulfing western economies,” comments Mary Nichola, a Dubai-based economist for Standard Chartered Bank. While she expects tight liquidity to remain a problem as local and regional banks find it harder to attract deposits, measures to curb lending could help to stem the ravages of inflation, she suggests. “The most likely outcome will be a soft landing rather than a crash,” says her colleague Marios Maratheftis, who heads up the Bank’s regional research covering the Middle East, North Africa and Pakistan. “The current account and fiscal balances are in surplus, in excess of 20% of gross domestic product, and the region holds net foreign assets of more than $1,000bn.” While the region has been adversely af

Many Gulf investors are taking a far more cautious view of investing in the us, now that, as some European officials have said, it is no longer the undisputed global financial superpower