How Islamic finance missed heavenly chance

Islamic Finance magazine:Amid the confusion and consternation of the global financial crisis, Islamic banking had a gilt-edged chance to step into the breach.
It is hard to remember amid screaming headlines proclaiming record bonuses for the bankers of Wall Street and the City.

But just over a year ago, the conventional financial system was on its knees.

"When Western banking collapsed, one sector should have escaped unscathed: Islamic banking," says Mohammad Saeed Rahman, chairman of a US-based think tank, the Institute for Halal Investing.

But from Mecca to Malaysia, the world's Islamic bankers were paralysed and failed to take advantage of the opportunity.

And now Dubai's debt problems have soured the sector's image, with property developer Nakheel asking for the trading of some of its Islamic bonds to be suspended.

So what happened?[Read More]

What spoiled the party in Dubai?

BBC Middle East:This time last year, Dubai was making headlines for entirely different reasons.

It was the opening party of the Atlantis hotel, the star attraction of the city's man-made palm-shaped island. Organisers spent millions on the fireworks and even more on the celebrities.

As the sky exploded overhead, broadcast live around the globe, it was Dubai's message to the world that it had arrived.

But as Dubai's elite sipped their champagne, the financial crisis was already beginning to take its toll in the West. For Dubai, this was the last night of extravagance before the credit crunch came knocking.

And so, 12 months on, the headlines are very different. But who spoiled the party, and how?...[Read More]

In Dubai Crisis, a Test of Law and Islamic Banking

The New York Times:The debt crisis in Dubai is about to test one of the fastest-growing areas in banking — Islamic finance — and put the emirate’s own opaque judicial system on trial, according to bankers and experts in finance, The New York Times’s Heather Timmons reports.

Issuance of loans and bonds that comply with Shariah, or Islamic law, has skyrocketed in recent years, as oil-rich Middle East nations ramped up spending and the global credit crunch led debt investors into emerging markets.

But the unique terms of these instruments, which technically make lenders partners with borrowers, have never been tested in a downturn.

“There have been very few major defaults in this market,” said Zaher Barakat, a professor of Islamic finance at Cass Business School in London. There are no consistent rules about who gets paid back first if a company defaults on Shariah-complaint debt, he said...[Read More]