Can Islamic Finance go global … Truth or Dare?

International Conference on

International Studies (ICIS 2014)

Raja Teh Maimunah

MD/CEO

Hong Leong Islamic Bank Berhad

1 December 2014

2

Islamic Finance on the uptrend

USD1.7 trillion

in 2013

Source: World Islamic Banking Competitiveness Report 2013-2014, Ernst & Young

Source: World Islamic Banking Competitiveness Report 2013-2014, Ernst & Young Image courtesy of jscreationzs at FreeDigitalPhotos.net

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However …

Global Islamic Assets

USD1.7 trillion

in 2013^

Source: ^ World Islamic Banking Competitiveness Report 2013-2014, Ernst & Young

We have a long way to go …

World 20 Largest Banks by Total Assets 2013*

Rank Bank Country Total assets

US$ trillion**

1 Industrial & Commercial Bank of China (ICBC) China 3.18

2 HSBC Holdings UK 2.76

3 China Construction Bank Corporation China 2.60

4 BNP Paribas France 2.59

5 Mitsubishi UFJ Financial Group Japan 2.51

6 JPMorgan Chase & Co US 2.48

7 Agricultural Bank of China China 2.47

8 Bank of China China 2.44

9 Credit Agricole Group France 2.35

10 Barclays PLC UK 2.27

11 Deutsche Bank Germany 2.25

12 Bank of America US 2.15

13 Japan Post Bank Japan 1.97

14 Citigroup Inc US 1.89

15 Societe Generale France 1.74

16 Mizuho Financial Group Japan 1.71

17 Royal Bank of Scotland Group UK 1.70

18 Banco Santander Spain 1.61

19 Sumitomo Mitsui Financial Group Japan 1.57

20 Groupe BPCE France 1.57

Notes:

* Latest financial reports ranging from mid-2013 to mid-2014

** Exchange rates based on 31 March 2014

Source: http://www.relbanks.com

Global Islamic Total Banking Assets of USD1.7 trillion

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Limited Coverage by Geography

Source: Islamic Finance in OIC Member Countries, OIC Outlook Series May 2012

OIC Countries by largest Shariah

Compliant Assets (USD billion), 2011

Approx 90% of total IF

assets sits in only 7 countries

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… and lacking infrastructure in most

Weak or no infrastructure

Some infrastructure

Relatively developed infrastructure

Source: World Islamic Banking Competitiveness Report 2011-2012, Ernst & Young

6

Development in Non-Muslim Countries

United Kingdom

Issue Date : 25 June 2014

Amount : GBP200 million

Type : Sukuk Ijara

South Africa

Issue Date : 17 September 2014

Amount : USD500 million

Type : Sukuk Ijara

More traction

seen in

Non-Muslim

countries?

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

Luxembourg

Issue Date : 1 October 2014

Amount : EURO 200 million

Type : Sukuk Ijara

Hong Kong

Issue Date : 11 September 2014

Amount : USD1 billion

Type : Sukuk Ijara

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The truth …

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

Misconception of IFRestrictive Legal, Regulatory & Tax

Framework

Lack of drive & support by Islamic

countries

Dearth of Liquidity Management tools

Challenge in decoupling from

conventional banking prudential

framework

Dominance of conventional

banking liquidity

Education on Ribaamongst Muslims

Standardisation of contract documents

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The dare?

Image courtesy of cooldesign at FreeDigitalPhotos.net