Is­lamic lenders can plug China’s Belt and Road gap in fi­nanc­ing

The National - News - - BUSINESS - SARAH TOWNSEND

China’s $5 tril­lion “Belt and Road” presents op­por­tu­ni­ties for Is­lamic banks to plug a size­able fund­ing gap, as the Asian su­per­power signs up more Mus­lim-ma­jor­ity na­tions to its transcon­ti­nen­tal eco­nomic de­vel­op­ment scheme.

“The Belt and Road is about sup­port­ing in­fra­struc­ture de­vel­op­ment and eco­nomic growth,” Ad­nan Chilwan, chief ex­ec­u­tive of Dubai Is­lamic Bank, the UAE’s big­gest Sharia-com­pli­ant lender by as­sets, said yes­ter­day at a sum­mit in Dubai.

“When you talk about fi­nanc­ing such projects, clearly there is a great op­por­tu­nity for Is­lamic bank­ing. It is a cat­a­lyst for bring­ing pub­lic and pri­vate fund­ing to­gether.”

Of the 70-plus coun­tries that have signed up to China’s ini­tia­tive to im­prove re­gional co-op­er­a­tion and link global eco­nomic cor­ri­dors, about 30 have pre­dom­i­nantly Mus­lim pop­u­la­tions, in­clud­ing Malaysia and other coun­tries in South East Asia, Africa and the Mid­dle East, Mr Chilwan said.

“There is a ten­dency for peo­ple in those coun­tries to lean to­wards Is­lamic fi­nance, but of­ten [there is] a dearth of liq­uid­ity, so Is­lamic banks in other na­tions, such as the UAE, can play a ma­jor role.”

Belt and Road faces an es­ti­mated $49 tril­lion fund­ing gap over the pe­riod 2015-30, said Na­bil Bay­doun, vice-chan­cel­lor of aca­demic af­fairs at the UAE’s Hamdan Mo­hammed Smart Univer­sity, dur­ing the Global Is­lamic Econ­omy Sum­mit in Dubai.

Launched in 2013 as “One Belt, One Road”, the ini­tia­tive in­volves China un­der­writ­ing bil­lions of dol­lars of in­fra­struc­ture in­vest­ment in coun­tries lo­cated along the old Silk Road link­ing it with Europe. China is spend­ing about $150 bil­lion per year in the coun­tries that have signed up to the scheme. All six GCC na­tions have signed up.

China is the UAE’s big­gest trad­ing part­ner, with UAE-China bi­lat­eral trade cross­ing $35bn in the first nine months of 2017 and ex­pected to reach $58bn this year, the UAE’s econ­omy min­is­ter Sul­tan Al Man­soori said dur­ing the three-day state visit of Chi­nese Pres­i­dent Xi Jin­ping in July. The two coun­tries are seek­ing in­creased eco­nomic col­lab­o­ra­tion.

Is­lamic bank­ing of­fers eth­i­cal, Sharia-com­pli­ant fi­nan­cial prod­ucts to cus­tomers and is ex­pe­ri­enc­ing a surge in pop­u­lar­ity world­wide. The in­dus­try grew by 6 per cent

to reach $2.4tn by the end of 2017, ac­cord­ing to this year’s Global Is­lamic Fi­nance Re­port by Ed­biz Con­sult­ing in the UK, while global Is­lamic fi­nance as­sets are pro­jected to to­tal $3.8tn by 2023, said the Dubai Is­lamic Econ­omy De­vel­op­ment Cen­tre’s 2018-19 re­port on Sun­day.

Although Malaysia topped the re­port’s rank­ing of coun­tries with the most de­vel­oped Is­lamic economies, the UAE ranked first in five in­dus­try sec­tors in­clud­ing halal food, halal travel, halal fash­ion, recre­ation and phar­ma­ceu­ti­cals.

An­other study this week, the fourth an­nual Is­lamic Bank­ing index by Emi­rates Is­lamic Bank, found that 55 per cent of the UAE’s bank­ing con­sumers have at least one Sharia-com­pli­ant fi­nan­cial prod­uct – up from 52 per cent in 2017.

Over the same pe­riod, the pen­e­tra­tion rate for con­ven­tional bank­ing prod­ucts in the coun­try has shrunk to 63 per cent, from 69 per cent in 2017.

“The op­por­tu­nity for Is­lamic banks lies in im­prov­ing aware­ness of the core val­ues and ben­e­fits of Is­lamic bank­ing, while con­tin­u­ing to in­vest in dig­i­tal tech­nol­ogy to cre­ate new so­lu­tions,” said Wasim Saifi, EIB’s deputy chief ex­ec­u­tive of con­sumer bank­ing and wealth man­age­ment.

In par­tic­u­lar, the adop­tion of blockchain, ar­ti­fi­cial in­tel­li­gence, cryp­tocur­ren­cies and other ad­vanced tech­nolo­gies are ex­pected to have a pos­i­tive im­pact on the sec­tor, as Is­lamic banks can achieve greater ef­fi­cien­cies and bet­ter serve their cus­tomers, sum­mit del­e­gates heard.

“The global Is­lamic econ­omy is en­ter­ing its next phase of growth as it em­braces the Fourth In­dus­trial Revo­lu­tion,” said Ma­jid Saif Al Ghu­rair, chair­man of Dubai Cham­ber of Com­merce and In­dus­try.

Smart Dubai, a UAE govern­ment body, and IBM yes­ter­day launched the Mid­dle East’s first state-backed blockchain plat­form, which slashes payment pro­cess­ing times on elec­tric­ity bills, traf­fic fines and more.

In the past, IBM faced re­sis­tance from clients to its blockchain pro­pos­als, but pub­lic un­der­stand­ing of the dig­i­tal ledger sys­tem is deep­en­ing, IBM’s chief tech­nol­ogy of­fi­cer An­thony But­ler told del­e­gates.

The ini­tia­tive in­volves China un­der­writ­ing bil­lions of dol­lars of in­vest­ment in coun­tries along the old Silk Road

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