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Islamic banking influencing North American institutions

Panelists at the first Islamic Finance News Forum

By Abdul Hannan Tago | 15 Nov 2012

While Shariah-compliant banking is not widespread in the United States, Islamic financial institutions are making headway in gaining a foothold in North American banks to bring services to customers.

“I have no doubt that investment in a purely Islamic-compliant banking is growing in the US, where there is a lot of openness, I guess, through a Shariah-compliant investment,” said Benjamin Newland, partner with King & Spalding. The firm has offices in Riyadh and specializes in Islamic Financing.

“I can see even before coming over here (to Saudi Arabia) that there was a shift by the time I left in 2006,” he added. “There was a lot of recognition in the market for Islamic structure and investment due to the presence of the Muslim community in the US.”

Newland was attending the first Islamic Finance News Forum, which concluded Tuesday in Riyadh. The forum focused in Islamic financing in Muslim countries and the growing role that Saudi financial institutions are playing in the region.

Saudi Arabia had one of its best years in 2011 when Islamic capital markets had issuances that included $ 4 billion Sukuk for the General Authority of Civil Aviation (GACA).

In addition, Islamic Development bank reported assets of $ 94 billion in December 2011, which represents slightly more than one-quarter of the GCC’s total Islamic financing assets.

Despite the growing interest in Europe and Asian countries in Islamic banking, Shariah compliance has hardly made a dent in North America. Yet Newland argues that the time is right for US banks to embrace the concept.

“If you look at the financial crises in the US, a lot of it was caused by a financial conflict instruments,” he said. “That’s why the banks here have a strong footing as they do not rely on exhausted financial instruments, which are causing a lot of trouble.”

Meanwhile, banking experts spent the second day of the forum debating key issues facing investors in the Kingdom.

Humphrey Percy, chief executive officer of the Bank of London and Middle East (BLME); Jawad Ali, managing partner of the Middle East offices and deputy global head of Islamic Finance; King & Spalding's Neil Miller and Abdulkader Thomas, president and CEO of SHAPE Financial Corporation discussed sovereign wealth funds and their reach and scope in Asia and the Gulf.

They also addressed investment in Saudi Arabia compared to other Gulf countries in terms of costs, legal considerations, opportunities and sectors.

Investor protection, recourse to assets, default, insolvency and restructuring of Islamic finance, key practical issues and avoiding costly mistakes of enhancing risk management were among the other subjects listed for discussion.

The session on Islamic Private Equity (IPE) dealt with IPE and Saudi Arabia and Gulf, and the future of IPE vis-a-vis conventional private equity.

King & Spalding focuses on Islamic finance and investment and its presence in the region dates to early 1980s. In 1995, it was the first law firm to establish a dedicated Islamic finance and investment practice group.

The firm has advisers to sponsors of more than 50 Shariah-compliant property funds valued at approximately $ 10 billion that have invested in properties in the United States, Europe, the Middle East and Asia.

It also specializes in private equity funds with advisers to sponsors of private equity funds valued in excess of $ 6 billion domiciled in Saudi Arabia, Bahrain, the United Arab Emirates, the Cayman Islands, Luxembourg, Jersey and other offshore jurisdictions for equity investments in Europe, the Middle East, Asia and the United States.


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