By Richard Barley
LONDON (Reuters) - While conventional finance in Western Europe and North America is wracked with turmoil and many market participants filled with gloom, in the world of Islamic finance there is a refreshing burst of optimism.
Speakers at the Reuters Islamic Banking and Finance Summit this week in London sprinkled their comments liberally with words like "positive", "growth", and "opportunity".
Recent conventional finance events, by contrast, have featured muted conversations laden with doom. Some recent credit strategy notes from Societe Generale have referred to "catastrophe" and "the daily dross of bad news that has beset the ... markets since July last year".
Largely shielded from the subprime crisis, although not entirely immune -- credit spreads have widened and issuance has slowed -- Islamic financiers are upbeat.
"As the conventional banking system goes into the credit crunch there will an opportunity for the Islamic financial system to expand and to offset the deduction in credit and liquidity in the Western system," said Nor Mohamed Yakcop, second finance minister of Malaysia.
"Ten years ago during the Asian financial crisis there was a flow of funds from the Western financial system in Asia ... that helped in some way to overcome the crisis. Interestingly this time around this flow is reverse. The flow is now from Asia and the Middle East," he said.
Issuance of sukuk, or Islamic bonds, is still expected to grow this year, albeit not at the breakneck pace of recent years. There is talk of growing use of Islamic securitization, and work on Islamic derivatives markets. Companies spoke of pressing ahead with merger and acquisition plans.
"There is a great opportunity for the Islamic industry generally, not to take advantage, but to play their due role in providing capital where capital is required," said Afaq Khan, head of Islamic banking at Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz). Continued...
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