Shariah-compliant mortgages are being made available in the state of New York by HSBC. HSBC plans on offering these products in other states soon as well. Already, American Finance House-lariba is looking towards breaking HSBC's control of the New York sharia-compliant mortage market.
Due to recent events, Islamic financial istitutions must now look beyond standard risks and examine the changing Regulatory Risks as well as the Anti-Terrorism rules. Risk management requirements include adequate monitoring systems. The sub-categories of Risk Management include (but are not limited to): Financial Risk, Loan Review, Credit Risk, Asset/Liability Mismatch (short-term vs. long-term), Portfolio Composition (short-term overweighting), Currency Risk, Regulatory Risk, Technology Risk, Country Risk, etc.
Islamic finance has continued to grow following the terrorist attacks of September 11, particularly in terms of bond financings by Islamic governments. More money is being invested within the Middle East, in part due to increased restrictions by western countries. Further development of Islamic financial instruments will promote growth, particularly from central banking institutions.
At a two-day conference on 'Stable and Just Global Monetary Systems' the economic advisor to the Prime Minister of Malaysia, Tan Sri Mohamed Yakcop, outlined how the gold dinar could play a role in international trade. The gold
Historically, National Commerical Bank (NCB) has been a pioneer in the field of Sharia-compliant investment. NCB's Al-Ahli Global Trading Equity Fund proved highly popular from the start and continues to dominate the Islamic shari`a-compliant equity sector. The GTEF is based on exclusion of prohibited industries, the financial ration screens (minimize inclusion of interest), and the prohibition of certain types of transactions (short sales and derivatives).
Interest in non-Western methods of finance is spreading and embracing a growing range of products and services. Muslims seeking to live by their Islamic principles must reconcile themselves to the difficulties of living in a world where the practice of setting a predetermined interest rate is central to borrowing and lending money. The total deposits of today's over 160 Islamic financial institutions are well over $100 billion and have a projected growth rate of 10% each year.
The Bahrain Monetary Authority is working on an Islamically-acceptable money market in which scondary instruments, backed by assets such as schools and hospitals, can be traded. These bonds would be acceptable to Islamic scholars, proponents argue, because they fund socially desireable projects. There are doubts, however, that the Islamic banking system is large enough for the market in Islamic bonds to reach critical mass and be successful. The main concern right now is that Bahrain is over-supplied with Islamic banks and that mergers should be taking place.
Islamic banks in Brunei Darussalam have recently been quite successful in controlling 11.5 per cent of the total deposits in the nation. At this moment, however, they can be categorized as an evolving financial intermediary. Thus, there is a need to complement the existing system with capital markets, as a high proportion of the national savings is placed overseas. The government can assist in providing the necessary push for the advancement to the next phase of capital markets. It is important to keep the 'spirit and flame' growing in the progress of Islamic banking.
Most of the financing provided by Islamic banks does not conform to the principle of profit-and-loss sharing. Instead, much of the financing provided by Islamic banks takes the form of debt-like instruments. Also, it appears that much of the 'lending' done by Islamic banks is secured this is in violation of a legal prohibition on collateral. This evidence suggests that the claimed benefits of Islamic banking may be somewhat overstated.