The ABC’s Lateline Business ran a piece last night on Islamic finance in Australia. The program featured Andrew Reynolds, occasional Austrolabe commenter but, more importantly, one of the few people in Australia to have given serious thought to Islamic banking models in this country.
Of particular interest is this quote from the reporter Sue Lannin:
Several major and regional Australian banks are conducting business case studies to see if Islamic banking is feasible here. Earlier this year, one of the world’s biggest Islamic finance institutions, Kuwait Finance House, carried out a country study on Australia, and ratings agency Standard & Poor’s says it expects a stock market index that complies with Islamic law will be operating here over the next 12 to 18 months. That means it won’t invest in sectors like gambling, tobacco or alcohol.
Currently, there are really only two organisations offering “Islamic finance” in Australia — one a community-owned cooperative and the other, a business. There appears to be some competition between them but not enough to lead to significant innovation in product development or downward pressure on fees and rates. The entry of major international and local banks into the fray could, I believe, have a very positive effect (with the Muslim consumer being the ultimate benefactor).
Of course, in order for Islamic finance to be attractive to the larger banks, they need to find a market for these products that extends beyond the relatively small number of prospective Muslim home-buyers in this country. In other words, these models must be made attractive to non-Muslim investors and borrowers.
As Andrew said last night:
Many of the products that are Sharia-compliant would also be of interest to non-Muslim investors. There is a lot of opportunity here, it’s just a matter of developing the experience, the time and putting together a good business case.
It may be that in order for “Islamic finance” to become widespread, it will need to drop the “Islamic” and simply market itself as an alternative finance product.
UPDATE: Here’s an excellent article on the subject that goes into more detail.
2 comments ↓
Fascinating… some of my colleagues who are more savvy in this area than me have repeatedly said that “islamic” finance is simply another way of saying good finance. I am tending towards that idea as well – it seems there is a lot of possibility in this area for alternative methods of finance and so on, which could potentially benefit a wide range of people in Australia.
Austrolabe on Islamic finance in Australia.
Kashmiri Nomad
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