Islamic finance—developments in 2014 and a look ahead to 2015

Islamic finance—developments in 2014 and a look ahead to 2015

To coincide with the release of an updated version of Division F1 ‘Islamic Financial Institutions and Islamic Finance’ in the Butterworths Encyclopaedia of Banking Law (September update (Issue 133)—see here), we spoke with the Editor of that Division, Dr Karim Aldohni about what 2014 has been like in the world of Islamic finance, and what 2015 might have in store.

What do you think has been the most important development within Islamic Finance during the past year?

At the international level, Islamic finance has expanded significantly to reach new international financial markets, where Sukuk, for instance, have become a recognisable product by markets’ participants and regulators around the globe.  At the UK level, there has been a clear shift in interest from retail Islamic banking to Islamic capital markets, which has been demonstrated by the issuance of sovereignty Sukuk in June 2014 by the UK government.

What are the current hot topics for lawyers in the Islamic finance sector?

The legal and regulatory framework governing Islamic capital markets in general is an area that would require further attention.

How do you see the sector developing in the next 12 months?

I could expect the sector to make advances in a number of Western markets within the EU considering the growing interest in the Islamic capital markets segment of the Islamic finance sector.

Are there any upcoming developments/cases you are particularly interested in?

There are three emerging themes that they could be of interest to those who are interested in the Islamic finance sector. First, the interaction between Islamic finance and social inclusion policies. Second, the ability of Islamic finance to catch up with global regulatory reforms, especially Basel III.  Third, Islamic financial institutions and financial resilience.

How significant do you think the UK issuing sovereign sukuk will be and do you think this will lead to other Western nations following suit?

It is a milestone event in relation to the development of the Islamic finance sector, especially the Islamic capital market segment, in the UK. It represents an official recognition and approval of the sector.  In relation to other Western nations flowing suit, it is a political question as much as economic which makes it difficult to have a clear cut answer.

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