As scholars quibble, sharia banks eye convergence

KUALA LUMPUR/LONDON (Reuters) - Jurists may never fully agree on how to interpret the sharia but controversial Islamic finance structures are likely to be dropped eventually as the industry strives to reach wider markets.

Disputed contracts like bai bithaman ajil and bai inah will probably be pushed to the sidelines while mudaraba and musharaka bond structures will be modified as governments and corporates try to narrow a gap in opinion that shuts out some investors, some bankers say.

"As more cross-border transactions take place and there is a need for meeting standards and requirements of a broader segment of market, naturally there will be a trend toward convergence," said Zarinah Anwar, chairman of the Securities Commission, which regulates Malaysia's capital markets.

The interpretation of religious scriptures is key to the $1 trillion Islamic banking industry as issuers and investors look to the sharia to determine if contracts are halal or haram.
Resource, Source: Reuters

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Chinese Interest in Islamic Banking

We will not be able to say that Islamic banking has become a strong competitor to conventional banking unless it is able to surmount the Great Wall of China and settle upon the Chinese mainland and take advantage of what is considered to be one of the world's fastest growing economies. According to the World Bank, the Chinese economy is expected to experience a growth of 6.5 percent –during the [global] financial crisis – while during the same period of time the World Bank expects world growth not to exceed 1.5 percent. China is considered to be the US's largest creditor, and its investment in US bonds exceed one trillion dollars, while its own monetary reserve stands at nearly two trillion dollars, according to the CNN Arabic website. A Price Waterhouse report predicted that by 2050 the Chinese economy would surpass the [combined] economy of the G7 countries. The report based its prediction on Chinese purchasing power, which is founded upon the savings culture that is prevalent among the Chinese population, and their aversion to debt. China is also considered to be one of the more attractive countries for foreign investment which helps to finance this rapid growth. By the end of 2007 foreign investment in China reached approximately $74 billion.

Source: Al Huda