Islamic finance is the ideal catalyst for taking trade relations between East and West to a new level, Bahrain-based Ithmaar Bank CEO Michael Lee told the World Economic Forum on the Middle East at the Dead Sea, Jordan.
More than 1,200 political and business leaders, including 16 heads of state, took part in the conference, which was opened by King Abdullah bin Al Hussein.
In his keynote address, Lee said Western countries and companies are increasingly looking towards Islamic finance as an option for raising money for major projects.
“The worldwide Islamic finance market is currently worth more than $500 billion, with Islamic banks growing at around 20 per cent a year, twice as fast as their traditional counterparts. The combined turnover of the Islamic banking industry could top 2 trillion US dollars in the next three years or so,” he said.
“The Sukuks (Islamic bonds) market is still in its infancy stages but has huge potential for growth. The sizes of some Sukuks already issued are staggering, running into the billions of US dollars, and they are being used to fund major developments and expansions in the West,” said Lee.
Lee also explained that Sukuks are no longer solely being issued by Middle East-based Islamic banks.
“In 2004 a Sukuk was issued by the German State of Saxony specifically targeting Middle Eastern markets and last year saw the first US Sukuk, which raised money for gas field projects. Sukuks are also expected to become a popular mode of financing in the UK and Japan,” he said.
“Even the banking giants of the Western world are getting into Islamic finance, with Standard Chartered, Citigroup and HSBC being just some of the major institutions launching Islamic services.”
Lee added, however, that Islamic Banking will need time to mature as an industry before it can operate on the same level as conventional banks.
“A broad and transparent regulatory framework needs to be in place in order to win the complete trust of multinationals and countries outside the Muslim world. We at Ithmaar Bank are pleased to be operating from the Kingdom of Bahrain, which is helping to pioneer these new standards,” he continued.
“The industry also needs to find new ways to differentiate itself from traditional banking by offering unique products and services that emphasise the strengths of Islamic finance.”
Lee is a seasoned investment banker with over 34 years of experience serving multilateral, governmental, corporate, financial institutional and high net-worth clients, at Merrill Lynch in London, Hong Kong and New York, and at Dean Witter, where he was Chief Executive of Dean Witter Capital Markets-International in London.
In 1992, he became a senior adviser at the Kingdom of Bahrain's then Ministry of Finance & National Economy, providing inter alia strategic advice on the development and regulation of the Bahrain International Financial Centre.
Immediately prior to joining Ithmaar Bank, he was with Emerging Markets Partnership, which he joined as Managing Director in 1998, and where he was Deputy Chairman and Managing Director of Emerging Markets Partnership Bahrain, 40 owned by Shamil Bank of Bahrain, a subsidiary of Ithmaar Bank; EMP Bahrain is the general partner and manager of the $ 930.5 million Islamic Development Bank (IDB) Infrastructure Fund.
Ithmaar Bank is licensed by the Central Bank of Bahrain and listed on the Bahrain Stock Exchange.
It has a paid-up capital of US$360 million and total equity of $964.5 million and is a full investment bank, with businesses covering the Middle East and North Africa (MENA) region, as well as South Asia, Asia-Pacific and Europe.
Besides holding significant investments in the banking, financial services and real estate sectors in different markets, the main activities of the Bank include underwriting business (equity and other financi