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Banking

Islamic banking needs to break out

The Shariah-complaint finance sector has been growing strongly, but only in a few jurisdictions and with limited product diversity. As oil-derived liquidity flows dry up in its core markets in the Gulf, what can it do to fix its lack of international reach?

by Dominic Dudley

riyal saudi-R-600
A Saudi man poses with Saudi riyal banknotes at a money exchange shop, in Riyadh, Saudi Arabia January 20, 2016. REUTERS/Faisal Al Nasser - RTX237QW
© Faisal Nasser / Reuters/REUTERS

Sometime later this year Qatar International Islamic Bank is hoping to gain a licence in Morocco for a new bank that it is setting up in a joint venture with the local CIH Bank. It is just one small part in a wider story of Islamic banks gaining footholds and expanding. Among other recent converts to the cause is Oman, which began to issue Shariah-compliant banking licences in 2012.

It is not just a trend in Muslim-majority countries. In Europe, the Bank of England issued a consultation paper in February on the feasibility of establishing a Shariah-compliant liquidity facility. Such developments create the impression that Islamic banking is starting to make headway in the global banking system.

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