South Asia Investor Review

Dubai's debt woes are bringing the world's attention to the Islamic finance , particularly the Islamic bonds known as sukuk. Sukuk are Sharia-compliant bonds that do not pay interest. Instead, the sukuk sellers pay the debt holders a share of the rent or capital gains from non-cash physical assets or share of the profits earned from businesses purchased with the money raised. Unfortunately for the Nakheel sukuk holders, the real estate bubble in Dubai that promised big gains from rents and sales has collapsed. And the Islamic bond holders are facing the possibility of a major default, resulting in a dramatic sell-off of sukuk in the last few weeks. According to Data Explorers, a company that tracks how much of a company's stock or bonds are out on loan, about 75% of institutions holding the sukuk sold their position between the end of August and the end of November. "It's an extraordinary sell-off in a bond so close to maturity, when there was no indication of a pr...

For a long time, the halal simply meant buying meat from a halal butcher, who slaughtered in accordance with Islamic principles. But the halal food market has exploded in the past decade and is now worth an estimated $632 billion annually, according to the Halal Journal , a Kuala Lumpur-based magazine. That's about 16% of the entire global food industry. Throw in the fast-growing Islam-friendly finance sector and the myriad other products and services — cosmetics, real estate, hotels, fashion, insurance — that comply with Islamic law and the teachings of the Koran, and the sector is worth well over $1 trillion a year, according a recent report in Time magazine . Time attributes the rise of the halal economy to the world's 1.6 billion Muslims, most of whom are younger and, in some places at least, richer than ever. Seeking to exploit that huge market, non-Muslim multinationals like Tesco, McDonald's and Nestlé have expanded their Muslim-friendly offerings and now control an ...

In yet another act of conciliation on the part of Western religions towards Islam, the Vatican newspaper Osservatore Romano has voiced its approval of Islamic finance. The Vatican paper wrote that banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis . “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the Osservatore Romano said. “Western banks could use tools such as the Islamic bonds , known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” the article says. The Vatican article is only one of many articles that have recently appeared on the acceptance by Western governments and bankers of an Islamic financing system . More than accepting it, they seem to be welcoming it, though they are certainly being pressured into this by unnamed force...