“There is a gap between all the money coming in to Islamic banks and the deployment of that money into real economic assets,” says Sad Faro, the global head of Islamic finance at Thomson Reuters. “A crazy amount of money has gone Into their coffers and they need somewhere to Invest It. ” There was a need for a bank that followed the rules and bans of certain Investments and money handling, and this began the establishment of Islamic Banks In the SASS. The establishment of these banks opened a new way to invest.
Which has started an abundance of depositors into the Islamic Banking system. One example is the Share Islamic Bank. It has tripled its depositors from 2006 to 2012 to $3 Billion. This is only one example of the growth. The entire Islamic Banking sector has increased in the last 30 years from virtually nothing to $1. 6 Trillion. Real estate is a top asset for Islamic banks. But because of the restriction on types of investments and companies to invest in, Islamic banks are over flowing with money that needs to be invested.
And after the financial crisis in 2008, the Islamic banks needed a new way to Invest money. Banks started selling SKU. The amount of SKU sold every year has grown 6 times since It first began. From 2006 to 2012, SKU grow to $133 Billion. Waver Moll, the former head of Islamic banking at Morgan Stanley, began an operation that would collect assets from around the world that can be packaged Into SKU. He established this Idea because he believes there are not enough opportunities for Islamic investors.
And this caused them to invest in the conventional field. The financial crisis actually benefited Islamic Banking, while other conventional banks were having trouble during this time period. The industry assets grew 19% and then 20% the following year while other conventional banks in the rest of the world only grew less than 10%. And as stated before, since real estate was hit hard during the financial crisis, Islamic Banks found a new way to grow their industry with SKU. With this, new opportunities created more supply to their efforts for Investing.
Hussy Dolores, a muslin law scholar, Inspects the financial “health” of a railroad company called Continental Rail. Continental Rail Is a railroad company that transports products throughout the east coast of the united States. Dolores has to make sure that the company does not involve itself with “harm” products and activities. American investor bankers had Dolores examine the railroad to see if the investment in this railroad was “hall” (permissible) according to Islamic Law.
If Dolores observes the Railroad is compatible with Islamic Law then this deal will be the first of its kind in America. This deal is not yet completed but they have agreed to buy 1000 rail cars in Pennsylvania and still looking to buy 5000 more. A Texas Oil Company tried dealing with SKU. In 2006, they sold $1 66 Million in SKU to finance oil explorations, but the many went bankrupt during the financial crisis. But that did not discourage General Electric. They Issued $500 million In SKU for aircraft leases.
Each of these examples had someone Like Dolores to determine If the deal is according to Islamic Law. Prime Minister David Cameron of Britain announced England plans to become the first European country to Issue SKU. And Just Like England, there are some Non- Muslim African countries that are raising money using SKU. Because Islamic Banks where both sides benefit. Islamic banks get their opportunity to grow even more, and western companies get the money they need for their company.
