What does the rise of the global Islamic economy mean for Islamic finance? For some, possibly everything. There is a fitting corollary in the fact that ‘finance’ is often the very lifeblood of an ‘economy.’ So too, Islamic finance now stands to become the lifeblood of a growing global Islamic economy now estimated at over $8 trillion.
With goods ranging from food to travel, ‘halal’ as a lifestyle is here to stay. And with over 1.5 billion Muslims bearing a steady north and westward direction as new immigrants in developed markets, a growing Muslim middle class in the Gulf, Europe, and North America could further drive the growth of the ‘halal’ sector. What this means for Islamic finance is that it could become the instrument of choice for industries keen on being perceived as thorough going in their ‘halalness.’
Ethica Institute of Islamic Finance, recently featured in Thomson Reuters’ ‘State of the Global Islamic Economy Report,’ believes that the key to legitimacy in the eyes of the Muslim consumer will be scholar-based standardization: “Muslims do not want to continue doing the research needed to figure out whether their finances, food, and other goods are actually halal or merely halal in name only. They are ready for a legitimate, regulated, third-party standard.”
In this vein, Dubai has made 2016 the year by when it would like to establish itself as the capital of the global Islamic economy with His Highness Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai, taking personal interest in the initiative. As part of the drive, Dubai would like to create certified standards for a variety of industries. In terms of Islamic finance, Dubai does not currently regulate its banks for Shariah compliance to AAOIFI, the leading Islamic finance standard followed by over ninety percent of the world’s Islamic finance jurisdictions, but if Dubai hopes to become the capital of the global Islamic economy, AAOIFI-compliance will be a key component.
With Muslims in a burgeoning global Islamic economy coming from all walks of life, there is a growing sense that Islamic financial institutions must cater to the poor and the middle class better than they have in the past. The effectiveness of community-based finance will become the touchstone by which a truly inclusive Islamic finance will be judged. As one Islamic finance practitioner noted, “For the Islamic economy to work, Islamic finance must be all things to all people.”
