Islamic Banking Lessons for the Financial Sector
Soul-Searching After the Crisis
Ribera Azorín, Alberto; Etzold, Veit M.; Wackerbeck, Philipp
Date: Third Quarter 2011
Tags: Islamic banking, Western banking, Muslim, Basel III, usury
The financial crisis that started with the demise of Lehman Brothers in 2008 and almost brought the world economy to its knees has prompted many international financial institutions to do some serious soul-searching. As they try to strengthen their capital and reduce their risk operations, whom should governments, regulators and financial bosses turn to for inspiration? A good place to start would be to study those banks that have performed best since the crisis – many of which, ironically, were shown to be “underperforming” in 2006, during the heady days of the housing boom. In this sense, Islamic banking is a good test case. The authors, who all have extensive experience in the Middle East, analyze how faith-based values have shaped some of the unconventional products and services that Islamic banks offer, and they highlight the challenges these banks face as they expand their presence to Western countries. Might there be useful lessons for conventional banks as they reconceptualize and rebuild their damaged institutions in the wake of the crisis?
Tools and Frameworks:
Traces the evolution of Islamic banking from the 1970s to today, taking readers through the steps, arguments and thought processes that led to the setting up of a truly alternative banking form, which may be of help to those rethinking their current business model or looking to expand their range of services in new markets where there is a large Muslim clientele.
Barclays Bank, Dubai Islamic Bank, Dow Jones, Standard & Poor’s 500 Shariah, FTSE Global Islamic Index Series, Bank Negara, Islamic Financial Services Board, IFSB, Accounting and Auditing Organization for Islamic Financial Institutions, AAOIFI, Islamic Bank of Britain, Qatar International Islamic Bank, HSBC Amanah, Grameen Bank, International Islamic Financial Market, International Swaps and Derivatives Association, Stoxx Europe Christian Index, Dubai World, Lehman Brothers
Draws on extensive, hands-on experience the authors have gained as consultants on Islamic banking issues. This includes devising market entry strategies and restructuring Islamic banks, everywhere from Southeast Asia to the Persian Gulf, from Turkey to the United Kingdom, as well as developing Shariah-compliant offerings and Islamic private-banking strategies for European firms.
About the Authors:
Alberto Ribera is a senior lecturer of Managing People in Organizations at IESE.
Veit Etzold is program director and lecturer for executive education at the European School of Management and Technology, Berlin.
Philipp Wackerbeck is a principal at Booz & Company, Munich.