Islamic finance is undergoing some sort of schizophrenia. Perhaps this is characteristic of every nascent market, but the underlying issue is not the structures and big numbers in all its technical glory but rather, a simple question of whether or not market players are ready to bear the risk that comes with the rewards.
For a while now, there has been internal debate brewing on the issue of asset securitisation. Asset-backed or asset-based, both are viewed as acceptable practice in different jurisdictions and let us not kid ourselves – Islamic banking now is perhaps as abstract as Pablo Picasso and Georges Braque’s concept of cubism in 1910. But of course, being such a young industry, we have actually had much to juggle on our shoulders. For one, there is the conventional banking system to compete against, then there are the conventional investors to attract and of course, who can forget the basis on which this system is derived – Islam.
Having to amalgamate and consider so many facets while not losing the essence of the religion is perhaps the industry’s greatest challenge, which is why it is perhaps easier to agree to disagree at this point.
