Vulnerabilities of the Islamic Financial Industry

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Vulnerabilities of the Islamic Financial Industry
and the Global Finance Crisis Sustainability
and Future Directions Fehmy Saddy, PhD FS
International Partners SA

4th Islamic Banking Conference Damascus, Syria
June 1-2, 2009
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Presentation Outline
This presentation consists of four parts Part
I Premises of the Islamic Financial
System Part II Islamic Banking in
Practice Part III Impact of the Global
Financial Crisis Part IV Sustainability and
Future Directions
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Part I Premises of the Islamic Financial System

1. Islamic finance as instrument to serve the
   community
2. Islamic finance as instrument of growth
3. A higher moral ground
4. Ethical imperatives
5. Integrity
6. Asset-based finance
7. Risk aversion
8. Transparency
9. Resilience
10. Expansion of Islamic finance
11. Market breadth
12. The missionary vision
13. Sailing into the sun
14. Pride and prejudice
15. Salvation of the global financial system

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Part Two Islamic Banking in Practice

1. The players
2. The legitimizers Sharia boards
3. The regulators regulation and standardization
4. The story of innovation
5. Mirror imaging v. adaptation
6. The structure of structured products
7. Islamic banking a la carte
8. Form over substance the great debate
9. The use of legal fictions (Hyals)
10. Murabaha contracts as instruments of monetization
    
11. Use and misuse of corporate notes (Sukuks)
12. Transparency and risk assessment
13. Concentration of risk private equity, real
    estate and corporate notes
14. Exposure local, regional and international
15. The culture of greed

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Part III Impact of the Global Financial Crisis

• Integration of Islamic Finance in the Western
  markets
• Symbiotic relations the stakes
• Leveraging the debt addiction
• Western equity markets gainers and losers
• The rating game
• Financing failed enterprises
• Collapse of real estate markets
• Sukuks quality and risk assessment
• The Islamic wholesale markets
• Securitization of toxic assets
• Islamic banking under stress
• Creative accounting
• Islamic Russian roulette
• Dilemma of bank regulators
• Government bail outs
• Consolidation

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Part IV Sustainability and Future Directions

1. Return to basics
2. Foundations of Islamic finance
3. Islamic finance in the service of the community
4. Islamic finance as an instrument for development
5. De-coupling from dependency to interdependence
6. Asset-based finance v. speculation
7. Long term vs. short term investments
8. Original research vs. packaged research
9. Market focus MENA, Asia and Latin America
10. Sector focus financing infrastructures
11. Focus on the real economy Public Private
    Partnerships (PPPs)
12. Agriculture, industry, energy, water, education,
    etc.
13. Oil as a finite resource search for alternatives
14. Time a precious commodity
15. The future of future generations