BearingPoint Institute reveals great potential for East-West business collaboration
Paris, July 2, 2015 - New research from BearingPoint Institute shows that the Islamic finance sector has grown by a factor of five over the last decade, driven in large part by the financial downturn, geopolitical instability and revelations of corruption and graft in the global banking industry.
Islamic finance - the delivery of banking services in accordance with the tenets of Islamic Law - is a key player in the global financial landscape with USD 1.8 trillion in estimated assets. Yet a fundamental lack of understanding of the system is at the center of many of the difficulties found in existing business relationships, hurting opportunities for greater collaboration.
Islamic finance lends itself to transparency and the formation of strong partnerships through the key concept of Profit & Loss Sharing (PLS). It forbids usury, uncertainty, speculation and interest on loans, instead placing emphasis on shared risk/reward. These central tenets lead to strong supplier-customer relationships and a ‘participative’ system.
Western financial institutions willing to develop and introduce Islamic finance products and services face a number of critical challenges, chief of which is the development of a cohesive brand strategy. The changing dynamics of Islamic finance makes this particularly important.
According to the authors of the report, Jean-Michel Huet, Partner at BearingPoint, and Saleh Cherqaoui, Senior Manager at BearingPoint, the best way for Western financial institutions to successfully enter the Islamic finance sector is by creating a subsidiary within a specific brand. Another key challenge for financial institutions is meeting the requirements of applicable regulations, both national and global, while at the same time operating within the letter and the spirit of the Islamic finance model.
Organizations looking to capitalize on the rise of Islamic finance must therefore make concerted efforts to understand the dynamics of Islamic finance. Developing offerings and working practices that align with the tenets of Islamic Law is the key to richer business relationships - and greater long-term profitability.
To read the full article, please download the BearingPoint Institute paper, “The Rise and Rise of Islamic Finance”, which can be found at: The rise of Islamic finance
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