The Booming Global Islamic Finance

From the Economist (bold emphasis added)

THE global market for Islamic finance at the end of last year was worth around $1.3 trillion, according to the UK Islamic Finance Secretariat, part of the CityUK lobby group. The total value of sharia-compliant assets has grown by 150% since 2006. Globally, banks hold over 90% of Islamic assets, and together with funds are big investors in sukuk, a type of bond. According to the latest quarterly report from Zawya, a business information firm, global sukuk issuance in the first quarter of this year was $43.3 billion, almost half the total for the whole of 2011. The withdrawal of European banks lending to the Gulf Co-operation Council (GCC) region is thought to have contributed to this rise. Total issuance could reach $126 billion this year, continuing the growth trend (aside from a brief decline in 2008 associated with the global economic slowdown). Malaysia, which dominates the global sukuk issuance market, is over 60% Muslim, and Islamic banking assets make up around a quarter of the country’s total. Globally, perhaps 12% of Muslims use Islamic financial products, but with other countries (predominately Muslim or with large Muslim populations) expressing interest in increasing services, the market seems likely to continue to grow.

My observations

The unfettered market always evolves according to the people’s demand. In today’s deepening of the information age, market trends have increasingly been based on niches or custom designed products and services. And this applies to the fast growing modern Islamic financing.

The terse article also shows how the world does not operate on a vacuum. The European crisis may have even bolstered the demand for sukuk issuance, as Muslim investors seek alternative options or safe havens.

Yet, Islamic finance has not been limited to the Muslims, as seen by the over 90% holding of Islamic assets by global banks, along with other countries “expressing interest in increasing services”. The point is that integration represents as natural consequences of free trade. In other words, the booming Islamic finance has been representative of the deepening of financial globalization.

Lastly, it is should also be pointed out that Malaysia being the largest sukuk issuer in 2011 has been a key proponent of the reintroduction of the Islamic gold standard, or the Islamic gold dinar since 2002.

While there seems hardly any traces of connection between sukuk issuance and the gold dinar yet, perhaps further inflationism by the developed nations may prompt for wider usage of the gold dinar in Muslim states as Malaysia, and also perhaps sukuk issuance could be backed by gold or denominated in the gold dinar. A combination of the two would likely incite greater demand for sukuk bonds and the dinar.

Has the UN’s intervention in Libya been about the Libyan Gold Dinar?, Mexico Central Bank Buys Gold

Remember when some people speculated that the Iraq war had been prompted by Saddam’s proposal to price her oil trades in Euro?

Well, here is another theory on why the UN has intervened in Libya’s civil war and wants Gaddafi ousted: the Libyan Gold Dinar.

Says the Daily Bell, (bold emphasis mine)

Some believe it [the NATO/US-led Libyan invasion] is about protecting civilians, others say it is about oil, but some are convinced intervention in Libya is all about Gaddafi's plan to introduce the gold dinar, a single African currency made from gold, a true sharing of the wealth.

Gaddafi did not give up. In the months leading up to the military intervention, he called on African and Muslim nations to join together to create this new currency that would rival the dollar and euro. They would sell oil and other resources around the world only for gold dinars.

It is an idea that would shift the economic balance of the world.

"If Gaddafi had an intent to try to re-price his oil or whatever else the country was selling on the global market and accept something else as a currency or maybe launch a gold dinar currency, any move such as that would certainly not be welcomed by the power elite today, who are responsible for controlling the world's central banks," says Anthony Wile, founder and Chief Editor of the Daily Bell.

"So yes, that would certainly be something that would cause his immediate dismissal and the need for other reasons to be brought forward from moving him from power."

Read the rest here.

I am not saying that I believe in this, but this info just adds up to the possible avenues on how things could be shaping up.

By the way, as the war against precious metal continues, the Mexican central bank has reportedly accumulated massive amounts of gold during the first quarter

From the Reuters,

Mexico massively ramped up its gold reserves in the first quarter of this year, buying over $4 billion of bullion as emerging economies move away from the ailing U.S. dollar, which has dipped to 2-1/2-year lows.

The third biggest one-off purchase of gold by any country over the past decade took Mexico's reserves to 100.15 tonnes -- or 3.22 million ounces -- by the end of March from just 6.84 tonnes at the end of January, according to the International Monetary Fund and Mexico's central bank.

This goes to show that either the Mexican Central Bank plays the role of the greater fool or that today’s manipulated decline will present itself as a buying opportunity. My bet is on the latter.