1. The Landscape of
Shariah-compliant Finance:
Identifying the Key Players and Opportunity
Prepared for:
Company XYZ
Prepared by: Manny Peralta
July 25, 2012

2. Defining the Opportunity with Key Players
• Demand for more Shariah-compliant financial products and services is on
the rise. Financial institutions are positioning themselves to meet this
surge in demand. This form of finance is carrying over into the
Landscape development finance world.
• While not the only player in this market, Islamic Development Bank is the
Key Players leading the multilateral development organization in terms of funding.
• Company XYZ should position itself to play in the Shariah-compliant
finance market by targeting sectors that receive the most investment by
Opportunity the ISDB and similar multilateral development banks.
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3. Landscape: Demand for Islamic
finance products is on the rise.
A. This surge in demand is occuring everywhere
in the Islamic world, and there are stark regional
differences in terms of the Islamic financing
solutions that can be provided.
• Malaysia has a well-developed sukuk infrastructure,
while the Gulf States are still struggling to meet
short-term maturity needs.
• The governments of Bahrain, UAE, and Qatar are
testing out new short-term products with
increased success.
• Saudi Arabia is more adept at handling short-term
liquidity needs due to the depth of its investment
sector.
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4. Landscape: Demand for Islamic
finance products is on the rise.
B. Changes in the regulatory environment are
producing an increased supply of capital.
• Saudi Arabia is recognizing that housing has
According to the
become a national priority, hence the IFC, mortgage
Council of Ministers have passed a mortgage finance is not only
law to boost real-estate development that is a high priority, but
also one of the
Shariah-compliant. fastest growing
• in Bahrain, Islamic banks are being asked to investment areas.
join forces in order to be better capitalized
and be better prepared to weather global
economic crises
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5. Landscape: Demand for Islamic
finance products is on the rise.
C. Increased economic prowess in Asia and the
Middle East.
• Islamic finance assets total $1.3 trillion globally and are
growing at an average annual rate of 15%.*
• The IMF estimates economies in developing Asian countries
will expand 7.3% this year and 7.9% in 2013.**
• The number of millionaires in the Middle East rose 2.7% to
450,000 last year.***
*according to the Malaysia’s Securities Commission
**according to its World Economic Outlook Update issued in April
***according to World Wealth Report 2012 from Capgemini and RBC Wealth Management
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6. Muslim customers are low-hanging fruit for
new Shariah-finance solutions.
Regulatory
environment
growing more
favorable
Number of
Surge in demand affluent Muslims
and regional in Asia and the
differences Middle East on
the rise
Private sector is
catering more to
Muslim
customers’
financing needs
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7. Some financial institutions are trying to
step up to match that demand.
• Global consumer banks, such as Standard Chartered
Private Bank, have introduced a host of new Islamic
finance solutions to target rich Muslims in parts of Asia
(e.g. Malaysia) who lack investment options in the region
• SCPB and similar institutions have portfolios where 60%
of profits or more come from Africa, the Middle East,
and Asia.
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8. However, private banks are still lagging
in terms of solutions that they can offer.
• A leading Singapore-based wealth management firm
interviewed in the New York Times states that while
demand is on the rise:
“few understand the needs of the Islamic
ultrahigh net worth individual or take a
‘holistic view’ of wealth management
services”
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9. Still, Shariah-compliant finance is also
growing in the development world.
The Islamic Development Bank (ISDB) is the
front-ronner in this market
• A week ago the ISDB made its largest approval for funding
development projects since its inception in 1975
• Other major players include the Asian Development Bank, the
World Bank, and some national governments.
• Many examples of these include co-financing agreements with the
ISDB, who have actively looked for partnerships in Islamic financing.
• The ISDB and the WB have co-financed over 60 projects in 26
countries in Africa, Asia, and the Middle East worth $3.2 billion.
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10. Key Players: Islamic Development Bank
Where does ISDB focus its investments?
Key Sectors*
4% Utilities and
13% Infrastructure
Agriculture
24%
59%
Human
development
SME Finance +
Other
*Based on funding allocation for 2012
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11. Key Players: Islamic Development Bank
The details of ISDB's recent $1+ billion deal
Allocation by sector (in millions)
800
700
600
500
400
300
200
100
0
Utilities and Agriculture Education SME Finance
Infrastructure
*The list of countries receiving funding can be found in Appendix A.
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12. Key Players: Islamic Development Bank
Other recent deals
• In June 2012, the ISDB signed a co-financing agreement
with the Korea Development Bank for $2 billion,
aimed at building public-private partnerships in the ISDB’s
4 key sectors
• In July 2012, the ISDB signed a $1 billion agreement with
the Egyptian government to finance their energy
sector and food imports.
• The timing of this deal is key, because Egypt’s
outgoing military government had a difficult time
securing funding from multilateral institutions, hence
why President Morsi is keen to fill the gap in funding.
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13. Key Players: Asian Development Bank
The ADB is following ISDB's lead.
• The ADB has 13 common member countries with the
Islamic Development Bank.
• They signed a co-financing agreement in September
2008 calling on both institutions to provide up to $2
billion each over a three-year period.
• The co-financing agreement mainly targets infrastructure
and public utilities, with some funding for education and
health.
• The ADB has piloted Islamic financing in an infrastructure
project in Pakistan. Though Islamic financing hasn’t been its
first choice originally, the decision was based on client
needs.
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14. Opportunity
DFI should identify Multinational Companies who
have large operations in the Middle East and
Islamic parts of Asia with business in key sectors
that receive ISDB funding.
• One leading example is General Electric, and
specifically, their GE Energy division.
– GE is the first American company to have launched
Islamic bonds (2009).
– Middle East and Africa accounted for 6.1% of GE’s total
revenues in FY2010.
– GE Energy signed a $2 billion contract with the
government of Kuwait in 2009.
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15. Questions?
• Please don’t hesitate to contact me
(manuel.i.peralta@gmail.com) with any questions.
• I addressed a few potential questions in the
appendices.
• Thank you for your time!
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16. Appendix A:
Details of ISDB’s recent $1Bn deal
• $683 million for power generation and power
transmission projects in five IDB Member Countries:
Morocco, Tunisia, Iran, Uzbekistan and Tajikistan;
• $274.8 million for food security and rural development
activities in African countries: Cameroon, Chad, Uganda,
Benin, Burkina Faso, Mali, Niger, Mauritania and Togo;
• $146.2 million for educational projects in Indonesia,Yemen
and Bangladesh;
• $45 million to Indonesia Exim Bank for the financing of export-
oriented small and medium size industries;
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17. Appendix B:
Is Shariah-compliant finance cost-effective?
• This trend toward Shariah-compliant finance is
indicative of future growth in an industry that is
rapidly developing.
• As more capital is channeled to Islamic finance
solutions, the cheaper the products will become.
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18. Appendix C: Are there any non-monetary
downsides to using Islamic finance solutions?
• Yes. There have been some cases where political
and legal resistance to this form of financing are
apparent.
– E.g., in Kazakhstan, which has a Muslim-majority (70% of
population) and is a member country of the ISDB,
regulations have been passed to secularize state
institutions (e.g. banning prayer in those institutions).
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