Sukuk continues to dominate the Islamic finance industry in 2012. A series of milestone transactions, both in terms of innovation and size, shows not only the remarkable flexibility of Sukuk but also its importance in generating finance and high return. While Malaysia has emerged as an unchallenged global leader in Islamic banking and finance, with further marginalization of Bahrain and Dubai, one may also look at Turkey as a rising star of Islamic banking and finance. Following the rise to power of Islamist governments in Egypt and Tunisia and a new regime in Libya, there is expectation that Islamic banking and finance in these countries will flourish in the next few years.
Overall, this year has shown some signs of vulnerability of Islamic banking and finance. HSBC has wound up their Islamic businesses in most countries except Saudi Arabia and Malaysia; though in my opinion, it is only a matt er of time before HSBC Amanah decides to call it a day even in Malaysia. This is certainly disappointing for HSBC, which invested greatly in creating a global Islamic brand. Some other western institutions have also shut down their Islamic businesses but rather quietly. It is also disappointing to see Islamic Bank of Britain still struggling.
Islamic retail banking in UK has not been successful at all. One questions the quality of market research and intelligence available to the people who started Islamic retail banking in UK. Similarly, despite some real estate success, Islamic investment banks have not been able to make a mark on the market. I have always argued that there is no need for fully-fl edged Islamic investment banks in the UK. Islamic investment companies are easier to run and cheaper to maintain than investment banks constrained by the dictates of regulation.
It was also disappointing to see a former non-Muslim senior executive of Gatehouse Bank in London drag its former employer into a labor tribunal, accusing the bank of making him redundant because of his Christian faith. Obviously, his case is weak, as more than half of the said Islamic bank’s top management (including its CEO) is Christian and none of them have been treated unfairly because of their faith. It is interesting to note that the person in question was perfectly happy when he drew over a million pounds in wages and bonuses working for the bank. It was only when he was made redundant that he maliciously used his faith as a factor contributing to the termination of his employment. This was an interesting incident, which many Muslims would like to use in favor of their argument that CEOs of Islamic banks in UK should be Muslims (at present four out of six Islamic banks in UK have non-Muslim CEOs; Islamic Bank of Britain is without a full-time CEO but has never had a Muslim CEO since its inception). It would be really damaging for an Islamic bank in UK if its non-Muslim CEO after being removed from his job decides to take the matter to a court.
Overall, not a bad year for Islamic banking and finance, but the players in this market must be more cautious in the New Year.

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