ISLAMIC BANKING

Liquidity crunch

August 2010

ISLAMIC BANKS hit by the real estate downturn face a crisis that could include layoffs or more rescue measures if liquidity does not improve, with some players aiming simply to survive instead of grow, according to leading bankers.

Sohail Zubairi, chief executive of Dar al Sharia consultancy, said sparse liquidity continued to dog Islamic and conventional lenders in the United Arab Emirates and that worse could be in store if conditions do not improve by the third quarter.

“Anything is possible in this scenario,” he told the Reuters Islamic Banking and Finance Summit in Dubai. Dar al Sharia was set up in July 2008 by Dubai Islamic Bank to provide financial and legal expertise for the Islamic finance industry.

Zubairi’s assessment, echoed by others at the summit, reflects how the West’s financial woes have also punished the Islamic sector, once thought protected due to its conservative nature and ban on speculation.

To see the full contents, please login or subscribe.