Islam Meets Wall Street

What the heck?  14 years ago 90% of Americans hadn't even heard of Islam.  We didn't know what Sunni and Shi'ite were, Madrassas, burquas, Shariah and Jihad were all absent from our lexicon! Today we can't go a single day in this country without seeing something about Islam and Muslims.

It's like a flood....

Today I ran across this article in one of the daily financial newsletters that I receive.

Islam Meets Wall Street

Saqib Awan was working as an attorney at the global law firm DLA Piper when his firm was asked to advise a Saudi Arabian company as it structured a bond deal that would comply with Islamic law, also known as Sharia law. The type of bonds, called sukuk, usually involve placing assets into a special purpose vehicle (SPV) and then issuing certificates that give investors an ownership stake in the asset pool. Since Islamic law prohibits the charging or paying of interest, sukuk transactions often look more like equity than debt.

The problem was, Awan’s client didn’t want to move the underlying assets into an SPV. He didn’t want to pay the costs associated with moving the assets off of its balance sheet or suffer the risk that the assets might be lost. Awan’s firm told the client the assets had to be transferred on to the books of the SPV in order for the deal to be Sharia compliant. However, the company hired an Islamic scholar, who said such a move was not necessary. The company opted to keep the assets on its own books.

“If you asked 20 Sharia scholars, they would say this was not the way it’s supposed to be done. It was a bit odd,” says Awan, now a senior consultant to a sovereign wealth fund in the United Arab Emirates.

The deal highlights one of the main questions in Islamic finance today: What is compliant under Islamic law, and who gets to make that determination? These questions are becoming increasingly important as the Islamic finance sector flourishes.  

Islamic financial institutions worldwide hold about $1.8 trillion in assets—and are likely to sustain double-digit growth over the coming few years to reach about $3 trillion, according to a report this year by Standard & Poor’s.

The sukuk market alone has doubled in the last three years, with annual issuance rising sharply from less than $32 billion in 2010 to a record $118 billion at year-end 2014, according to Moody’s.

The deal involving Awan’s client underscores the dilemmas  faced by advisors and other professionals in this sector.

Demand for Islamic financial products has increased over the last decade—not just in the Gulf and Southeast Asia, but also in America. There are 5.7 million Muslims in the U.S. with $98 billion in disposable income, according to a report by DinarStandard, and many are looking for Sharia-compliant investments. The American Muslim population is younger than the national average and the education and income levels are on par with the average American household’s, says the study. And wealthy Muslims are looking for some of the same things rich American investors seek: capital preservation, education savings and retirement planning.

Ernst & Young estimates global Islamic banking assets will exceed $3.4 trillion by 2018. Even if Muslims represent just 10% of world GDP, their high saving rates means that wealth is being generated in the hundreds of billions of dollars each year, making the Muslim population worth noting for wealth managers, experts say. In Asia alone, more than 2.6 million high-net-worth individuals control an estimated $8.4 trillion in assets, according to the International Centre for Education in Islamic Finance.

Here;  http://www.fa-mag.com/news/islam-meets-wall-street-21630.html?issue=246

Ouch!  For all the messes that Islam it creating from Syria to Boston....they are saving/investing some serious money and beginning to cause sway even on Wall Street.

Of course Wall Street could say, "This is America...we don't do shariah deals!  Issue bonds or issue stocks...that's how we do it here."   But of course they aren't because there is A LOT of money involved and A LOT of money to be made as the Muslims control more and more assets.

I remember seeing a cartoon 30 years ago of a Wall Street broker smiling and patting the back of an obese, bald man smoking a cigar.  The caption read, "This is a potential client.  He smells bad.  He has money. I like him!"

Islam is clearly a blight to the civilized world.  It breeds hatred, ignorance and poverty wherever it settles....but when there are $billion dollar deals to be done the Wall Street brokers say, "So tell me all about this shariah law thing so I can help you structure a deal."