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Date: 12th October 2016 Venue: PricewaterhouseCoopers LLP, New York

Press Release

Note-to-editor
28 October 2016

New opportunities for Islamic finance in the US

Washington DC, US – The US not only offers significant opportunities for Shariah compliant finance across multiple asset classes including inward investment into real estate and private equity but also highlights the developing interest in debt transactions and diversification from overseas investors chasing solid yield in a safe environment. On the 12th October, IFN returned to the US for the first time in eight years to an enthusiastic welcome from domestic players and international investors alike, with a comprehensive exploration of the opportunities available in this vast yet fragmented market.

The event was launched with a keynote address from Brooklyn State Senator Kevin Parker, who was vocal in his support for Islamic finance both within New York State and across the US. “My interest in Islamic finance grew out of an interest in serving my community,” he emphasized. The US hosts the fourth-largest Pakistani community outside of Pakistan, many of whom live in the Tri-State area and especially in Brooklyn, along with a significant population of Muslims from Bangladesh, the Caribbean and other countries.

Senator Parker has been instrumental in proposing an Alternative Investment Bond bill to the State Senate which would allow the New York State Common Retirement Fund to issue Sukuk – as well as working closely with the Dormitory Authority of the State of New York (which provides public construction, financing and allied services) to look at infrastructure financing opportunities. “Getting a state Sukuk [facility] through is important,” stressed the senator. “But there are multiple other opportunities already available. New York is open for business – and people like to make money. If we show people in New York that they can make money, the rest of the US will not be far behind.”

One issue that was raised despite its sensitive nature was the issue of Islamophobia in the US, and this was a question that participants were keen to tackle. Currently, there are 27 states with bills in place that suggest banning or restricting Shariah or Islam in some shape or form. “This is a real issue,” highlighted Parker. “We need to be vocal and active about beating back Islamophobia. This is a country built on religious freedom and we must be the drum majors in the march for justice. In this kind of battle, silence equals consent – and it doesn’t just hurt those who are attacked, it hurts us as a nation.”

This strong support was echoed by other participants – although the topic of branding for Islamic finance was a repeated point. “We need to face political reality and work with the authorities to get around these issues without scaring people through an unfamiliar lexicon,” pointed out one panelist. “We can make this a reality by arguing on its merits, not on its religious principles.” However, opinions on the subject varied. “Rebranding is a misnomer,” suggested Ibrahim Mardam-Bey, the principal and chief commercial officer with Taylor De Jongh. “There needs to be an evolution through organic growth, not an artificial branding. I think this will happen, and it is happening, because it simply makes more sense.”

The theme of driving growth through opportunity was also consistent throughout the day. Ahmed Al Qassim, CEO of Emirates NBD Capital, stressed in his panel session on industry growth that: “There is a large investment pool, and significant capital in the Middle East that is looking to be deployed. We are seeing plenty of appetite.”

Michael Orzano, the director of global equity indices with S&P Dow Jones Indices, agreed. “There is a lot of demand from investors seeking income yield,” he noted. “The US is providing a very strong opportunity for Islamic finance that has not been seen before,” added Patrick Drum, a portfolio manager for Saturna Capital. He noted that due to the rapid growth of negative yield assets, major capital market investors who have mandates not to obtain negative rates have been looking elsewhere for yield – particularly to emerging markets and especially toward Sukuk and Islamic securities allocation. “A large part of our client base are not of the Muslim faith,” addred Drum. “They are attracted to the returns.”

Anxiety around the US elections was of course much-discussed, but on the whole the attitude was positive. “When the dust settles, this concern should fade away,” said Nasr El Hage, the managing director of the Ritz Banc Group. “It won’t affect the appetite long-term. In fact, the major challenge we have today is finding enough products. There is a lot of capital-chasing, not enough deals.”Anup Patel, the president and chief investment officer with Arch Street Capital, agreed – and stressed the importance of trust and strong relationships with local partners. “We are in an environment where there is more capital than there are good opportunities. And to get access to the best transactions you have to have access to a US-based counterparty that is able to move rapidly and negotiate the best terms.”

Hosted by PwC and sponsored by Emirates NBD, King & Spalding, Talyor De Jongh, Moody’s, Guidance Residential and the Financial Accreditation Agency, the event saw upwards of 120 delegates, with a strong atmosphere of positivity and excitement for the future. With growing activity from both overseas and domestic players and increasing expressions of interest toward Islamic alternatives as challenging market conditions drive players to seek more creative methods of raising capital, the US looks once again to be a market on the rise. IFN looks forward with anticipation to returning next year.

 

 

 


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Islamic Finance news

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