São Paulo – Islamic banks, those that follow the laws of Islam, suffered less than conventional banks during the international financial crisis that hit the world in late 2008. The theme was part of the discussions of the Islamic Finance Seminar, which took place on Monday (4), at the Research Institute of Accounting, Actuarial and Financial Foundation (Fipecafi), in the city of São Paulo, turned to businessmen and banking executives.
One of the reasons for Islamic institutions feeling the crisis less, according to specialists, was the more controlled expansion of credit practiced in the Islamic finance system. Exaggerated liberation of financing, especially in the real estate sector, triggered the problems in one of the markets that was most affected, the United States. In the country, losses reached US$ 855 billion of a total of US$ 4 trillion worldwide, according to Islamic Research and Training Institute (IRTI) economist Salman Syed Ali.
This more controlled expansion of credit was due to the fact that, in Islamic banks, the institution faces the same risk as the client. For this reason, the liberation of the funds is more careful. Islamic banks also invest only in real assets, not speculating. "There is no investment in non-existent things, so there is no speculation, you do not bet on the price, on the sale of something that does not exist," said the director of the International Area of bank ABC Brazil, Angela Martins, a member of the event’s organising committee.
For example, there are no bets on the futures market and money that has not been received is not used in investment. "You only buy and sell existing things, with money you have, so you avoid gambling, the game, the risk of the game," explained Angela. Islamic banks, however, also felt the crisis as they invest, for example, in real estate, which was strongly depreciated due to the crisis, and in stock markets.
As it is a linked system, in which only real money is loaned, money in the hands of the bank, originating, for example, from deposits and investment, the shock from a crisis is smaller. "The shock is distributed throughout the system," explained Ali. Apart from that, according to Ali, Islamic banks follow a different series of principles, taking into consideration their objectives, being a system for inclusion and helping alleviate poverty worldwide.
According to figures disclosed by the head of the training department and financial specialist at IRTI, Mabid Al Jarhi, the perspective is that Islamic banks should have US$ 1.3 trillion in assets in 2020. Last year, for example, the figure was US$ 226 billion. The growth, in truth, has been accelerating in recent years, as, in 2000, assets of Islamic banks were just US$ 27 billion. While, between 2000 and 2009, the assets of Islamic institutions rose 27%, those of conventional banks grew just 14% in the Gulf.
The IRTI, for which the specialists who spoke at the Fipecafi work, is part of the Islamic International Bank, a development bank. The institution has several branches, like the research and training area, the IRTI, and the International Islamic Trade Finance Corporation (ITFC). The director general at IRTI, Bambang Brodjonegoro, said that for Brazil, the bank may, for example, finance exports to countries that are members of the organisation or even guarantee operations in Muslim nations.
"Brazil is a great economy, one of the largest in the world, and the largest in South America, a rapidly growing economy. There is potential for Islamic finance," said Brodjonegoro. The financing of projects, however, is only for countries that are members of the financial institution.
The seminar was promoted by Fipecafi in partnership with the Department of Accounting and Actuarial studies of the College of Economics, Administration and Accounting of the University of São Paulo (USP) and had the support of Bank ABC Brazil, controlled by the Arab Banking Corporation, and of the Humanitarian Institute. Apart from the meeting on Monday, turned to businessmen, there should be another seminar, on Tuesday afternoon, for scholars.
*Translated by Mark Ament
