There was the feeling yesterday at the World Islamic Economic Forum that Islamic finance had finally come of age. In the forum’s 10th year, and its first in Dubai, the talk is no longer just about “potential” or “possible” growth in the economies of the Muslim world, it is about the hard realities of a rapidly expanding business segment which both challenges, and offers opportunities to, the conventional world.
The long-term trends are clear. In absolute terms, Islamic business has become a huge factor in the global economy.
According to figures from the information group Thomson Reuters, in the halal food business the total value will reach $2.26 trillion by 2018, or more than 20 per cent of the global spending on food, roughly doubled since 2012.
In Islamic fashion and clothes design, the total market is forecast to reach $438 billion three years from now, or 14 per cent of global expenditure.
In family tourism (essentially family-friendly hotels and resorts), the market is expected to hit $216bn by 2018, or nearly 13 per cent of global spending on tourism. This is the biggest untapped sector of the global tourism business.
In Islamic finance, the boom is even louder. Thomson Reuters estimates that the Islamic commercial banking market (that is, excluding investment banking, insurance and other financial businesses) has a potential value of worth more than $4tn.
Because the traditional Islamic population – largely concentrated in the Middle East, India, Pakistan and South East Asia – is comparatively underbanked compared with the US and Europe, bankers in these countries can grow their market significantly just by opening Sharia-compliant branches and persuading customers to open an account. That opportunity is huge.
In non-commercial banking, the world on everybody’s lips at the Dubai forum was “sukuk”. In 2012, the international accounting firm PwC estimated the global worth of sukuk at $240bn; in 2016 it is expected to have nearly doubled to $420bn.
There is a long list of governments and corporates that are planning to issue Islamic bonds, ranging from the Dubai International Financial Centre (which is in talks with bankers about an imminent $1bn sukuk issue), to Goldman Sachs, the government of Hong Kong, right down to relatively small corporate issuers like Bank Muscat and numerous Malaysian property companies.
With all these new issuers coming into the market at this rate, the competition to get the listings and actual trading of sukuk instruments is heating up.
At the forum, the three big beasts in the sukuk listings jungle - Kuala Lumpur, London and Dubai - were quick to highlight the opinion that they are not locked in some kind of death struggle for market share.
You can believe that if you wish. The flow of issuers is increasing the value of the sukuk sector at such a rate that for the moment, the pie is growing fast enough to satisfy everybody.
There will inevitably come a time when competition among the listing authorities becomes more intense, but it should be noted that Nasdaq Dubai, the biggest sukuk listing authority in the region, is well placed, and pushing both London and Kuala Lumpur for top slot.
The point was well made by several experts at the forum: the global Islamic economy is growing so fast that for the time being all participants can talk of cooperation, rather than competition.
But in this apparently harmonious scene, there is potential for friction at some stage.
Dubai has declared its ambition to be the global capital of the Islamic economy, which might imply a threat to the other centres.
It is hard to see how Dubai can aim for the No 1 slot without banging up against rivals to the East and West.
To their credit, UAE policymakers have realised that the best way of growing market share in the Islamic economy is to cooperate and even compromise.
The Islamic world as a whole would not accept a Dubai-imposed standard in banking, halal food or any other aspect of the Muslim economy.
What was especially notable at the forum’s opening day was the repeated appeal for the non-Muslim world to use elements of Sharia models in finance and the broader economy to reduce the risk of another global financial crisis.
If that happens, the Islamic economy will have truly arrived, and could help create a new paradigm for the global economy.
fkane@thenational.ae
Follow The National's Business section on Twitter