Islamic financiers meet as downturn bites business

[Ghost Dog]

Source: Reuters

Tue Feb 24, 2009 3:52am EST

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Islamic finance had been seen as relatively safe until recently, because its ban on interest and strict guidelines on speculative instruments such as derivatives and hedge funds meant it had largely avoided toxic assets.

But like their mainstream competitors, Islamic banks have now been hit by the crisis in global liquidity and investor confidence, which has resulted in a fall in real estate prices used to underpin transactions.

Issuance of sukuk -- or Islamic bonds -- fell last year, hurt by the credit crisis, dashing hopes that the sector would provide a more stable revenue stream.

There are also difficulties with contract standardisation, and the fact that scholars may take varying views on what is and what is not allowed further complicates matters.

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Read more: http://www.reuters.com/article/marketsNews/idUSLM10397820090224