Qatar could play a key role in promoting the development of the Islamic finance industry in non-Muslim countries, according to experts from Carnegie Mellon University in Qatar (CMU-Q).
John O’Brien, senior associate dean of faculty and outreach, and associate professor of Accounting and Experimental Economics and Fuad Farooqi, area head of business administration, and associate teaching professor of Finance, stated that Qatar is well-placed to be a positive catalyst for promoting Islamic banking opportunities and this could lead to attracting some cross-listings on the Qatar Stock Exchange (QSE), as well as further boosting the growth of the sector in the country.
“The developments evolving with Turkey, Malaysia, and the Philippines are prime examples of what can result by having the separation of the banking sectors in Qatar. This is because each sub-sector is now free to pursue its comparative advantages. This can include helping to fast-track the development of the industry in non-Muslim countries,” the experts pointed out.
Both the experts consider that Islamic banking’s strength and experience with promoting ethical finance are the essential factors that provide the ideal path for growth in non-Muslim countries. While the variation in the shariah interpretation and approvals in countries are being a limitation for the market’s expansion.
The conventional banking sector has a large body of research compared to Islamic banking, the experts noted, adding that the academic community can play a supportive role in terms of both research and training.
The more research that is focused upon understanding the strength and weakness of each banking business model, the more efficient the Islamic banking sector can become relative to the conventional banking sector, the experts stated.
Regarding the exchange-traded funds (ETFs) and the potential of having more Islamic ETFs, the experts said, “Currently, if we compare the average performance of stocks in the Islamic ETF versus stocks in the Qatar Stock Index along some important dimensions, it is favorable. If we were making a prediction about future ETFs, we would say that given the strength and separation within the banking sector there is an opportunity for creating separate banking ETFs (especially an Islamic banking ETF).”