Shariah Bank

There is a race on within the Asian banking system chasing the lucrative US$300 billion a year Islamic financial funds that grow at an estimated 15% each year. Singapore bank DBS have negotiated a position with the Islamic Bank from the Middle East; whose investors are made up from twenty two prominent families and trade groups from the Gulf region. So what is the Islamic bank?

Well the Islamic banking organization is run strictly adhering to Shariah law that does not allow business transaction between companies that deal in gambling or alcohol and forbids the charging of interest to its clients. There is currently US$500 million invested in Singapore Shariah law compliant property and insurance funds. DBS will have the company within its building in Singapore, “Islamic Bank Asia” and will remain the majority share holder of this company. This company will not be dealing with the average man in the street and will be chasing the corporate dollar.

Purely as an example many Shariah banks obviously have to make a profit, however the bank may enter into a profit sharing agreement with the client, but not charge the client any interest. Investors in a Shariah bank may be happy not to take any profit completely sticking to the law in its entirety; also this is probably why DBS in Singapore is only dealing in the easier corporate clients. The large investors whom place their funds in a Shariah bank will find it easy to acquire joint projects with the bank thus alleviating the non interest law. Another example of Shariah business is that all transaction has to be completely open and transparent and if any profit is made the two parties have to declare each others position.