The next big economic power might not be where you’d expect it.
Jeffrey Kappen, international business professor at Drake University, profiles the burgeoning market places of the Middle East.
Dr. Jeffrey A. Kappen is an Assistant Professor of International Business at Drake University. Grounded primarily in institutional approaches, his research examines how socio-cultural differences are negotiated and legitimated within organizing processes. Current projects include the formation of new transnational partnerships and organizational practices across varieties of capitalism, the influence of religion on shaping industry norms and social impact, and the implications of corporate language policies. His most recent publications have explored the impact of culture and religion on insurance, financial services, and sustainability issues in emerging markets.
Middle East Economics
If you’re interested in investment products screened for social concerns, the quickly growing Islamic financial sector may be for you. Growing at a rate 50% faster than conventional banking, current estimates value the Islamic financial market at nearly $3 trillion and project that it could increase to $5 trillion by 2016.
Large banking centers like Dubai, Kuala Lumpur and London are moving quickly to create products that comply with the requirements of Sharia or religious law. Muslim consumers must avoid haram – or prohibited – industries, namely, those that are associated with alcohol, gambling, pornography, weapons manufacture, and pork products. Islamic law also prohibits interests, which is seen as a form of exploitation, and Muslims are enjoined to mobilize their savings and investments towards activities that better the community, which may offer interesting financing possibilities for non-profit organizations.
On a recent research trip to Qatar and the United Arab Emirates, I found considerable enthusiasm and optimism among academics and industry leaders engaged in creating the technical infrastructure necessary to meet growing consumer demand. For example, current efforts aim to move the sector beyond only screening investments so funds don’t flow to prohibited industries towards financial solutions that ensure capital will be used to create positive social impact.
Businesses have a wonderful opportunity to tap into the growing market for sharia-compliant financial products by translating their existing resources and capabilities to an Islamic marketplace. For example, last year the Hong Kong government was able to issue an award-winning $1 billion dollar Islamic bond at rates lower than those that other regional governments were paying for conventional issuances at comparable credit ratings.
Globally, this is becoming a competitive industry where culturally savvy countries and companies are poised to reap benefits from embracing a rapidly expanding market.