Islamic finance and banking must be developed as an alternative to the discredited Wall Street model of doing business, the World Islamic Economic Forum resolved as it wrapped up in Indonesia on March 4.

More than 1,550 delegates including prime ministers, presidents, princes and sheikhs from 38 countries issued a declaration calling on the Islamic Development Bank (IDB) to take the lead in promoting Islamic finance.

They also called for “effective regulations” in the conventional global financial industry to “mitigate risk and failure” in the aftermath of the Wall Street collapse triggered by a credit crunch in the US housing sector.

It also called on “governments and Islamic banks to expand Shari’ah (Islamic) compliant micro-credits” to small businesses in the developing world.

Vatican offers Islamic finance system to Western Banks
The Vatican said banks should look at the ethical rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis. "The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service," the Vatican's official newspaper Osservatore Romano said in an article.

• Islamic finance doing well in credit crunch

An International Financial Services London (IFSL) report on Islamic finance published on February 9, estimated that the global market for Islamic financial services rose by 37% to $729bn at end-2007.

The industry has felt the influence of the credit crunch and downturn in the global economy in 2008. Sukuk issuance has more than halved and the value of equity funds has fallen. Islamic banks, however, have been less affected than many conventional banks as they are prohibited from activities that have contributed to the credit crunch, such as investment in toxic assets and dependence on wholesale funds.

London is establishing itself as the key western centre for Islamic finance. The cluster of expertise in London is represented by banks, fund managers, international law firms, a secondary market in Sukuk and a growing market for retail mortgage business.

There are various aspects of Islamic finance in the UK: 22 banks including five that are Shari’ah compliant, more than in any other Western country. Two Islamic banks were granted licences in 2008. 18 Sukuk issues raising $10bn listed on London Stock Exchange, exceeded only by Dubai Nasdaq.

Seven Shari’ah compliant ETFs, including four launched in 2008; two new equity funds also launched in 2008. First company to offer Takaful to UK residents was authorised in 2008. There are18 law firms supplying services in Islamic finance. A total of 55 institutions offering educational and training products in Islamic finance, more than that provided in any other country worldwide.