Newsletter No. 312
News-Analysis
June 20, 2006

 

JAPAN EYES THE ISLAMIC BANKING MARKET

The Nihon Keizai Shinbun has reported that several major Japanese banking groups are planning to enter the Islamic banking market. This project is led by the government-backed Japan Bank for International Cooperation (JBIC), and will also include participation from the Sumitomo-Mitsui Banking Group, Mizuho Corporate Bank, and the Bank of Tokyo-Mitsubishi UFJ.

These groups have already established a four-person advisory panel that includes authorities on Islamic banking from Malaysia, Pakistan, and Saudi Arabia. The Japanese government will also take part as an observer in the Malaysia-based Islamic Financial Service Board in order to learn more about Islamic banking. Separately, a smaller outfit called the Japan Asia Investment Company has set up an advisory panel of Islamic legal scholars to help it manage its Sharia Asian Investment Fund.

There are said to be about 300 Islamic banks worldwide, which manage about US$300 billion overall. Every year their assets are growing, especially in the Arab Gulf countries. With the dramatic rise in oil prices, no doubt Islamic banking will also experience massive growth in the next few years. British and German financial institutions have already made some moves toward participating in this market, and clearly Japan is now taking notice as well.

It will be interesting to see how this story develops.