MANAMA: Islamic finance and banking have proved more resilient than conventional finance, according to BMB Islamic UK chief executive officer Dr Humayon Dar.
But he is convinced that both will bounce back, certainly by the beginning of next year.
BMB is the Sharia advisory partner to the fifth World Islamic Funds and Capital Markets conference.
He was a leading speaker at a session on the closing day of the conference which examined how a strong Sharia foundation enabled greater resilience in the wake of the current global economic turmoil.
"Clearly Islamic finance, along with the rest of the financial industry, has suffered from the downturn, but the effect came later and resulted in less of a slowdown because Islamic institutions were not exposed to any of the toxic assets which caused the slump," he said
"Islamic equity funds have clearly suffered because of the credit crunch which has seen all equities fall, but they have lost less than conventional financial funds.
"And when we look at money market funds, Islamic institutions have performed with three to four per cent growth in spite of problems elsewhere."
"What we have seen time and again is that in a downturn Islamic funds tend to lag behind conventional one," he said.
"In 1997 with the Asian crisis it was found that Islamic funds in Malaysia were affected 12 to 18 months later than other investment vehicles.
"It is the same this time round. The crisis began to hit the West in 2007 but did not hit Islamic funds here until about August 2008 and they are in a better position to recover because they have not lost a lot of money compared to conventional funds."
"How they react in the good times is open to debate because evidence is mixed, but I have seen no statistics to suggest that conventional funds perform better," he said.
Dr Dar remains positive about the outlook for both Islamic and conventional finance in the near future.
""I am very optimistic that a recovery is imminent and will be in place by the end of this year or the beginning of next," he said.
"There are positive signs from both US retail markets and Chinese export markets.
"Bankers caused this downturn and then got governments to hand over massive amounts of money to bail them out. They wrong footed governments who were prepared to come to the rescue of any perceived weakness."
He said banks now had enough money, some were beginning to spend and there would be increasing pressure on others to start lending.
"Tony Blair's former spokesman Alistair Campbell has made it clear that if the banks in the UK do not start lending then the government we be prepared to use a nuclear option to make them."