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Making a mark in Islamic finance...

Sunny beaches and the paranormal triangle are synonymous with Bermuda in popular culture. Business Bermuda's chief executive Cheryl Packwood, a regular to Bahrain, is on a mission to promote her island as a hub for Islamic finance.

Bermuda typifies the small is better principle.

An island of ironies, the tiny country of around 70,000 people boasts the third highest per capita GDP of almost $88,000.

A popular offshore destination for years and the world's best known reinsurance market, Bermuda has slowly but steadily increased its partnership with the Middle East.

Islamic finance, which is gaining acceptance and growing in popularity in the West, is only a natural progression for the country, says Business Bermuda chief executive Cheryl Packwood.

Bermuda's best-known face in the Middle East, Ms Packwood has been regularly visiting the region, representing her country annually at the World Islamic Banking Conference in Bahrain.

"Bahrain has been the beginning and end point to enter the Middle East and the world in terms of traditional financial products and Islamic finance," she said ahead of the conference.

With her small team, Ms Packwood has been a regular host of receptions at well-known business centres in Bahrain and Dubai to drum up support and showcase what her country can best offer the region.

"It was a natural progression when we started coming here," said the lawyer educated at Yale and Harvard universities.

"We've had a relationship with this part of the world for decades.

"When we started coming, we understood the need of the region, which was Islamic finance."

After the financial crisis of 2008, Business Bermuda understood that Islamic financial institutions remained one of the few that did not take a hit.

With sound, ethical principles and transactions based on real assets, Sharia-compliant products began to be viewed favourably by the West.

"Islamic financial institutions were not impacted at all when the first crisis hit," she said.

"When the second crisis came around, Islamic banks came back on track without the need for any stimulus package," she added.

This year's World Islamic Banking Conference urged the industry to look at consolidation and increasing scale.

Islamic financial institutions were urged not to exercise false caution and remain small, but enter into partnerships with other Islamic banks.

The industry at present has only 13 Islamic banks, which have an equity of more than $1 billion.

The small size of the institutions, far from being a weakness, is what makes them more bankable, much like Bermuda.

"The asset size and capitalisation are smaller, particularly because of the concerted nature of Islamic finance," she said.

"It really is very much the way of the future, with the basis being real assets.

"You don't have to call an Islamic bank an Islamic bank.

"In Turkey, they're called participation banks, which is what they really are.

"When you are sharing the risks equally, the risk of failure goes down.

"It is something to bring to the Western world."

With growing Muslim populations in the West and an increasingly cautious investment climate, Islamic products are seen as a safe haven, fuelling much demand.

"Islam in the US is a fast growing religion, while Canada and Europe are also seeing growth.

"South Africa, where four per cent of the population are Muslim, is considering issuing its first sukuk.

"Even non-Muslims are increasingly choosing Sharia-compliant products as they seem to be safer and provide, depending on your appetite for risk, a good return on value.

"That's what every investor wants."

Sensing this opportunity, Bermuda is eyeing a greater share of the pie by keeping its shores ready for its first takaful company.

While reinsurance is what it is well known for, Bermuda is keen to open doors for the industry's Sharia-compliant version.

"We're still waiting for the first Takaful company to set up in Bermuda.

"There has been a lot of interest and it only seems like a natural solution to the Islamic insurance and reinsurance world, particularly because of Bermuda's expertise in those fields.

"Partnerships with Bahrain's takaful companies would be optimal as well."

Bermuda has signed a double taxation agreement with Bahrain and neighbouring Qatar.

Agreements such as these are signs of respect, transparency and willingness to do further business, she said.

"Certain agreements such as the Qatar-Bermuda double taxation deal have special provisions in reinsurance matters," she said.

"We have value added tax expertise we can provide to a market like Qatar."

With close proximity to the US, Bermuda has been impacted by the slowdown of the US economy.

Estimates say that in 2008, Bermuda's GDP may have contracted by up to 2.5pc from the $6bn of the previous year.

The percentage decline mirrors that of the US.

To ensure that the little island does not endure serious impact, Bermuda has adopted a more protectionist policy to govern its interests.

"Bermuda has been traditionally a more protectionist market in terms of assets as well as labour," said Ms Packwood.

"We are opening up as the world is more globalised and we have to keep up with that. We're taking steps to ensure that we are competitive and always will be." jennifer@gdn.com.bh



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