Fletcher in the News

The Rise of Islamic Finance: Prof. Warde Weighs In

Global Islamic financial assets have soared from less than $600 billion in 2007 to more than $1.3 trillion in 2012, an expansion rooted in the growing pool of financial assets in Muslim-majority countries driven by consumer demand for products that comply with religious codes. Assets are concentrated in Muslim countries of the Middle East and Southeast Asia, but the sector appears poised to enter Western markets and complement conventional financing…

…A major principle in Islamic finance is to have a direct link between the real and financial economy. Sharia boards—oversight committees made up of experts in Islamic finance who are paid by banks to sign off on products and practices—have been lenient at times with some structures, but hold firm to the principle that financing must benefit the real economy. Ibrahim Warde, a professor of international business at [The Fletcher School,] Tufts University, says some bankers were annoyed with their sharia boards for forbidding Islamic banks from following the lead of conventional banks during the run-up to the global financial crisis. "Sharia boards acted as a safeguard against the excess of conventional finance," he says.

Read the full piece