Islamic Banking Raises Interest

By Martin, Josh | Management Review, November 1997 | Go to article overview

Islamic Banking Raises Interest

Martin, Josh, Management Review

The growth of Islamic banking is a reflection of the demand for ethically acceptable financial mechanisms, but they're still prohibited in the United States.

Imagine being able to borrow money without paying interest and have your banker assume half the risk. Impossible? No, it is a commonplace transaction in the rapidly growing world of Islamic banking.

U.S. companies doing business globally, particularly in countries with large Muslim populations, are turning to Islamic finance as an alternative source of funding for everything from trade finance to equipment leasing. Although Islamic banks do not operate yet in the United States, due to restrictive banking legislation here, the number of U.S.-based Islamic financial-service providers is growing - from home finance companies and asset managers to leasing companies.

Their customer base is increasing as well, ranging from individuals setting up college funds to corporate giants using sophisticated lease/purchase and project finance packages both at home and abroad.

Multinationals such as General Motors, IBM and Xerox have raised money through a U.S.-based Islamic leasing fund set up by the United Bank of Kuwait, while international oil giants Enron and Shell have used Islamic banks to finance their activities in the Arabian Gulf and Malaysia. "We've utilized Islamic financing techniques for U.S. real estate developers and corporations," says Sam Byrne, principal of Boston Capital Institutional Advisors, which provides Islamic real estate finance and manages Islamic funds for Arab investors. "As long as they can be educated about the Islamic product, there's no problem."

Boston Capital, which expects to arrange $200 million in real estate financing this year, is one of many U.S. financial companies that now offer Islamic banking products or services. Others include Citibank, Goldman Sachs and Kleinwort Benson (see "Key Players to Know," page 28).

Phenomenal Growth

Islamic banks have fast emerged as a major pool of international development and investment capital, with assets exceeding $160 billion. That's a dramatic growth rate considering there were fewer than 10 Islamic banks back in 1975, with combined assets of barely $1 billion. Today, there are several hundred institutions operating in more then 40 countries in Africa, Asia and Europe.

Their funds are growing, too, at annual rates of more than 15 percent. This growth reflects the demand from Western corporations operating globally, and from Islamic countries looking for ethically acceptable financial mechanisms. In some instances, there is little choice in the matter. Both Malaysia and Pakistan insist that part or all of any project carried out in their country be financed through Islamic banks, while Iran, Pakistan and Sudan now have entirely Islamic banking systems.

But business is increasing in the West also, particularly the United States, where many nonbank Islamic financial-service providers are opening up shop. "Islamic finance is occurring now, left and right" says Soliman Biheiri, president of BMI Leasing Inc., an Islamic leasing company based in Secaucus, N.J. "Investment banking comes close to Islamic banking here in the United States." In both cases, the banker and the client share the risk of a particular project. Although investment banks, unlike their Islamic cousins, charge interest, both have consulting and other user fees for various services they offer.

Islamic financial companies can draw on two significant client bases in the United States. First, there are the 8 million to 10 million resident Muslims, who are increasingly seeking Islamic financial tools. Second are the consumers and businesses seeking alternate sources of finance for everything from car loans to real estate development.

Elsewhere, Islamic banking is beginning to operate in local communities around the country. The Muslim Community Credit Union of Philadelphia, the first of its kind in the United States, was created in 1996 for the local 30,000-member Islamic community and is expected to serve as a model for other credit unions around the country. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

Islamic Banking Raises Interest


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.