Singapore and Hong Kong – July 8, 2009 – Leading independent research and advisory firm IDC Financial Insights today announced the release of a new report that examines the performance of the Islamic financial system during this period of global economic crisis. Though numerous shariah scholars and economists initially believed that Islamic finance had fared significantly better in the crisis due to its rigorous risk management practices and its adherence to shariah law, IDC’s Financial Insights Asia/Pacific latest report entitled “Islamic Finance Update – Weathering the Crisis” (Doc #FIN218657, June 2009) finds otherwise. While the Islamic financial system may have been spared the direct impact of the subprime fallout, the indirect impact clearly affected the performance of shariah financial products and services as shown in Figure 1.

Figure 1

Abhishek Kumar, Senior Research Analyst, Asia/Pacific Banking Advisory Service, states, “The true durability test of any financial system is to see how it performs in an economic crisis. The current unstable financial environment provides the perfect opportunity to gauge the effectiveness of Islamic finance as a viable alternate to conventional system. Initial statements by shariah scholars and economists stating that Islamic finance has fared significantly better during this current economic turmoil have been proven to be premature for Asia/Pacific.”

Kumar continues by stressing that despite lower performance, Islamic market indices still performed better than the overall market. In addition, Islamic finance in Asia/Pacific continues to grow at a rapid rate with countries such as Indonesia and Pakistan working diligently to nurture Islamic financial assets and replicate the success seen in countries such as Malaysia.

Kumar concludes, “The Islamic financial system has an extremely bright future but it is on a long road to maturity. Even though Islamic finance is considered an alternative financial system, it still operates within the global economy, and is ultimately bound by the same constraints as its conventional counterpart. It would therefore be unwise to frame Islamic Finance as a completely separate system from conventional finance, as it could alienate and even disillusion potential clients and investors."

For more information on obtaining this report, "Islamic Finance Update – Weathering the Crisis" (Doc #FIN218657), please contact sales@financial-insights.com. To set up an interview with Abhishek Kumar, please contact Lay-Fang Tan at lftan@idc.com.

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IDC Financial Insight is the region’s leading research and advisory firm, helping banks, insurers and financial institutions choose or short-list vendors, assess their IT master plan and devise business and operational best-practices. IDC Financial Insights is one of the only research firm’ with a significant on-ground presence in Asia. Their access to decision-makers from both business and IT divisions enables them to accurately depict and document trends, best-practices and industry benchmarks in the region. IDC is a subsidiary of IDG, the world's leading IT Venture capital, technology media and events company. For more information, visit www.financial-insights.com

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