By Jenny Lunn
The Islamic financial services (IFS) sector is booming. Worth an estimated US$639 billion in 2008, the sector has proved to be remarkably resilient in the recent global financial crisis. One of the most interesting aspects of the growth of IFS over recent years has been its widespread expansion beyond the Gulf countries. This is occurring in two main ways: first through the opening of banks (either the formation of new Islamic banks outside the Gulf, such as the Islamic Bank of Britain, or the establishment of foreign branches of Gulf banks); second, through product differentiation within existing conventional banks, such as HSBC’s subsidiary HSBC Amanah, which is headquartered in London and offers Islamic products.
The paper by Bassens, Derudder and Witlox in Area (March 2010) examines the Islamic financial services sector from a geographical perspective. They apply the ‘interlocking world city network’ model developed by Taylor (2001, 2004) to examine the worldwide distribution of IFS. This model measures connectivity and flows between cities and identifies primary and secondary hubs of activity. Bassens et al analysed the location strategies of 28 leading IFS firms in 64 cities and found that the ‘Mecca’ of global Islamic finance is Manama in Bahrain. Tehran and London were ranked second and third in terms of overall connectivity, followed by Dubai, Amman and Beirut.
Perhaps a different proxy for measuring connectivity and global significance in terms of Islamic finance would be the hosting of major summits and conferences. There are a range of events this year, for example in February Euromoney held its Ninth Annual Islamic Finance Summit in London; at the beginning of May the Islamic Financial Services Board (IFSB) is holding the Seventh Annual Summit in Manama; May also sees the 6th World Islamic Economic Forum in Kuala Lumpur, Malaysia, which expects 2,000 participants and the attendance of various Heads of State; whilst the 2nd Annual Islamic Finance Paris Summit is scheduled for September. These are just a very small selection of major events being held this year but mapping the location and frequency of events could be an alternative way of examining the hubs and networks of Islamic finance.