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Annual Islamic Finance Conference July 3 2013, Mombasa, Kenya

Global Trends In Islamic Finance. Annual Islamic Finance Conference July 3 2013, Mombasa, Kenya. Overview. Shameless Advertisement Trends (7 Dichotomies) Questions Bonus Slides? More Dichotomies Ugly Statistics. Shameless Advertisement. World’s 3 rd largest financial data vendor

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Annual Islamic Finance Conference July 3 2013, Mombasa, Kenya

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  1. Global Trends In Islamic Finance Annual Islamic Finance Conference July 3 2013, Mombasa, Kenya

  2. Overview • Shameless Advertisement • Trends (7 Dichotomies) • Questions • Bonus Slides? • More Dichotomies • Ugly Statistics

  3. Shameless Advertisement • World’s 3rd largest financial data vendor • Founded September 1978 • 1990 released first non-US data • 1996 listed on NYSE • 2009 dual listed on NASDAQ • Great Islamic investment (debt to capital)

  4. FactSet Services • Broker Research • Corporate Activism • Corporate Governance • Economic • Estimates • Events • Financial Entities • Fixed Income • Fundamentals • Global Filings • Market Aggregates • Mergers • Mutual Funds • New Issue • Ownership • People • Private Company • Private Equity • Research • Transcripts • Venture Capital

  5. Recent Recognition • 2011, Inside Market Research names us “Best Research Provider” • 2011, Ranked 60 by Forbes on “America’s Best Small Companies” list • 2009, Received PilotHouse Innovator Award from Nemertes Research • 2009, Ranked 59 by Business Week’s InfoTech’s 100 • 2009, Best Analytics provider, Inside Market Data • 2007, Named to Deloitte Tech Fast 50

  6. Dichotomies -Mutually Exclusive -False Dichotomy -Top 7 – Here they come! Source: Wikipedia

  7. # 1 • Prophet vs Profit • Why do we participate in Islamic Finance? • Why do others participate in Islamic Finance? • Does everyone have the same motivation?

  8. # 2 • Islamic vs Participatory • How should Islamic financial institutions be identified? • Does a rose by any other name smell as sweet? • Islamic? Participatory? Cooperative? House? Ethical? “Bank”?

  9. # 3 • Apple vs Halal Foods • Intra vs Extra-investment? • Halal Foods 560 b per year • Islamic Finance valued at: 1.8 t • Dow Jones Industrial Market Capitalization 4.4 t; Nasdaq 5.5 t; S&P 500 14.9 t • Nairobi Stock Exchange Market Capitalization 1.7 t • Apple Market Capitalization: 372 b; Google 292 b

  10. # 4 • Inter vs IntraBenchmarking • LIBOR? vs IIBR? • IIBR must always be higher than LIBOR?

  11. # 5 • Growth vs Profit • Growth rates of 15% per annum for years • ROE was 12% in Islamic Banking vs 15% in Conventional • Islamic Bank Challenges • Subscale Operations • Asset Quality • Negative Operating Income • Weak Risk Culture Source: E&Y Competitiveness Report

  12. # 6 • SEA vs Gulf • Who will influence global Islamic markets the most? • Who speaks for Islamic Finance? • Who sets the standards? • Who will train the next generation of scholars? • Who will Africa follow? Or will Africa forge its own identity?

  13. # 7 • Data vs Relationship • How are decisions made in Islamic Finance? • How are decisions made in places where Islamic Finance is practiced?

  14. Break Questions? Joe Nehila Content Development jnehila@factset.com *Were they true or false dichotomies?

  15. Bonus - Dichotomies • Windows vs Fully Fledged Banks • Core vs Varied Offerings • Niche vs Alternative • Retail Banking vs Investment • Lower Class vs High Net Worth • SME vs Micro

  16. Bonus – Dichotomies 2 • Informal vs Formal Systems • Not just informal economy, Cooperatives, Credit Unions, SME Banks, Microfinance Banks, etc. • Mitigation vs Contract Law • Centralized vs Disbursed Authority • Top Down or Bottom Up

  17. Bonus - Stats • 2010 new equity = $387 b • Most from Emerging Market (60%) • Global Stocks $212 t (2010) • $96 t foreign investments Source – McKinsey, Aug 2011 Mapping Global Capital Markets

  18. Bonus - Stats • Africa on the Map? • “Rest of World” • Egypt Only • GIFR • Kenya 22 (down from 17) • UK 12; US 15 • Sudan 9; Egypt 14; SA 21; Algeria 27, Tunisia 28; Nigeria 32, Senegal 36; Gambia 42, Mauritius 43 Source – GIFR 2013; E&Y Competitiveness Report

  19. Bonus - Stats • Banking • Bahrain, $47b vs $13b (27%) • Egypt, $215b vs $8b (3.8%) • Malaysia $579b vs $106b (19%) • Indonesia 4% • Kuwait 33% • Pakistan 6% • Saudi Arabia 49% • Turkey 5% • UAE 17% Source –E&Y Competitiveness Report

  20. Bonus – Math Problem • Problem • $212 t total finance value • $2 t Islamic value • $210 t conventional value • .9% value Islamic to Conventional • CAGR Islamic 20% • CAGR conventional 1.5% How long will it take to: 5% 7.5% 10% 20% 50% Source –E&Y Competitiveness Report; GIFR, McKinsey Capital Markets, Friendliness

  21. Bonus – Math Solution • Solution 5% 10 Years 7.5% 13 Years 10% 15 Years 20% 19 Years 50% 24 Years Realistic (2.75% Conventional, 15% Islamic Growth) 5% 15 Years 7.5% 19 Years 10% 21 Years 20% 28 Years 50% 36 Years

  22. Bonus – Math Prediction • Prediction -1.6 billion Muslims, 23% of world population -Varying levels of adherence -Attractive to non-Muslims -Growth Rates: Islamic 15% 7 years, 10% 10 years, 7% 15 years, 5% thereafter Conventional: 2.5% 2 years, 3% 3 years, 5% 4 years, 3.5% thereafter 5% 34 Years (World Takes Notice) 7.5% 62 Years (Significant Waypoint) 10% 83 Years (Important Achievement) 12.5% 98 Years (Target) 15 % 110 Years (Realistic Objective) 20% 130 Years (Stretch) 50% 194 Yeras (*Unlikely unless rebranded as an alternative and ethical)

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