25994
Growth Prospects for Islamic Finance After Sanctions
Economy, Business And Markets

Growth Prospects for Islamic Finance After Sanctions

The lifting of international sanctions on Iran will boost the country's economy and fuel the growth of Islamic finance, Standard & Poor's Ratings Services said on Tuesday.
For Iran - one of the largest players in the Islamic finance industry contributing to around 40 % of global Islamic banking assets - the lifting of sanctions could bring about its eventual economic rebound and help boost Islamic finance.
The ratings agency said in a report that if Iran meets all deliverables, sanctions may start to lift in the first half of 2016.
The World Bank estimates this would help Iran's oil exports rebound to pre-2012 sanction levels within eight to 12 months. Sanctions lifting could also restore Iran's access to the global financial markets. Under this scenario, Iran's GDP growth would hover around 6% annually in fiscals 2017 and 2018 according to market estimates, compared with less than 1% in 2015.
We expect that accessing the sukuk market might help Iran raise funding for its projects and be seen by global Islamic investors as a diversification opportunity. The Islamic financial market could also benefit from volume effects as post-sanction investment projects are reportedly high. This could support market growth in the medium term," S&P said.
Mohammad Dammak, Director at the Global Head of Islamic Finance at S&P said in a video interview that sanctions lifting and the resulting investment projects would create growth opportunities for the banking system in Iran.
But he cautioned that the banking system alone won't be able to absorb all the upcoming investment projects knowing that it has already some weaknesses on asset quality and capitalization sides.
"Regulation would be a key success factor; Iran has already started to revise some of its regulatory framework for example for ijarah sukuk, Murabaha sukuk and for the fiscal neutrality of SPVs… but I think that additional work would be needed when it comes to putting together the necessary regulatory framework for other structures that are already accepted in the market today," he said.

Flip Side
"It would also be helpful to clarify whether it would be possible to issue financial instruments in foreign law ----English law for example in Iran."   
The flipside of sanction removals is the possible drop in oil prices. This could intensify pressure on some oil exporting countries that rely heavily on oil revenues, in turn curbing their spending and banking system growth, the report said.
Tehran is aiming to ramp up oil production despite a supply glut that has sent prices down drastically.
Iran, which has the fourth-biggest oil reserves in the world and is pumping about 2.8 million barrels a day, is expected to add between 600,000 and one million barrels to output once sanctions are lifted.
But Iranian authorities are much more bullish and aim for an increase of close to 1.5 million barrels by the end of 2016, taking daily production to 4.2 million.
For banks in the UAE and Lebanon, the opening up of the Iranian economy bodes well with Tehran lining up $100 billion worth of energy deals to kick-start its economy.
Potentially, western, Chinese and Indian banks also will likely be attracted to Iran's diversified economy and significant trade flows, according to a Moody's report last week.
Iran agreed to the joint comprehensive plan of action with the P5+1 (China, France, Russia, the UK and the US plus Germany) in July to limit its nuclear program.  Under the accord, Iran will be freed from economic and financial sanctions.

 

Short URL : https://goo.gl/Z3Jh8Q
  1. https://goo.gl/BEzVnM
  • https://goo.gl/bPuahf
  • https://goo.gl/La6dsW
  • https://goo.gl/IE9551
  • https://goo.gl/sg9IGy

You can also read ...

Facebook, Google Hit by $8.8b in Lawsuits
On the first day of GDPR enforcement, Facebook and Google were...
The rial has lost more than 30% of its value during the three months to April against the dollar.
Majlis Research Center, the parliamentary think tank, has...
There are 359,700 active heavy-duty vehicles in Iran’s cargo truck fleet, of which 125,000 (34%) are over 15 years old and almost 1,500 trucks are five decades old.
A number of truckers across the country have taken industrial...
Tipax and Q-Post agreed to share their resources for the establishment of a courier network between Iran and Qatar to help boost bilateral trade.
A private Iranian courier service firm, Tipax, signed a...
Tehran Housing Market Rebounds
Following a very weak performance during the first month of...
Iran's Foreign Trade Tops $14b (March-May 2018)
Iran’s non-oil foreign trade during the two months of the...
14,000 Complaints Against Businesses in One Month
More than 14,000 public complaints were filed against goods...
The expected decline is due to extreme cold and hot temperatures experienced by pistachio orchards this year.
Close to 200,000 tons of pistachios are estimated to be...

Trending

Googleplus