Islamic banks are less vulnerable than conventional banks to the global financial crisis because they never invested in leveraged products, but the sector is still exposed to risks from tight liquidity, lower oil prices and weakening property prices, according to the latest research from Moody’s Investors Service and Standard & Poor’s.
“Islamic finance is not an island and has suffered from the liquidity drought; however...as an industry, it can now demonstrate a track record of resilience and may even emerge stronger from the crisis,” said Mardig Haladjian, an analyst and co-author of a report on Islamic finance by Moody’s Investors Service.
The main sources of stress for Islamic financial institutions include mounting concerns on the property sector in the GCC, a sharp correction in regional stock markets and certain investments made mainly by Sharia compliant investment banks in European or American companies.
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