Islamic Banks: Real estate exposure may be largest threat (Islamic Finance Special Report 3:4)

Islamic banks have grown apace in recent years, fuelled by petrodollars gushing into the Middle East, but have remained minnows compared with western conventional financial institutions.

But the credit crunch has shaken things up. While few western financial institutions have been spared by the global economic storm and desiccated credit markets, Islamic banks have so far performed relatively well.

Measured by market capitalisation, Saudi Arabia’s Al Rajhi Bank – the world’s largest Islamic bank – has recently been larger than Citigroup, Barclays and Royal Bank of Scotland. Its value was only slightly lower than Morgan Stanley and Deutsche Bank.