GFH woes ‘not sign of weakness in Islamic finance’

A leading Islamic finance expert has denied that the troubles afflicting Gulf Finance House (GFH) are indicative of a wider systemic risk within the Sharia-compliant industry.

Dr Hitam Tahir, the head of consulting giant Deloitte’s new Islamic Finance Knowledge Centre (IFKC) in Bahrain, told Arabian Business on Monday that there was no sign of underlying weakness.

“We still believe that Islamic finance will remain positive and reflect growth in the challenging environment,” Tahir explained.

“The difficulties that some institutions have faced are not common phenomena, if you like – and they are not a sign of any systematic trend or weaknesses in Islamic finance per se.”

GFH has been hit with three rapid ratings downgrades by Standard & Poor’s (S&P) due to a liquidity position that the agency described as being “under immediate and severe stress”. The Islamic investment outfit nevertheless successfully restructured a $300m loan earlier this month.

Tahir added that Deloitte had opted to base its centre in Bahrain due to the country’s robust regulatory system and central geographical location.

The IFKC is designed to help Deloitte’s clients tap into the Islamic finance field by providing experts who will support the firm’s Middle Eastern audit, tax, consulting, risk and financial advisory employees.

“We believe that the sector will continue to have difficulties, but it will remain positive, vibrant and we’re very optimistic for the growth in 2010 and beyond,” Tahir stated.