September 19, 2009

Islamic finance is winning many fans but further evolution is necessary.Islamic investment banking is being described as the darling of the new financial age. At least that has been the overriding theme of much of the industry talk and articles written since the onset of the global crisis.One Asian newspaper recently described Islamic finance as the emerging "blue ocean", which is a reference to the business strategy book written by W. Chan Kim and Renée Mauborgne of INSEAD, an international business school.

The two business gurus promote creating new market space or "blue ocean" rather than competing in an existing industry.Islamic finance certainly fits this description. However, much of what has been written fails to acknowledge that the sector has been hurt by the global financial crisis too - and it would be unrealistic to think otherwise. And moreover, it may turn out that Islamic investment banking will find itself reproducing some of the characteristics which make conventional finance so successful.