Islamic banking - too Islamic for some?

By Mohammed Abbas

MANAMA (Reuters) - Islamic finance has surged as more of the world's 1.3 billion Muslims demand services that comply with their beliefs, but the religious link may also be a barrier to growth in non-Muslim and even secular-leaning Islamic states.

The industry not only faces barriers in the West, but even in some Muslim states which may have an interest in appearing more secular.

"One barrier of entry is the link with Islam. Islam in the West has a negative connotation. That is the feeling within the retail market that we are targeting," Ashraf Bseisu, a general manager at Islamic insurer Solidarity, told the Reuters Islamic Banking and Finance Summit.

Islamic law, or sharia, bans charging interest and prohibits investment in sectors such as alcohol and gambling. Solidarity said this could attract non-Muslims looking for ethical financial services, a market it aims to tap in the West.

From Islamic banking's origins in the Gulf and Malaysia, there are now over 300 Islamic financial institutions spread among 75 countries, up from almost nothing 30 years ago, Kuwait's Global Investment House said in a January report.

But even in some Islamic states the sector faces hurdles.

In Egypt, Islamic bankers say the government, which is facing a political challenge from the Islamist group Muslim Brotherhood, has not been as keen to promote the industry as Gulf countries, or even Britain.

Mainly Muslim Turkey is secular and is aiming to join the European Union. Tens of thousands of Turks rallied on Saturday in protest at a plan to lift a ban on women students wearing the Muslim headscarf at university.  Continued...