Demand grows for Islamic finance

By Laura MacInnis

GENEVA (Reuters) - Shariah-compliant bank accounts and investment tools have become mainstream product offerings for high-end wealth managers who aim to woo clients from the booming Middle East.

Increasing numbers of Middle Eastern clients are asking for Islamic financial products to invest their assets, which have swollen along with the recent oil price spike, in a way that matches their religious beliefs, private banking executives said.

"Most of our clients (in the Middle East) do want Islamic products," said Emilio Saracho, head of J.P. Morgan's European, Middle Eastern and African private banking division.

While shariah products make up a small slice of worldwide investments, successful banking in the Middle East necessitates offering these products, which do not pay interest and generally avoid investments in alcohol, gambling, and other activities barred in the Muslim faith, Saracho said.

"Islamic finance and Islamic banking is not an anecdote; it is something that is pervasive. It is in every discussion and is taken very seriously by an increasing number of people in the region," he told the Reuters Wealth Management Summit in Geneva, a traditional hub for Middle East money.

While the Swiss private banks do not reveal how much money they manage from the region, John Sandwick of Geneva-based Encore Management has estimated that up to $200 billion of Muslim assets may be under management in Geneva.

Faisal Private Bank said on Wednesday it had won Swiss regulatory approval to open shop in Geneva. The bank, which has Bahrain-based Ithmaar Bank ITHMR.BH as its principal shareholder, will be the first in Switzerland fully dedicated to providing Islamic financial products.

A PRETTY BIG NICHE

Christopher Meares, chief executive of HSBC Private Bank UK, Channel Islands and Luxembourg, described Islamic financing as one of the wealth manager's fastest-growing areas and estimated such assets could multiply to $10 billion in coming years.

"The Middle East is somewhere that is a real growth market for us," he told the Geneva summit.

With many existing clients in the energy-exporting region flush with petrodollars and newly rich players emerging as potential customers, winning Middle Eastern business requires catering to Muslim religious needs, Meares said.

"You can't just go in with traditional products," he added.

Barclays Wealth Management Chief Executive Thomas Kalaris said competition was heating up over the development and launch of Islamic financial tools.

Though they remain relatively small in scale, he said it was wrong to classify shariah-compliant products as a secondary or marginal investment category.

"If it is a niche, it is a pretty big niche," he told the Reuters summit, saying he expected demands for Islamic finance to keep growing steadily. "It is an area now where you are seeing really rapid innovation. We need to be good at it."