GloboTrends columnist Bio: Brian Butler is a specialist in “global-macro” economic analysis.
As a global-macro analyst, Brian founded “GloboTrends“, an online site for macro-economic trend analysis, with a focus on providing this analysis to global investors. The highly popular “GloboTrends blog” is prominently displayed on Thunderbird’s MBA website , and has been featured as syndicated content on Nouriel Roubini’s RGE Monitor, Emerginvest.com, Business Week Exchange, Wikinvest.com, and other reputable news outlets. In the Gulf States (GCC) (wikipedia) have been very active recently in setting up sovereign wealth funds (SWF’s). One interesting thing to note is that in many of these countries, there is also a tradition of Islamic banking, where there are religious rules limiting banks ability to charge or earn interest. But, with this heritage of Islamic banking, I find strange is that amid the recent credit crisis of 2007-08, we saw many of these SWFs come to the US and purchase large equity positions in Western Banking institutions such as CITI Bank. Is this a conflict of interest with their Islamic banking cultural heritage? If the banks are doing it just for the additional potential return on investment, then you might argue “yes”. I’m not an expert on Islamic banking by any stretch of the imagination, but, to me these investments seem to be more “strategic” in their nature (i.e. interest is not the primary goal). Perhaps in light of this realization, the western regulators may be right in worry about the intentions of these (less-than-transparent) massive funds in control of the Gulf States.
On the other hand;
For Africa: project finance and bonds financed by Islamic finance from the Gulf States may be just what the doctor ordered. This matches up Africas desperate need for infrastructure investment, and their desperate lack of funds. Mix this with the fact that Islamic finance has rules about the requirement to back up loans with physical assets, this might be a perfect match (and a good outlet for excess Gulf investments and sovereign wealth funds). Examples: invest in tourism, hotels, roads, airports, etc. See more in our discussion on Islamic finance
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