Abstract:
Recent surge in oil prices and production levels has created record levels of liquidity in the oil producing countries particularly in the GCC region. According to Standard and Poor estimates the investment-ready Arab capital now exceeds $2.3 trillion. Boston Consulting Group has also conducted a study of the accumulated wealth of the Middle Eastern investment entities and individual ruling families. Their estimate is that these entities are sitting on a combined asset pool of $10.2 trillion. Most of this wealth remains under the management of private banking departments of major western banks such as UBS, Cititgroup, Barclays, HSBC, and others. Even though several mega projects are being planned in the GCC countries, there simply are not enough viable projects for absorbing these surplus funds and channel them into productive private investment. Moderately industrialize Muslim countries such as Malaysia and Egypt offer the best potential for absorbing these surplus funds into profitable long-term investments. The historic opportunity exists for Islamic finance to tap this phenomenal liquidity and channel it into productive infrastructure and viable economic projects. This study provides an insight into various modules of Islamic economics and capital markets, which could be the most viable channel for such enormous fund, and could serve as a model for the analogous goal of islamization of financial and banking systems.
