From the late 1990s, the Islamic Finance market grew substantially in many parts of the USA, paralleling the rise of Muslims: being 50% in the 1990s and equaling to 66% in the 2000s. Nowadays, 25 Islamic financial institutions operate in the US area. According to asset size, the top two Islamic Finance institutions are the followings:
- LARIBA American Islamic Finance House,
- University Bank (through its subsidiary University Islamic Financial)
JP Morgan is one of the first companies which offer its services in the Islamic banking sector in 2013. Standard Chartered Bank through its Islamic banking division, Saadiq, also started to offer Islamic banking products worldwide, such as Asia, Europe, the Middle East, and the USA. Though there are significant changes in the development of Islamic Finance, there are no US laws that are specifically related to Islamic Banking in the USA. Unlike the United Kingdom which has a variety of Islamic financial services, the US market is relatively smaller.
Recent Rise Of Islamic Finance In The USA
The interest and involvement of US-based entities in Islamic ﬁnance have grown continuously over the past 30 years. So far, the companies have launched seven Islamic funds with total assets under management of USD 3.6 billion. It represents 7.9% of all Islamic funds managed around the globe. There are about 15 ﬁnancial institutions that operate on a “interest-free” basis. They offer a wide range of Shari’ah-compliant products and services, including home ﬁnancing, personal ﬁnancing, and investment services. Furthermore, ﬁve different issuers have tapped the Sukuk market in various jurisdictions, issuing Sukuk worth USD 1.1 billion, of which USD 500 million by GE Capital.
Islamic ﬁnance has grown differently in the US than in other parts of the world. US market is primarily driven by domestic demand. Home ﬁnancing products account for most of this demand with around 10,000 Shari’ah-compliant home purchases having been concluded over the past decade. To date, in the US, Islamic ﬁnancial institutions have avoided deposit-taking operations due to the regulatory hurdles involved. The relevant regulation on banking is currently similar for all banks wanting to operate in the US. Hence, many Islamic institutions have opted to work as leasing companies or mortgage brokers, as these are subject to far fewer restrictions. In conclusion, the US Islamic ﬁnance industry remains a niche segment in the wider American ﬁnancial sector.
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