The Political Economy of Islamic Banking and Finance in the Gulf Cooperation Council Countries

Exploring Connexion between Sovereign Wealth Funds and Islamic Finance in the Gulf Countries

“…In terms of national development, a study by Invesco (2012) notes a substantial shift in the investment strategy of GCC SWFs towards domestic markets in post-Arab spring. A few years later, Mishrif (2015) underscored the engagement of GCC SWFs in public investment in infrastructure, healthcare and education; these investments increased in terms of assets from 33 per cent to 56 per cent and in investment in local bonds from 6 per cent to 14 per cent in the GCC countries.…”

“…As for Islamic finance, the accumulation of wealth from oil revenues has also helped in creating a large number of Islamic banks, including Dubai Islamic Bank (1975), Islamic Development Bank (1975 Mishrif (2015) argues that the institutionalisation of Islamic finance through wide-ranging policies on legislation and regulations has facilitated the growth and development of the Islamic finance industry. This led to substantial growth in sukuk and takaful, although Islamic banks still lag behind in personal banking in some GCC countries (Wilson, 2009).…”

“…By 2017, the member states of the Gulf Cooperation Council (GCC) -Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and United Arab Emirates (UAE) -have accumulated assets and capital worth around US$2.99 trillion, accounting for 40 per cent of total global assets managed by SWFs worldwide (SWFI, 2017). Meanwhile, analysis of Islamic financial data underlines the correlation between the rise in oil prices and the growth of Islamic finance in the GCC region (Mishrif, 2015). According to the World Islamic Banking Competitiveness Report 2016, GCC countries have played a prominent role in the development of Islamic finance, with these countries collectively accounting for over 47 per cent of global Shariah-compliant financial assets in 2014.…”