Over the past years, there has been a real rise of Islamic financial institutions in the United States, whether we’re talking about small community banks based in Midwest or nationwide banks, as well as brokerage companies.
As a matter of fact, their influence started to grow ever since the early 2000s, but back in 2016, the Islamic banks in the US had a capital close to $3 trillion, which is definitely an impressive number.
What’s interesting about such institutions is that they are different from ‘traditional’ banking systems, as they forbid usury and speculation. In fact, all of them must operate in accordance with the Islamic Principles and, therefore, be compliant with Shariah, the legal code of the Islamic religion, based on the Koran.
In short, the Islamic banks in the US are prohibited from taking interests on loans, as well as funding any business that produces or sells products like alcoholic drinks, pork or is operates gambling. Also, such banks are more risk adverse when it comes to their investment practices, as they usually avoid businesses that can be associated with an economic bubble.
Otherwise, with a few exceptions, these institutions offer a complete range of services, starting with mortgages and traditional loans, and ending with investment banking products, as well as equity funds and Islamic bonds.
One of the reasons behind this growth is definitely the constant rise of the economy in some Muslim countries that have benefited from the increasing oil prices over the years. Still, the overall share of Islamic banks – worldwide, not just in the United States – remains somewhere around 5 per cent.
Banks from Iran and Saudi Arabia are dominating the sector in the United States, where the number of financial institutions revolves around 25. As for the more important names, we should mention The American Islamic Finance House, University Islamic Financial, a subsidiary of University Bank, as well as the Harvard Islamic Finance Program. US-based JP Morgan also started offering Islamic banking services six years ago.
Islamic investment banks are also present in the United States, through institutions like Standard Chartered Bank, LARIBA Bank of Whittier, Saturna Capital, founded back in 1989, as well as Saudi Al Rajhi Bank.
This sector will surely continue to grow in the United States of America, as a lot of investors are currently tempted by Shariah-compliant financing and more and more Islamic banks will appear.