MANAMA: The securitization of mortgages will be the next catalyst of growth for Islamic finance once financial markets have calmed down, an executive said on Monday.
The Islamic finance industry is striving to develop more banking products to venture into new growth areas after its first breakthrough – the establishment of Islamic bonds, or sukuk, a few years ago.
The next catalyst for growth for securitization purposes would be mortgages, all the way down to consumer mortgages, Ahmed Abbas, chief executive of the Bahrain-based Liquidity Management Centre, told the Reuters Islamic Banking and Finance Summit in Bahrain.
Abbas said during the oil boom in the Gulf Arab region, banks were interested in securitizing assets, but lacked the real estate assets to do so.
All the banks or mortgage houses were looking for assets rather than trying to securities, he said.
The complex securitization of mortgages has been one of the triggers of the financial crisis but Abbas said Islamic financial groups would take a conservative approach.
When we re actually talking about Islamic mortgage securitization we are looking at the same concept as in conventional but at level one and stop, he said.
It would involve tangible assets, it would involve real economy … rather then mortgage it once and mortgage it twice and on and on.
Abbas cited car leases as another product class that Islamic banks will increasingly offer as they try to diversify.