Banque Nationale de Paris (BNP) is the latest in the line of international banks to establish an Islamic investment department. The division has been set up by BNP Bahrain, the offshore banking unit. ‘We have been an active participant in Islamic financial markets since 1985 and by establishing a dedicated department we can build on our experience,’ says Glyn Davies, who is the head of the new unit.
He says the success of the Shield Fund, launched last November in conjunction with Faysal Islamic Bank of Bahrain, has demonstrated the strong appetite for Islamicequity funds and BNP Bahrain will be launching similar vehicles in the future (MEED 14:1:00).
‘We are also looking closely at ways of harnessing BNP’s massive leasing contracts to create an Islamic short-term instrument,’says Davies. ‘We aim to set up the fund in conjunction with local Islamic banking partners.’ He says the aim of the fund is to allow asecondary market in the instruments to develop, generating the equivalent to an Islamic interbank market. ‘We already have nearly $2,000 million worth of assets under Islamic management and we would expect maybe 90 per cent of these to be placed in such a fund.’
The new unit will also concentrate on expanding its trade finance operation and widening its Murabaha activities. ‘We already have the third largest presence in this market,’ says Davies.
The decision to establish the Islamic unit demonstrates BNP Bahrain’s commitment to develop Islamic financial products, says Davies. But it comes at a time when at least one other major international bank is rethinking the future of its Islamic banking operation and is considering leaving the market. ‘We have been active for more than 15 years and have good relations with the major Islamic banks in the region, and also have strong contacts with high net worth individuals,’ says Davies. ‘We don’t want to take business away from the Islamic banks, but we want to work with them to develop the market.’