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Islamic Project Finance in the Gulf States

Justin Dargin, Harvard University, Cambridge, Mass. wrote in Oil & Gas Financial Journal about the Islamization of project finance in the Gulf states saying that although Islamic financial instruments currently make up a small proportion of global finance, they actually experienced an annual 15% growth from 2005 to 2008, with the energy-producing Gulf nations in the Middle East responsible for much of the increase.

Islamic finance now reached the heavy industry of oil and gas, petrochemicals and manufacturing, with SABIC officially promoting it. However, regional Islamic banks are not widely involved in this business, only Al Rajhi and Bank AlJazira so far.

The conducted transactions may evidence a flight from the endlessly leveraged financial products that brought about the economic crisis to what is actually a more orthodox set of asset-backed and asset-based products, integral to Islamic finance. The author shows in the original article a substantial number of cases and details.

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