FS International Partners SA1 Vulnerabilities of the Islamic Financial Industry and the Global Finance Crisis: Sustainability and Future Directions Fehmy Saddy, PhD FS International Partners SA 4 th Islamic Banking Conference Damascus, Syria June 1-2, 2009

FS International Partners SA2 Presentation Outline This presentation consists of four parts: Part I: Premises of the Islamic Financial System Part II:Islamic Banking in Practice Part III:Impact of the Global Financial Crisis Part IV:Sustainability and Future Directions

FS International Partners SA3 Part I: Premises of the Islamic Financial System 1.Islamic finance as instrument to serve the community 2.Islamic finance as instrument of growth 3.A higher moral ground 4.Ethical imperatives 5.Integrity 6.Asset-based finance 7.Risk aversion 8.Transparency 9.Resilience 10.Expansion of Islamic finance 11.Market breadth 12.The missionary vision 13.Sailing into the sun 14.Pride and prejudice 15.Salvation of the global financial system

FS International Partners SA4 1.The players 2.The legitimizers: Sharia boards 3.The regulators: regulation and standardization 4.The story of innovation 5. Mirror imaging v. adaptation 6.The structure of “structured products” 7.Islamic banking a la carte 8.Form over substance: the great debate 9.The use of legal fictions (Hyals) 10.Murabaha contracts as instruments of monetization 11.Use and misuse of corporate notes (Sukuks) 12.Transparency and risk assessment 13.Concentration of risk: private equity, real estate and corporate notes 14.Exposure: local, regional and international 15.The culture of greed Part Two: Islamic Banking in Practice

FS International Partners SA5 Integration of Islamic Finance in the Western markets: 1.Symbiotic relations: the stakes 2.Leveraging: the debt addiction 3.Western equity markets: gainers and losers 4.The rating game 5.Financing failed enterprises 6.Collapse of real estate markets 7.Sukuks: quality and risk assessment 8.The Islamic wholesale markets 9.Securitization of toxic assets 10.Islamic banking under stress 11.Creative accounting 12.Islamic Russian roulette 13.Dilemma of bank regulators 14.Government bail outs 15.Consolidation Part III: Impact of the Global Financial Crisis

FS International Partners SA6 Part IV: Sustainability and Future Directions 1.Return to basics 2.Foundations of Islamic finance 3.Islamic finance in the service of the community 4.Islamic finance as an instrument for development 5.De-coupling: from dependency to interdependence 6.Asset-based finance v. speculation 7.Long term vs. short term investments 8.Original research vs. packaged research 9.Market focus: MENA, Asia and Latin America 10.Sector focus: financing infrastructures 11.Focus on the real economy: Public Private Partnerships (PPPs) 12.Agriculture, industry, energy, water, education, etc. 13.Oil as a finite resource: search for alternatives 14.Time: a precious commodity 15.The future of future generations