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Jul 06 2010

Shariah loans plummet along with home prices

Shariah-compliant loans slumped to a five-year low in Europe, the Middle East and Africa in the first half on credit-ratings downgrades and falling property prices.

Islamic syndicated loans declined 40 per cent to $2.2 billion, compared with a five per cent drop in total lending to $304 billion, according to data compiled by Bloomberg.

"Banks have plenty of liquidity but they have been very selective when it comes to where they would like to deploy it," said Faisal Hijazi, the business development manager of rating services and Islamic finance in Dubai at Moody's Investors Service.

"Real estate and investment companies seem to be the most seriously chall-enged when it comes to refinancing."

Middle East property developers have been forced to renegotiate debts after the global recession, prompting ratings agencies to downgrade credit rankings and making borrowing more expensive.

The last time banks made fewer Islamic loans was in 2005, when the total was $75 million.

© 7Days 2010


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