A new challenge to the World Bank? A 'BRICS' bank is launched in Shanghai, while in another sign of the world's changing financial architecture, the euro zone's first Islamic bank opens in Frankfurt. Ciara Lee reports.
Kuveyt - the euro zone's first Islamic bank. The Turkish based lender is opening in Germany's financial capital Frankfurt, and is hoping to tap into Europe's second largest Muslim community. Islamic finance has been slow to gain a foothold in the region, partly due to a lack of regulations. IHS Global Insight's Jan Randolph. (SOUNDBITE) (English) JAN RANDOLPH, DIRECTOR OF SOVEREIGN RISK AT IHS GLOBAL INSIGHT, SAYING "Some countries have suitable laws for dealing with Islamic finance. But when things go wrong, sometimes the regulation is not there. Some countries are better at handling that than others so it's partly a regulatory issue, particularly when things go wrong. Just like in the West we've built up an architecture of legal issues to deal with bankruptcy for example. A lot of countries don't have that equivalent for Islamic finance." Also celebrating - officials from the world's largest emerging nations opening the New Development Bank in Shanghai. Known as the BRICS bank, the lender will fund infrastructure and development projects in Brazil, Russia, India, China and South Africa. The launch comes just a month after the China-led Asia Infrastructure Development Bank. The rise of alternative lenders is seen by some as competition for institutions like the World Bank. New Development Bank President Kundapur Vaman Kamath says that's not the case. (SOUNDBITE) (English) NEW DEVELOPMENT BANK PRESIDENT KUNDAPUR VAMAN KAMATH SAYING: "Our objective is not to challenge any of the existing system as it is but to improve and complement the system in our own way." But Randolph sees diversity as a positive move. (SOUNDBITE) (English) JAN RANDOLPH, DIRECTOR OF SOVEREIGN RISK AT IHS GLOBAL INSIGHT, SAYING "What we're seeing now is the emergence of Chinese influence essentially. And if these development banks do lead substantially to move investment, infrastructure for example, poverty reduction, boosting trade. That can only be a good thing really." For the BRICS Bank, it's not been a smooth ride. Disagreements over its funding, management and headquarters had slowed its launch. But the focus is now on its future. The bank will have an initial capital of 50 billion dollars to be equally funded by the five members.