MANAMA: The prospects for growth in Islamic securities markets are positive despite global credit crunch and economic slowdown.
"Part of this reflects the windfall from higher commodity prices," Central Bank of Bahrain director of financial institutions supervision Abdul Rahman Al Baker told delegates at the opening session of the two-day fifth Annual World Islamic Funds and Capital markets conference at the Gulf Hotel.
"It can also be attributed to the rapid expansion and increasing sophistication of the GCC financial markets themselves," he said
"The geographical spread of Islamic securities products and activities is likely to grow in the UK, Indonesia, Hong Kong, Singapore, France, North Africa and the energy-rich Central Asian states.
"Even jurisdictions where Muslims are a small minority are displaying interest in Islamic investment.
"In Bahrain, the mutual funds industry is one of the fastest growing segments of the overall financial sector.
"With over $11 billion in assets under management, through more than 2,600 funds, the industry has been growing at an annual average of about 20 per cent in recent years.
"Overall, there are 98 Islamic funds incorporated and registered in Bahrain with total assets of $1.8bn as of the end of 2008."
"The CBB, having pioneered the development of sukuk, remains active in the sovereign sukuk market, with a total of $1.69bn medium to long term sukuk issued, complemented by a regular programme of short term issuance," he continued.
"The CBB will issue its third international sukuk soon, which will be listed on the London Stock Exchange.
"It is the CBB's hope that such initiatives will go a long way in harmonising market practices and creating a deep and vibrant Islamic capital market.
"Generally, the potential size of the Islamic finance market is vast, and the accelerated establishment of Islamic finance hinges on attracting the flow of these potential funds into Islamic investment," he added.
"However, it is important to ensure that Islamic investment industry has a solid foundation for future development and growth.
"In order to further strengthen the Islamic investment industry and enhance its growth, there are several factors that need to be taken into consideration.
"First, it is important to create adequate straightforward regulation for Islamic investment instruments which industry players can use to grow their activities," he said.
"Such regulation should create the necessary framework for investment instruments targeting small investors, medium size investors, as well as professional or high net-worth individuals, who would like to invest their funds in accordance with Sharia principles.
"This regulatory framework should also cater for wide range of Sharia-compliant investment products that include equity, sukuk, various types of Islamic funds with moderate risks, as well as high risk funds, Islamic real estate investment trusts and other alternative investments," he said.
"Basically, addressing all types of investors and investment products will guarantee the wide spread of Islamic investment not only in the region, but also internationally," he added.