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Key Islamic securities market set for growth

MANAMA: The prospects for growth in Islamic securities markets are likely to be positive in spite of the credit crunch, an increase in commodity prices and the widespread global economic slowdown.

That was the message to the opening session of the Sixth World Conference of the Islamic capital markets and investment funds at the Gulf Hotel from Central Bank of Bahrain (CBB) executive director of financial institutions supervision Abdul Rahman Al Baker yesterday.

"Islamic financial products represent a class of investment which may appeal to those looking for socially responsible or ethical investments, as these products comply with strict Sharia rules that have religious as well as ethical underpinnings," he said.

"It is estimated that investors globally hold more than $1.5 trillion in Sharia-compliant investments. These include equities that are in line with Islamic principles, sukuk and Islamic funds.

"Currently, there are more than 500 funds globally that comply with Islamic principles, of which one-third of these funds were launched during the past four years, and the figure is projected to double in the coming five years.

"Sukuk is another Islamic financial instrument that shows a significant growth during the past five years. It was estimated that the global sukuk market exceed $100 billion as of the end of 2009," he added.

He said the prospects for growth in the Islamic securities market can also be attributed to the rapid expansion and increasing sophistication of the GCC financial markets themselves.

"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," he said.

"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.

"Overall, there are 100 Islamic funds incorporated and registered in Bahrain with total assets of $1.8bn as of the end of 2009.

"The CBB, through its enabling legislation, promotes the development of new products for investors in both Islamic and traditional finance, while at the same time providing credible regulation in both areas.

"This regulation extends to products offered through special purpose vehicles and trusts.

"Basically, addressing all types of investors and investment instruments will guarantee the widespread of Islamic investment not only in the region, but also globally," he added.

"It is important to further enhance the innovations of new Islamic instruments and encourage more spending in research and developments, in order to widen the contribution of the Islamic investment in the global financial market.

"But there is a need for the Islamic financial institutions to develop strategic alliances with other financial institutions globally, especially in the products structuring and offering, as the formation of such alliances will help to achieve economies of scale and improve the services across the Islamic investment industry," he added. business@gdn.com.bh



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