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Sukuk playing major role

MANAMA: The Islamic funds and investments industry has become an increasingly important component of the global financial markets.

The global issuance of Islamic instruments, especially sukuk, has played a key role in building cross-border linkages between issuers and international investors and has paved the way for the creation of a supply of Islamic financial instruments, Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) secretary general Dr Khalid Al Fakih told delegates at the opening session of the WIFFMC 2013 yesterday.

"However, it has not led as yet, to the promotion of active and efficient secondary markets and a greater focus is needed in this regard," he said.

"While there is real potential for further growth, there are also challenges that the industry needs to address," he added.

"Equity still dominates the overall allocation in the Islamic finance industry, representing around 39 per cent of the assets under management," said Sedco Capital chief executive Hasan S Aljabri. "The industry needs new asset classes like private equity, infrastructure and liquidity products.

"In 2012, Muslims represented around 25.7pc of the world population and by 2050 this figure is expected to grow to 30pc, representing an ever-growing global market with various financial needs for innovative Sharia-compliant products to meet the demand," he added.

"Investor appetite for Sharia-compliant investment options is pushing the Islamic funds and investments industry into the mainstream and the increasing demand for quality sukuk has played a key role in this," said conference organiser David McLean.

"Recent reports and industry estimates project that sukuk issuance worldwide is set to cross $100 billion again this year.

"Though there has been a significant increase in the demand for Islamic investment alternatives, supply is still lagging behind," he said.

"A key challenge that the Islamic investment and asset management industry is facing at the moment is lack of diversity.

"Moreover, the industry is currently geographically skewed towards the Middle East and Southeast Asia, although this is rapidly changing as more international investors look at Sharia-compliant products," he added.

"The industry's successful future can be significantly enhanced by broadening the base of issuers and investors. "It is quite commendable what the Islamic finance industry has achieved in the last decade with the global Islamic banking assets closing in on the $2 trillion mark," he said. "However, there is a lot more work to do to further support the push of Islamic finance into the mainstream," he added.



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