Popularity Of Islamic Finance Market On The Rise

Although Western and Asian firms are heading to the Middle East to raise cash, the region’s own investors are getting funding from overseas – a move that has speeded the globalization and popularity of the Islamic finance market, a recent Wall Street Journal article reports (closed access). The UK-based Islamic Finance Information Service says that $16.9 billion in bonds were issued in the first 10 months of 2006 – 43 percent more than all Islamic bonds issued in 2005. Also expected to boost the market is the new Islamic International Ratings Agency, which will soon finalize its first four ratings.

Islamic bonds, or sukuk, replace coupons with payouts backed by tangible assets. The first Islamic bond was sold by Shell Malaysia in 1990. Since then, the demand for sukuk have skyrocketed.

Not surprisingly, the jump in popularity of sukuks has drawn the interest of institutions outside the Middle East.Two years ago, the German state of Saxony Anhalt sold the first sukuk from the West. IFC is the first supranational to issue Islamic securities in the Malaysian market, and the first supranational to issue domestic Islamic bonds in any market. To find out more, click here