Islamic financial products represent a class of investment which appeals to those looking for socially responsible or ethical investments and are a fast-growing asset class globally, according to a top Central Bank of Bahrain (CBB) official.
It is estimated that investors globally hold more than $1.5 trillion in Sharia-compliant assets and currently there are more than 500 funds globally that comply with Islamic principles, said CBB executive director of financial institutions supervision Abdul Rahman Al Baker said at the opening session of the World Islamic Funds and Financial Markets Conference (WIFFMC2012) at the Gulf Hotel yesterday.
‘One-third of these funds were launched during the past seven years, while sukuk is another Islamic financial instrument that shows a significant growth during the past five years,’ he stated.
‘It was estimated that the global sukuk market exceed $200 billion by the end of the first quarter of this year. Actually, the year 2012 saw a revival in the global sukuk markets due mainly to gradual recovery of global economy and investors’ sentiment which drives the demand for sukuk,’ he noted.
‘It is clear that sukuk issuance in the first quarter of 2012 exceeded all expectations reaching a record $43bn globally. This is almost double the average amount of sukuk issued in any given quarter in the past year, and represents half the total amounts of sukuk issued throughout 2011,’ remarked Al Baker.
‘In spite of the recent credit crunch and widespread global economic slowdown, the prospects for growth in Islamic securities markets are likely to be positive,’ he said.
‘This positive trend can be attributed to the rapid expansion and increasing sophistication of the GCC financial markets, as well as the geographical spread of Islamic securities products and services that record remarkable growth in Europe, Asia Pacific countries, North Africa and the energy rich Central Asian states,’ the official said.
‘In Bahrain, the mutual funds industry is one of the fastest growing segments of the overall financial sector. With around $9bn in assets under management, through more than 2,700 funds, the industry has been growing at an annual average of about 15 per cent in recent years. Overall, there are 100 Islamic funds incorporated and registered in Bahrain with total assets of $1.7 billion as of March.’
‘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,’ he noted.
‘The CBB, having pioneered the development of sukuk, remains active in the sovereign sukuk market, with a total of $1.2 billion medium to long-term sukuk issued, complemented by a regular programme of short term issuance,’ he said.
‘Furthermore, the CBB had successfully issued a five-year maturity Islamic Leasing Sukuk in the local market with a value of BD200 million. 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,’ he added.