Increasingly sophisticated Gulf markets to drive demand for Shari'ah-compliant financial advicePress Release 06 Jul 2006 11:24 am
Improved regulation and accounting standards in the Middle East and the introduction of complex financial products will drive demand for Shari'ah-compliant financial advice, according to Yasaar Limited, which today became the first Shari’ah compliance advisory firm to receive approval to operate from the Dubai International Financial Centre (DIFC).
Majid Dawood, CEO of Yasaar Limited, says the increasingly sophisticated nature of regional markets will require more time-intensive consultation from Islamic scholars, whose services are already in short supply.
“As companies in the region grow and become compliant with international accounting standards, increasingly complex funding structures will require greater consultation from Shari’ah scholars. Combined with a growing demand for sophisticated financial products, including exotic credit derivatives and synthetic securities, further pressure will be placed on the already tight supply of scholars”, he said.
The Islamic securitisation market is growing, with Islamic housing finance firm, Tamweel, planning to launch a USD300 million mortgage-backed securities issue later this year. Several other Islamic securitisation deals are in the pipeline for 2006.
Developments in the derivatives market are continuing in-line with growth in conventional markets. Société Générale Asset Management Alternative Investment (SGAM AI) is launching BARAKA, a Sharia'h compliant protected product invested in an actively managed selection of Sharia'h stocks. Work is already being done on developing Shari’ah-compliant CDOs and equity derivatives, while the structure of interest rate swaps are being modified to provide a similar product for Shari’ah investors.
The Jersey Financial Services Commission also this year approved the launch of its first Shari’ah-compliant total returns fund.
Dr Omar Bin Sulaiman, Governor of the DIFC, says the Centre gives financial service providers a platform from which to meet growing global demand for complex Shari’ah-compliant investment and funding structures.
“The Islamic finance market is becoming increasingly sophisticated. We expect to see growth in primary and secondary capital markets in 2006, which will contribute toward the growing Islamic funds and securitisation markets. The DIFC provides firms such as Yasaar Limited with the base from which to access opportunities in the Gulf region and throughout the world”, he said.
Yasaar Limited recently partnered with global index provider FTSE Group to create a Pan-Asian index of the top 100 Shari’ah-compliant stocks. The two companies plan to establish indices for other regions. Yasaar Limited also plans to launch its own training programme to produce qualified financial Shari’ah scholars.
The USD300 billion Islamic banking industry grew at a rate of 15 per cent in 2005. This growth is expected to continue, driven by the increase in wealth in the Gulf region, a growing awareness of Islamic banking products and services and the introduction of sophisticated financial products.
Yasaar Limited was awarded ‘Most Innovative Islamic Product’ in 2004 by Deloitte Consulting Malaysia for its work on structuring the Caravan 1 Sukuk, which used an innovative SPV structure to give international investors access to assets in Saudi Arabia.