Abdul Rahman Al Baker, Executive Director of Financial Institutions Supervision, Central Bank of Bahrain (CBB) during opening remarks at the opening of the two-day the 7th annual World Islamic Funds and Financial Markets Conference (WIFFMC) 2011 told over 300 participants that Islamic asset management has come a long way since the 1970s when it began as a way for Islamic banks to make use of their excess funds.
He said that the global Sukuk market exceeded $190 billion as of the end of last year. Actually, he added, the year 2010 saw a revival in the global sukuk markets mainly due to government incentives which also resulted in a positive effect on the Islamic financial markets. “It is clear that sukuk issuance in 2010 has returned to pre-crisis issuance levels with total global sukuk issuance amounting to just over $45 billion,” he said.
Today, he said, as with other forms of Islamic finance, the industry is an area that has grown to become an increasingly substantial segment within the global financial markets and has gained significant interest as a viable and efficient alternative model of financial intermediation.
According to Al Baker, growing awareness of and demand for investing in accordance with Shariah principles on a global scale have been the catalyst towards making the Islamic financial services industry a flourishing industry.
“This is also a reflection of the increasing wealth and capacity of investors, both Muslim and non-Muslim, to seek and invest in new investment products that serve their needs.
“Islamic financial products represent a class of investment which appeals to those looking for socially responsible or ethical investments, as these products comply with strict Shariah rules that have religious as well as ethical underpinnings.
“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 five years, and the figure is projected to double in the coming five years. Sukuk is another Islamic financial instrument that shows a significant growth globally.
In spite of the recent credit crunch, he said, an increase in commodity prices and widespread global economic slowdown, the prospects for growth in Islamic securities markets are likely to be positive. “Part of this reflects the windfall from higher commodity prices. However, it 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 Europe, especially UK and France, Asia Pacific countries, North Africa and the energy rich Central Asian states. Even jurisdictions where Muslims are a small minority are displaying interest in Islamic investment,” he said.
In Bahrain, he said, the mutual funds industry is one of the fastest growing segments of the overall financial sector. “With around $9 billion in assets under management, through more than 2,800 funds, the industry has been growing at an annual average of about 15% in recent years. Overall, there are 101 Islamic funds incorporated and registered in Bahrain with total assets of $1.6 billion as of June 2011,” he explained.
On its part, the CBB, having pioneered the development of sukuk, remains active in the sovereign sukuk market, with a total of $2.9 billion medium to long term sukuk issued, complemented by a regular program of short term issuance. Furthermore, the CBB has successfully issued a 5 year maturity Islamic Leasing Sukuk in the local market with a value of BD200 million in April 2011.
He hoped that CBB’s such initiatives would go a long way in harmonizing market practices and creating a deep and vibrant Islamic capital market.