Prospects Bright For Islamic Capital Markets

Manama:  Prospects for international Islamic capital markets remain bright, according to the Chief Economist of the Economic Development Board, Dr. Jarmo Kotilaine.

Dr. Kotilaine discussed the prospects for the future of Islamic capital markets during a speech held at the World Islamic Funds and Capital Markets Conference in Bahrain. This year’s event marks the conference’s 10th anniversary and comes at a time of growing global interest in Islamic capital markets – including last year’s announcement from the UK government that it intends to issue a sovereign sukuk.

The speech assessed the global and regional economic outlook and the potential for a new wave of growth opportunities for Islamic investments.

Dr. Jarmo Kotilaine, Chief Economist of the EDB said: “Islamic finance is experiencing strong levels of growth worldwide, both as the industry itself matures, and as demand for financial services grows in markets with Muslim populations that are also experiencing rapid growth.

“Whether it is in bank credit, capital markets, or IPOs, regional economies are showing positive signs. Given the underlying growth fundamentals they possess, with young, fast-expanding populations and increasing demand for financial services, the prospects for the industry are strong.

“Growth in Bahrain estimated to be driven by a strong pick-up in the non-oil sector, thanks in large part to the initiation of a number of major infrastructure projects this year. With non-oil growth likely to exceed 4% this year, the finance sector, and the Islamic Finance industry within it, should see significant new growth opportunities, as investors look for means of funding projects”.

In 2001, Bahrain became the first country in the world to develop and implement regulations specific to the Islamic banking industry and presently, there are 24 Islamic banks in Bahrain, whose assets under management total $23.1 billion as of October 2013, up from $16.4 billion from June 2008, and 8 Islamic insurance companies (takaful and retakaful) operating in the Kingdom.

Bahrain is also host to a number of organisations dedicated to advancing Islamic finance policy and regulation, such as the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the International Islamic Financial Market (IIFM), the General Council for Islamic Banks and Financial Institutions, the Islamic International Rating Agency (IIRA), the Thomson Reuters Global Islamic Finance Hub and Deloitte’s Islamic Finance Knowledge Center. Bahrain also holds many conferences on the Islamic Finance industry, and most recently played host to the World Islamic Banking Conference (WIBC), marking the event’s 20th anniversary. It is through the presence of organizations and conference such as these, that Bahrain has been able to become one the region’s knowledge hubs for the industry.

In 2001, the Central Bank’s predecessor, the Bahrain Monetary Agency, became the first central bank in the world to develop and issue sukuk and Bahrain has continued to play a leading role in the introduction of these products through regular short-term issuance, which are regularly oversubscribed. In 2011, the CBB raised $750 million through a seven-year sovereign sukuk.