The economic boom in the Gulf Cooperation Council (GCC) region has fuelled the emergence of Islamic finance in the international market in the past decade. Revenue growth in this region has particularly benefited the asset management sector, as
Standard & Poor's noted in a report published today (see "Using Fund Ratings To Assess Credit And Market Risks In Sharia Funds").
The Middle East is by far the largest market for Sharia-compliant funds, but conventional players in Europe, South Africa, and the U.S. have also launched a number of funds that comply with Sharia law during past years, enhancing their product range to meet the specific requirements of Islamic investors seeking to invest in this asset class.
The number of product types remains limited, which Standard & Poor's Ratings Services believes is largely due to the nascent nature of Sharia funds. Funds also have to be invested in ways that are permitted under Islamic law. Sharia funds, unlike traditional bond funds, do not invest in conventional rated fixed-income securities because these are, by definition, financial instruments that accumulate interest and are therefore not considered Sharia-compliant.
In May 2010, Standard & Poor's assigned its first 'AAf/S1+' fund credit and volatility ratings to a newly established Sharia fund, EFH Funds SCA SICAV-SIF-Liquidity Subfund, domiciled in Luxembourg and managed by European Finance House, the European financial arm of Qatar Islamic Bank.
Global Arab Network