Brokers expand as demand for Islamic finance soars

Private client interest in Islamic financial products is growing at record levels, the Middle Eastern head of Saxo Bank said today.

The Danish bank and online brokerage has begun offering Middle Eastern investors access to internationally-listed Islamic equity products, aiming to capitalise on the booming demand for Shariah-compliant cash and exchange-traded fund products.

The bank has partnered with Middle Eastern fund manager IdealRatings to identify compliant stocks and equity-based ETFs across 25 international exchanges, offering local clients access to a broader range of investment options. All stocks must be passed by a Shariah Review Bureau before being offered to investors, Saxo said.

Jakob Beck Thomsen, chief executive of Saxo’s Dubai office, said: “Middle Eastern flows are growing strongly. There’s a big local appetite for international equities and products, from both private and institutional clients.

“Mena activities now account for around 6% of our total revenues – double what they did a couple of years ago, even at a time of significant growth for us elsewhere. We continue to have a strong focus on the region and ambitious growth plans.”

Under Shariah law, Islamic banks are forbidden from charging interest on loan products. Excessive speculation or the creation of financial uncertainty for investors is also prohibited.

Not all states are subject to such doctrinaire rules, however. Iran, under its ruling Shia regime, offers investors open access to equities, commodities and a limited number of equity derivatives on its Tehran-based exchanges.

Other international brokers are known to be upping their headcount in the region, keen to offer investors access to the Middle East’s vast oil reserves and solvent capital markets, and offer local clients exposure to international products in return.

GFI Group, the US interdealer broker, has ramped up headcount in the region this year. Its Middle East franchise pioneered international investor access to Islamic bonds.

Thomsen added: “Islamic finance is still in its infancy. There’s still a lack of standardisation and agreement of investment rules. Despite that, the market is still growing at some 25% a year. There’s now more than $1 trillion invested globally in Islamic financial products.”

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