Assets of Islamic financial institutions have grown by an average of 15-20% per annum* over the past five years, suggesting robust demand for Islamic investing. It is expected Islamic finance will continue to grow at this rate for the next few years as it continues to flourish in the Middle East and the Far East and that total assets in Islamic finance will reach $1 trillion by 2012*.

The growth in Islamic finance has also been mirrored in the growth of Shariah compliant investment funds. It is estimated that currently, there are more than US$30 billion under management* in Shariah compliant investment funds.

Shariah compliant investment funds invest in a wide range of asset classes – equities, real estate, commodities, private equity and infrastructure and the number of Shariah compliant funds worldwide is expected to double by 2010*.

Islamic financial institutions have taken the form of commercial banks, investment banks, investment and financial companies, insurance companies, and financial service companies.

This is an industry that is still evolving, developing and growing. The industry has also grown from retail banking to commercial banking and, more recently, into investment banking. Its sophistication and product offering have developed along with this change.

There is a general perception that Islamic finance is concentrated in the Middle East. While it is true that, at present, about 60% of the total assets of Islamic financial institutions are in the Middle East, Islamic finance is expanding to other Muslim-majority countries.

This is primarily because wealth creation and demand for Shariah compliant financial services are making those markets economically viable for financial institutions.

Owing to the oil boom of the 1970s, Islamic banking flourished on the Arabian Peninsula and, from there, expanded into the Middle East and South-East Asia. It is now rapidly developing in Western countries that have large Muslim communities such as in Europe and the United States, with significant activity taking place in London.

Islamic banking has already been integrated into the British, French and German banking systems to allow Muslims living in Europe to bank and invest using Shariah compliant products.

Islamic finance principles embody a unique form of investment management which corresponds with the values of socially responsible investing. Islamic finance is an ethical and equitable mode of finance that derives its principles from the Shariah (Islamic law).

The Shariah is based on the Quran (the sacred text of Islam) and the example of Prophet Muhammad, Peace Be Upon Him, (PBUH), and it governs all aspects of personal and collective life of Muslims.

The most distinctive element of Islamic finance is the prohibition of interest, whether “nominal” or “excessive,” simple or compound, fixed or floating. To comply with Shariah, investment must not involve interest (also known as “Riba”).

Islamic investment funds are joint pools wherein investors contribute their surplus funds for the purpose of their investment to earn Halaal (“lawful”) profits strict conformity with the precepts of Shariah.

Under the principles of Shariah, in addition to prohibition of interest, investment is also disallowed in businesses that deal with alcohol, pork, gambling, tobacco, media, pornography and anything else which is deemed “Haraam” (unlawful).