Published: Wednesday, 25 April, 2007, 08:43 AM Doha Time

DUBAI: Global demand for Islamic finance will surge to $4tn within five years from the current $400bn to satisfy investor appetite for new banking products and services, Standard & Poor’s Corp said yesterday.
“Investors’ appetite for Shariah-compliant vehicles is growing. The increase to $4tn is a massive jump. It will happen in the medium-term, in the next three-five years,” Torsten Hinrichs, a managing director at the international ratings agency, told Zawya Dow Jones at a company seminar in Dubai.
The growing trend for Islamic finance is supported by demand from cash-rich investors in the Persian Gulf seeking new investment opportunities in their home region, which is witnessing an economic boom fueled by record revenues from three years of high oil prices.
With new investment opportunities opening up in the Gulf, “significant volumes of money” are flowing back to the region, Hinrichs said.
This in turn is also driving demand for banking products and services compliant with Islamic law, or Shariah. New products and services are being made available by banks in the GCC states and Muslim countries in Asia and are increasingly becoming rival offerings to conventional banks, S&P said in a press release yesterday.
“The market share of Islamic banks currently stands at 12% in Malaysia and 17% in the six GCC countries. Retail banking services and issuance of Islamic notes, or Sukuk, have been and will continue to be frontrunners in the global Islamic finance boom,” S&P said.
It said it expects the value of global Sukuk to hit $100bn by 2010.
“Mounting demand around the world for Shariah-compliant financial products and services is fueling the Islamic banking industry’s buoyant expansion,” said S&P credit analyst Anouar Hassoune.
S&P yesterday also launched Shariah-compliant indexes tracking Gulf stocks in the Gulf states to capitalise on growing demand for Muslim investment products. - Dow Jones Newswires