Bahrain starts Islamic financial market


http://news.bbc.co.uk/1/hi/business/2188006.stm



An international Islamic financial market dealing in

products that comply with Sharia law has been set-up

in Bahrain, the Gulf's regional financial and banking

hub. 

Since 11 September, there has been a Western backlash

against the Islamic financial system, which was

accused of funding terrorists and how faces heightened

scrutiny. 



Bahrain signed an agreement in November with Malaysia,

Indonesia, Sudan and the Saudi-based Islamic

Development Bank (IDB) to create the International

Islamic Financial Market (IIFM). 



Islamic banking serves about 1.2 billion Muslims and

is valued at $180bn. 



Sharia banking 



Islamic banks deliver products which do not invest in

conventional financial services because interest, the

basis of Western banking, is regarded by Muslims as

usury. 



Investing in industries with links to alcohol,

gambling, tobacco, weapons or pork-related products

amongst others are also banned. 



But Islamic fund management was boosted by a fatwa, or

religious ruling, in the mid-1990s that investment in

equities did not violate Sharia principles. 



The IIFM will create the financial instruments and

maintain an active market for about 200 Islamic banks

and financial institutions around the world. 



The instruments will be endorsed by the IIFM's Islamic

Sharia committee. 



Western offering 



Switzerland's UBS has announced it will begin Islamic

banking next month. 



It joins just a handful of Western banks looking to

tap this market. 



Noriba Bank, a fully-owned UBS unit, said it will

start up in Bahrain offering products and services

compliant with Islamic Sharia law to rich individuals

and institutions. 



Citigroup, the world's largest financial institution

already offers Islamic banking via Citi Islamic

Investment Bank in Bahrain. 



The tiny Gulf island is a key US ally and hosts the

regional base for the US Navy's 5th Fleet. 





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