Islamic Finance in malaysia.

Malaysia's promotion of Islamic finance in the past five years has paid off: It now is second only to Dubai in terms of listed sukuk, or Sharia-compliant bonds, according to Standard & Poor's.

Malaysia issued the world's first global sovereign sukuk in 2002. Four years later, government-owned Khazanah issued the world's first exchangeable sukuk, and has issued two more since then. (Exchangeable sukuks allow investors to swap the investment for other securities, usually shares.) In tandem with these developments, Malaysia has opened up the sector to foreign companies, allowing for 49% foreign ownership of Islamic banks.

Industry insiders say, however, that Malaysian interpretation of sharia law can sometimes conflict with the more conservative tendencies of the Middle East. One fund manager said that a 15% level of leverage would be unthinkable for some Saudi investors, whereas in Malaysia it would not bat an eyelid.

FORBES.COM