Islamic Finance Has topped $800 billion in Assets.

The global financial collapse, as well as the erosion of the conventional financial markets have pushed investors worldwide into seeking refuge in more conservative arenas and the Islamic financial sector has proved to be a excellent candidate with Saudi Arabia having four Ipos in April 2009.

The middle east and north African markets have enormous cash reserves, governments in the region have also adopted many measures to encourage foreign capital such as substantial investments in education, consolidation of regulatory processes, and strengthening of accounting standards and market research that will in turn improve transparency and efficiency.

The recent study done by Arthur D Little looks at ten Islamic markets in the region: Kingdom of Saudi Arabia (KSA), Bahrain, Qatar, Kuwait, Oman, United Arab Emirates (UAE), Malaysia, Egypt, Morocco and Tunisia.

The Sharia compliant assets market has topped over $800 billion and is expected to reach $4 trillion by 2015 growing at an annual rate of 10% to 20%. The study split the countries into three categories the big 4, the challengers, the newcomers.

The big 4.

Malaysia with a 92% capitalization over GDP ratio, Kuwait with a 76% capitalization over GDP ratio and a 21% concentration of Islamic finance assets, KSA has the largest concentration of Islamic finance assets 40% while the UAE has 20% concentration. Other competitive advantages of these markets are initiatives taken by the government and financial institutions to promote education and diversify products. Opportunities in these countries are mainly in sukuk which have seen an erosion in investor confidence lately, making investors gravitate toward alternatives such as syndicated lending and project financing.

The challengers.

Qatar with a market capitalization of $77 billion was the fastest growing economy in the middle east in 2008 but the concentration of Islamic finance assets is still at a low 5%.

Bahrain has 15% concentration of Islamic finance assets but a low diversification of its products, things might shift with the co-founding by bank bakara of the largest pure sharia conform bank with an initial $10 billion capital.

Oman with a relatively small market capitalization, however it enjoys great accessibility to foreign capital and benefits from a well regulated financial services industry.

The newcomers.

In 2007 morocco and Tunisia authorized Islamic finance products, while Egypt followed suit in 2008, while the Egyptian Islamic finance industry is the most developed out of the three and the Tunisian government is encouraging the flow of foreign capital, morocco remains the biggest in terms of market capitalization but the government is still conservative about the industry.