The global market for Islamic financial services, as measured by Shariah compliant assets, is estimated to have reached $729 billion at end-2007, 37 per cent up from $531 billion in 2006, according to a new report from International Financial Services London

Islamic commercial banks accounted for the bulk of the assets, with investment banks and Sukuk issues (notes) making up most of the remainder. The developing funds and Takaful (insurance) sectors also made a contribution.

Key centres are naturally in Islamic countries including Iran, Saudi Arabia, Malaysia, Kuwait, UAE and Bahrain. The UK, in eighth place, is the leading western country with $18 billion of reported assets, largely based on HSBC Amanah.

But the Islamic finance industry has felt the influence of the credit crunch and downturn in the global economy in 2008, with a drop in Sukuk issuance and a fall in the value of equity funds. Islamic banks, however, have been less affected than many conventional banks because they are not exposed to losses from investment in toxic assets nor have they been dependent on wholesale funds, as they are prohibited from these activities.

In 2008, two Islamic banks were granted new licences in London, bringing the total to 22, including five that are fully Shariah compliant, and 18 Sukuk issues raised $10 billion listed on London Stock Exchange, exceeded only by Dubai Nasdaq.

The first company to offer Takaful to UK residents was also authorised in 2008.