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Islamic project finance will rise to $30b by 2012

DUBAI — Islamic project finance deals are projected to reach $30 billion by 2012, representing up to 30 per cent of all major structured deals finalised in the Middle East, according to the Islamic Project Finance Report released yesterday by the Middle East Economic Digest (MEED).

The driving force behind the development of the Islamic project finance market has been the economic boom in the GCC, brought about by strong oil prices, states the report. High rates of economic growth coupled with record balance of payments surpluses are fuelling unprecedented liquidity in the regional banking market.

"As the economic boom continues in the GCC, so interest in Islamic project finance and banking increases. There have been challenges in the past with the GCC courts and a shortage of qualified advisers but we now find that standards are improving and many Western banks are adding Islamic banking divisions," commented MEED's Edmund O'Sullivan.

Much of the impetus behind the development of Shariah-compliant corporate borrowing products has come from banks and professional advisory firms that are non-Islamic, the report notes.

Globally there are now 300 Islamic financial institutions in more than 70 countries. At the start of 2007 they had total assets of about $300 billion.

Figures for the first half of 2007 show that the balance sheets of the top 20 banks in the GCC grew by more than 30 per cent over the corresponding period in 2006.

The positive trends are expected to continue for the foreseeable future, the report notes.

"As the economic boom continues in the GCC, so interest in Islamic project finance and banking increases. There have been challenges in the past with the GCC courts and a shortage of qualified advisers but we now find that standards are improving and many Western banks are adding Islamic banking divisions," O'Sullivan said.

"Improvements in availability and quality of product will inevitably lead to greater integration of Islamic project finance in the GCC and other Islamic and non-Islamic countries," he added.