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London: Stable and conservative Islamic finance is attracting investors scared off by the global credit crisis, the chief executive of new UK Islamic bank Gatehouse said.
Islamic finance, which bans the payment of interest and restricts the use of some derivative instruments, has been growing rapidly in the past few years.
Islamic assets total around $1 trillion, the Asian Development Bank estimates, with annual growth of 10 to 15 per cent a year.
Islamic bonds, or sukuk, are structured as profit-sharing or rental agreements that are underpinned by physical assets.
The lack of exposure to some of the riskier markets of which investors have fallen foul in the past year makes Islamic finance attractive, and not just to those investors requiring Sharia-compliant transactions, Gatehouse Chief Executive David Testa said.
"It's actually quite old-fashioned banking. It's asset-backed and asset-based, it's not the infinitely leveraged model. It's a good story in these stricken times."
Gatehouse, a subsidiary of the Securities House of Kuwait, started operating in April and says it is the fifth Islamic bank to open in the UK, which market participants say has taken the lead in Europe in welcoming Islamic banking.
The bank has paid-in capital of £50 million so far, and authorised capital of £225 million.
Global reach
It has a staff of 30, with plans to reach close to 40 by the end of the year, and has a global reach, Testa said.
Testa, who joined the bank after 10 years with WestLB as executive director in its capital markets group, said Gatehouse would look for a public listing by 2012.
Gatehouse is targeting Islamic borrowers in the Gulf looking to raise money internationally, international borrowers tapping into Gulf investors, and Gulf investors looking to make acquisitions outside the local region.
There is also interest in Islamic finance from Britain, the United States and Europe including Turkey, as well as the Gulf, Testa said.
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