Gulf-based Global House Group is looking at setting up a new Islamic investment bank based in the UAE, according to a key investment banking source. The Group is currently seeking equity capital through private placement of shares. The exact quantum of shares to be placed is as yet unknown, though Global House is said to be eyeing target capital of $500 million.
The entire target capital for the new bank is to be raised at a minimum subscription is $1 million, with an initial $100 million already paid-up, sources said, adding that Bahrain-based Global House Group would be a partner in the new bank.
Started in 2004, the group currently runs Islamic investment banks in Bahrain and Syria, which provide investment banking and financial advisory services, besides fund management, in accordance with Islamic principles.
Though buffeted by the economic slowdown which has seen banks tightening credit issual norms, the UAE market is viewed as fertile territory for investment with many investors preferring to manage their investments in Sharia-compliant mode. More Arab and foreign investors, including Indian companies, are expected to invest in the UAE market over the next five years once the economic recovery starts, sources said.
The Global House Group provides investment banking services, including advisory on mergers and acquisitions, initial public offerings and private placements, besides asset management services.
Standard & Poor in its recently announced Islamic Finance Outlook 2009, says that Sharia-compliant assets now total about $700 billion after growth exceeding 10 per cent annually during the past decade.
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"The sukuk (Sharia-compliant non-interest bearing bonds) market suffered heavily in 2008 but we believe that the outlook for asset-backed sukuk is positive, despite doubts raised by the disruption in global financial markets and in structured finance,” said Mohamed Damak, credit analyst at Standard & Poor’s Ratings Services, in a note to investors earlier this week.
“When economies begin pulling out of the downturn, we expect Islamic finance to resume its rapid growth. The long-term pipeline for sukuk issuance is healthy, and the market is attracting interest from an increasing number of issuers in both Muslim and non-Muslim countries,” Damak said.
Standard & Poor notes that Islamic financial institutions have remained more or less insulated from the global financial downturn because Sharia law strictly prohibits them from handling interest-based instruments. The knock-on effects of the current economic slowdown, however, are pressuring Islamic financial institutions and creating new obstacles for their development, the investment firm said.