Malaysia has become the leader in the Islamic bond market, a market which is run according to principles of Sharia, one of which forbids charging interest. Malaysia is leveraging its prowess in the bond market to the full Islamic banking market. In its home base, Islamic retail banks now supply 12% of the nation's internal financing. It has managed three-fourths of the Islamic bond offerings world-wide. Even non-Muslim countries, such as China, are now issuing Islamic bonds.
Islamic banking is a fast growing market; it now holds about $250 billion in assets and is growing at 15% annually. In addition, $300 billion is invested in Islamic mutual funds.
How does a bank get around the Sharia prohibition against making money from money? Well, the bonds are linked to a pool of underlying tangible assets, such as an apartment building; it is these underlying assets that generate the profits the bond holders receive. Sounds fishy to me.
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