Islamic finance supplement - Foreword

The Islamic finance market is growing apace. Starting with the first deal, a $30 million issue from a Shell Malaysia subsidiary in 1990, sukuk - or Shariah-compliant bonds - have grown about 45% a year since 2001 to reach some $50 billion in total issuance so far.

As it takes its first steps towards maturity, expected developments in Islamic finance include the emergence of a liquid secondary market in sukuk and a broadening of the range of issuers in the primary market.

Indeed, such is its pace of growth that Islamic finance is no longer just for Muslims. Much of the $50 billion of issuance in the sukuk market so far has been placed in non-Islamic accounts, and in March the UK government announced that it would be granting tax relief on these structures. While this was hailed as an important move for Muslim investors, they will not be the only beneficiaries.

With several Western issuers rumoured to be planning sukuk of their own and Middle East private equity companies already making inroads in Europe - the Bahrain Arcapita group completed a Shariah-compliant $4.2 billion acquisition of the Northern Ireland electricity company Viridian in December - it is increasingly important for conventional finance market participants to understand Islamic finance.

As the sector stands on the threshold of change, we ask key players about their approach to the market, how far investors understand their exposure to existing structures, and what the most important innovations will be as scholarship and participation improve.

Matthew Attwood.