Stable and conservative Islamic finance is attracting investors. Islamic finance, which bans the payment of interest and restricts the use of some derivative instruments, has grown rapidly during 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. Britain intends to issue its own sovereign sukuk debt in a rolling programme worth around 2 billion pounds, although it has said legal barriers still remain and a final decision will be made later in the year. Japan, Thailand, Hong Kong and Singapore have also expressed interest in issuing sukuk.
However, the sukuk market is encountering further difficulties after a major scholar last year said 85 per cent of sukuk were not really Islamic, which caused many issuers to hold off debt sales. The extra documentation and oversight from Islamic scholars required to ensure sukuk issues follow Islamic law is a deterrent for some investors.