National and Global Islamic Financial Architecture:

Problems and Possible Solutions for the OIC Member Countries

In the asset management sector, Amana Income Fund was launched in the US in 1986 as the

first Islamic mutual fund.

1990s:

Some other types of nonbank financial institutions were established in the 1990s. The

first Islamic pawnshop, Muassasah Gadaian Islam Terengganu, was established in the

Terengganu state of Malaysia in 1992 (Hisham et. al. 2013). In Islamic project financing, the

first major co-financed transaction involving project financing was the USD1.8 billion Hub

River power project in Pakistan that started in 1993. Al-Rajhi Banking and Investment

Corporation provided a USD92 million Istisna’ facility in a total investment of USD 1.8 billion

for the project. Similarly, a USD200 million tranche by Kuwait Finance House for a USD2 billion

petrochemical plant for the Equate Petrochemical Company was a joint venture between the

Union Carbide corporation and the Petrochemical Industries Company, a subsidiary of

Kuwait’s national oil company in 1996 (Esty 2000). In capital markets, the first corporate

sukuk was issued by Shell in Malaysia in 1990. Furthermore, to meet the demand of Muslim

investors, the Dow Jones Islamic index was also launched in 1999.

2000s:

IDB established the Awqaf Properties Investment Fund in 2001 to invest in developing

awqaf properties in different parts of the world on a commercial basis. In the same year, IDB

also launched the first infrastructure fund with a capital commitment of USD 730 million.

Injazat Technology Fund E.C established in Dubai in 2001 was one of the first Islamic venture

capital funds. In Asia, CIMB Muamalat Fund I was the first Islamic private equity fund founded

in 2002 (Wouters 2008). Islamic leasing companies started in 2000 and since then several

have been established in the GCC region (Henry 2012). A few Islamic hedge funds were also

structured and marketed after the mid-2000s, but these did not get traction due to a lack of

demand (Gassner 2007). After the publication of Guidelines for Islamic Real Estate Investment

Trusts (REITs) by the Securities Commission of Malaysia in 2005, the first Islamic REIT AlAqar

KPJ REIT valued at RM 481 was issued in the country in 2006.

2010s:

Among the key innovations in Islamic financial institutions after 2010 were crowd-

funding platforms. While Liwwa was an asset based platform launched in Jordan in 2013,

Shekra was an equity based crowd funding platform launched in Egypt in the same year (CCA

and FCA 2013).

2.4.2. Supporting International Infrastructure Institutions

The progression of different international infrastructure institutions supporting the Islamic

financial sector over the years is shown in Table 2.3. The infrastructure institutions classified

according to the architectural features identified in Chapter 1 are discussed below.

Legal Infrastructure

The International Islamic Center for Reconciliation and Commercial Arbitration (IICRCA) was

established in Dubai, UAE in 2004 and started operations in 2007. The goal of IICRCA is to