JEDDAH: Establishing an Islamic mega-investment bank with an initial capital of $1 billion was discussed at a meeting of prospective investors at the headquarters of the Islamic Development Bank (IDB) in Jeddah on Sunday.

Ahmad Mohamed Ali, president of IDB, said the initiative was aimed at promoting the growth of the Islamic financial industry, expanding its global reach and improving liquidity management.

“The new bank will also aim at facilitating the establishment of an inter-Islamic banking market in line with Shariah principles,” the IDB chief said, adding that initial contributions to the bank’s capital had reached $250 million.

Mohamed Ali said the new investment bank would finance mega-investment projects in accordance with the principles of Shariah and devise Islamic solutions for liquidity management.

The establishment of the large investment bank is viewed as a mechanism for improving the role of the Islamic finance industry in supporting economic and social development. The bank will also facilitate the growth and spread of the Islamic finance services industry through the training of manpower necessary for the development of Islamic banking.

During the meeting, which was attended by some 30 major investors and financial managers from around the world, Mohamed Ali spoke about the success of his bank’s sukuk issue. “The demand for our sukuk exceeded $2 billion when the target was only $500 million,” he said, adding that the IDB was satisfied with a sukuk issue of $850 million.

Umer Chapra, a well-known Muslim economist, commended the IDB’s initiative to establish a mega-investment bank and said it had come at a time when Islamic banking and finance had won global acceptance, especially after the collapse of many Western banks and financial institutions as a result of the economic crisis.

“Most Islamic banks are very small and are not able to finance major projects. So we are very much in need of such mega-investment banks to meet market requirements,” Chapra told Arab News. He said there was a good scope for such mega-banks as the market for Islamic finance is growing rapidly around the world.

The growing Muslim population, which has reached more than 1.5 billion, will further increase the demand for Islamic finance. According to one expert, worldwide Islamic banking assets are set to hit $1.4 trillion by 2010. “The Islamic financial system has now won international acceptance with the opening of many Islamic banks and financial institutions in non-Muslim countries including the United States, Britain, France, Italy, Australia and Singapore,” Chapra added.