Deutsche Bank Publishes Sharia Investment 'White Paper'

by Phillip Morton, Investors Offshore.com

06 February 2007

Deutsche Bank has published a White Paper outlining an investment structure that facilitates the issuance of Sharia compliant securities that offer investors access to alternative asset classes.

Deutsche Bank has made public its procedures both in the interests of transparency and in an attempt to help alleviate some of the 'supply side' constraints that exist in Islamic financial markets. These constraints are mainly related to capacity - in respect of the number of qualified bankers involved and their Islamic structuring capabilities. In addressing these issues, the market will be more able to develop in line with customer demand.

By publishing this paper, Deutsche Bank hopes to achieve three objectives which will see the area of Sharia compliant securities growing, but off a solid and uniform base: make Deutsche Bank's investment structure available to other financial institutions and thereby alleviate the current shortage of supply of products; establish the White Paper as a quality benchmark, and encourage the use of academic resources to assist the industry in developing new products - something that has not been a feature of the industry so far; and encourage the use of the structure in its correct context through reference to the White Paper.

Geert Bossuyt, Managing Director, Regional Head of ME Structuring, Deutsche Bank, commented:

"We are confident that the structure will eventually be viewed as a significant milestone in the development of the Islamic finance industry as it provides Islamic investors with exposure, in a liquid and cost-efficient way, to new asset classes and pay-outs, removing one of the main structuring barriers. The structure itself is the result of close co-operation between academics, bankers and, of course, scholars.

"Too often, 'innovation' is achieved by pushing the barriers and/or misusing fatawa by taking them out of their context. Innovation ideally should be the result of a well documented and fundamental discussion on Sharia. Deutsche Bank wishes to encourage the use of academic resources to assist the industry in developing new products as this has not been a feature of the industry to date.

Bossuyt concluded:

"We believe that those institutions with the vision, creativity, innovation, courage and commitment to develop the Islamic financial markets will be recognised for their hard work and ideas. Sharia itself has inherent flexibility and fewer constraints than is often assumed by the financial services industry. Fundamental research is the key to unlocking this inherent flexibility, thereby allowing this market to grow to its full potential."

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