The term ‘Islamic economics’ first appeared in the 1950s and 1960s as research papers, articles and books began to discuss the subject.

By the 1970s the first Islamic banks and finance houses were opening in the Middle East and North Africa (known as the MENA region). Their growth was largely boosted by oil revenues. It was at this point that the first attempts at managing liquidity through commodity murabaha first appeared. Also in 1971 Dubai Islamic Bank opened for business.

In the 1980s the numbers of Islamic banks and finance houses blossomed to over 40. Banks at the time put capital into real estate for the long term and murabaha commodities for the short term.

By the 1990s international banks like Citi and HSBC began offering Shariah-compliant products. The first industry standards were established by the Accounting and Auditing Organization for Islamic Financial Institutions. During this decade Bahrain and Malaysia emerged as hubs for Islamic finance.

In 1994 the first conventional asset managers were invited to manage investments under Shariah supervision and Islamic investing itself expanded to include leasing funds and a few long-only equity funds. By 1999 Dow Jones had launched its Islamic market indices. By the beginning of the next century and millennium, the number of mutual funds had increased to over 60 and the number of Islamic banks operating around the world numbered more than 200.

In 2000 some of the major international law firms established Islamic finance practices and began to compete for market share. In 2001 the first Shariah-compliant structured products were introduced in the form of principal protected funds and notes. Real estate and leasing funds grew and the first infrastructure projects were financed under Shariah law.

The first sukuk was issued in 2002 by the Malaysia government. Since then the value of these issues has doubled. The following year the first corporate sukuk were issued and the ratings agencies began rating sukuk. In 2006 the first sukuk with US-based corporate assets was issued.

Shariah-compliant real estate investment trusts (REITs) and exchange-traded funds (ETFs) were introduced in 2007. In the UK the treasury announced it intended to issue sukuks and the London Metal Exchange (LME) reported that $100 billion in Islamic assets were invested.

By 2008 Shariah-compliant hedge funds were on the scene and several initiatives were launched to try to increase their numbers and investment flows into them.

Source: Shariah Capital.