Copyright 2004 Times Newspapers Limited
The Times (London)

January 30, 2004, Friday

SECTION: Business; 37

LENGTH: 311 words

HEADLINE: Islamic funds breeze in to new cash source

BYLINE: Angela Jameson

BODY:
CIGARETTES and alcohol, are, naturally, out. Neither McDonalds nor Ladbrokes
would find favour with Islamic investors.

But investors who are more typically used to counting fuel in barrels of oil
have taken to the UK's burgeoning renewable energy market with enthusiasm.

Wind power and the stable, bond-like returns it promises to investors have
convinced First Islamic Investment Bank to make its first step into the UK's
complex renewable energy market.

Producing electricity from wind may currently be more costly than generating
it from the black stuff, but Islamic investors are hoping that getting in at
the early stages of the Europe-wide push to reduce carbon emissions will pay
long term dividends.

Under Sharia law, Islamic banks are forbidden from lending money or
receiving interest, but taking equity stakes is permissible. Hence First
Islamic Investment Bank's £50 million investment in RWE Innogy's present and
future wind farms -which could produce electricity for some four million
homes in the next three years.

Islamic equity funds are one of the fastest growing sectors of the
international Islamic financial system. There are now more than 100 Islamic
funds in existence managing assets worth billions of dollars.

The funds emerged in the early 1990s and ballooned during the technology
bubble.

Between 1996 and 2000, a market of about 30 funds managing $ 800 million
(Pounds438 million) in assets had grown to almost 100 funds with a total
value of about $ 5 billion.

An Islamic equity fund will not invest in companies whose primary business
is forbidden under Sharia law.

Investments are prohibited in companies heavily engaged in the alcohol,
gambling, pork, armaments, tobacco and pornography industries. Stocks,
therefore, tend to be weighted towards the technology, utility and energy
sectors.



LOAD-DATE: January 30, 2004