What differentiates Islamic finance from western banking? For one thing, interest payments are prohibited under Sharia Law - the code of behaviour and practices derived from the Koran. According to Islamic scripture, charging high interest violates the principle of profiting from other's misfortune.
'This means loans and capital raising have to be done in other ways, for example, often Islamic transactions take the form of a profit-sharing arrangement, or make use of other forms of financing such as a lease,' says Andrew Tebbutt, co-founder of Red Money Group, an information portal and financial training company dedicated to helping international financial institutions adapt their products and services to appeal to Muslim clients.
At stake is US$250 billion in assets held by an estimated 1 billion Muslims worldwide, according to HSBC estimates. In addition, Islamic oil-producing states in the Middle East are flush with cash thanks to record petroleum prices.
'Other characteristics of Sharia-compliant finance include the elimination as far as possible of risk and uncertainty, and the idea that transactions must be fair, honest and equitable. There are clear distinctions between Islamic and conventional finance, although it could be argued that in the pursuit of innovative products and growth these distinctions are becoming a little blurred,' says Mr Tebbutt.
He launched the company in 2004 with partner Andrew Morgan, each financing the sub-$650,000 start-up capital from their own pockets. The two had worked for several years in Hong Kong for British-based publisher and conference organiser Euromoney before deciding to strike out on their own.
'I'd love to say that it was purely philanthropic, but it wasn't,' Mr Tebbutt says. '[We] had been looking to set out on our own for a while and that meant identifying a financial market sector that hadn't been saturated by other companies. Few such opportunities in international finance existed. Islamic finance was, and still is, one of the only areas of significant potential growth in international finance today.'
The two rejected the idea of establishing the company in Hong Kong and chose Kuala Lumpur instead, where office space is cheaper and the Islamic community is closer. The city also encourages Islamic finance as part of its economic sector growth plan. They moved to Kuala Lumpur in March 2004 and incorporated the company in June.