The new fund, the first of its kind, offers investors an assured rate of return much higher than the usual average. Its projected annual yield is seven per cent, significantly higher than similar conventional bonds.

"We are looking at a family of funds with a total size of $5 billion to $10 billion, in tranches of $1 billion a year which will be invested in a balanced Sharia-compliant portfolio of income generating asset classes with varying levels of risk," Isam Janahi, Gulf Finance House chief executive officer, said.

"It is estimated that in the whole region there is about $250 billion worth of pension and social insurance funds," he said.
 
"The industry norm is that usually each of these funds are free to invest about 20% of total corpus outside, which means that about $50 billion is available regionally for investments."


Interest

"There is tremendous enthusiasm towards Islamic investment instruments in the Middle East region as well as the world over," said Janahi.
 

"We are looking at a family of funds with a total size of $5billion to $10 billion, in tranches of $1 billion a year which will be invested in a balanced Sharia-compliant portfolio of income generating asset classes with varying levels of risk"

Isam Janahi,
chief executive officer,
Gulf Finance House 

Gulf Finance House, set up four years ago, has an authorised capital of $300 million and a paid-up capital of $135 million.

The Muhanna Foundation is a non-profit institution established in Switzerland and based in Beirut. It is dedicated to the promotion of actuarial education particularly in the Arab world.

The Islamic financial system differs from the conventional in that interest is forbidden, as the religion forbids usury.

For deposits, Islamic banks do not pay interest at a fixed rate, but instead pay a variable return based on the performance achieved by the bank's investments.