Analysts estimate that the Islamic finance sector - which complies with Sharia law based on the Quran - is now worth up to $500 billion, compared to $200 billion two years ago.
Islamic retail banks and investment funds now number in the hundreds and financial institutions in non-Muslim countries, including Citigroup, Deutsche Bank, HSBC, Lloyds TSB and UBS, are increasingly choosing to offer products that are compatible with Sharia law
Islamic finance bans the earning and payment of interest and forbids investment in businesses linked to the alcoholic drinks and gambling industries.
Japan will be the first major industrialised country to issue Islamic bonds if the Japan Bank for International Cooperation goes ahead with a plan aimed at attracting money from oil-rich Muslim countries.
'Better than ever'
"The [Islamic finance] industry is doing better than ever," said Rodney Wilson, director of post-graduate Islamic studies at Durham University in the northeast of England.
"There is a lot of money flowing into the Islamic finance institutions and conventional banks which are also offering Islamic finance products. It's obviously related to the high price of oil and the money flowing into the Gulf countries, including Saudi Arabia, Kuwait and the United Arab Emirates".
Investments into the Gulf region are increasingly complying with Sharia law such as the building of a so-called economic city north of Jeddah in Saudi Arabia at a cost of $27 billion.
Islamic finance is also growing in southeast Asia. Earlier this month, the central bank of Malaysia said it planned to conduct Islamic financial business in international currencies to help increase investment from abroad.
Modern Islamic capitalism was created in Egypt during the early 1960s with the introduction of savings accounts. But in the 1990s it really took off with the development of Sharia investment funds.
"The [Islamic finance] industry is doing better than ever".
Rodney Wilson, director of postgraduate Islamic studies at Durham University, England
One area of Islamic finance which is burgeoning is the bond market, with much of the investment coming from non-Muslim overseas investors, according to a recent study by a London-based law firm.
During the first half of 2006, the value of issued Islamic bonds, or sukuk, more than doubled to $4.585 billion, according to Trowers and Hamlins, whose offices abroad are based mainly in the Gulf region.
Earlier this month, the Kuwait Finance House launched the first sukuk in China to finance construction of a power station, whose profits will be shared among investors.
"There has been a huge inflow of oil wealth into Islamic investment funds which are, naturally enough, seeking Islamically-compliant vehicles, such as sukuks, in which to channel funds," said Neale Downes, a partner at Trowers and Hamlins.
"There has been a huge inflow of oil wealth into Islamic investment funds which are, naturally enough, seeking Islamically-compliant vehicles, such as sukuks, in which to channel funds"
Neale Downes, a partner at Trowers and Hamlins
"Foreign investors represent an increasingly dominant segment of the market for Islamically-compliant debt. What is really significant is that they are now comfortable buying corporate sukuk and not just those issued by sovereign borrowers," he added.
The influence of Islamic finance is spreading across the world.
The International Swaps and Derivatives Association recently signed a deal with the International Islamic Financial Market, based in Bahrain, to define Islamic standards. While the leading Islamic speculative fund, Algo Al-Qayyim Fund, was approved in February to operate on the British island of Jersey.
And according to a study last year by London South Bank University, the European property market is the preferred investment area for Islamic funds.