Islamic Rating Agency Set Up

The first Islamic rating agency has been established with the aim of supporting Shariah compatible banks and mutual funds and helping them penetrate the international market.

The establishment of the Bahrain-based International Islamic Rating Agency (IIRA), with a $10 million capital - only $1 million of it is paid-up was announced at the end of its shareholders meeting in Manama, chaired by Dr Ahmed Ali, president of Jeddah-based, Islamic Develo-pment Bank (IDB) which, along with its subsidiaries, owns 42 per cent of the new agency.

Other major players are Abu Dhabi Islamic Bank (ADIB), Bahrain Islamic Bank, the Kuwait Turkish Bank (a subsidiary of the Kuwait Finance House) and Malaysia's Takaful with 11 per cent each, said Adnan Youssif, president of Bahrain Islamic Bank.

The shareholders also include several rating agencies such as the Cyprus-based Capital Intelligence, with two per cent, and JCR of Pakistan, 5.3 per cent, among others, he noted.

The agency, which will be operative during the first quarter of 2003, will rate Islamic banks and their financial instruments, Sukuks, to help them offer 'credible products' in the international market, Youssif explained.

"Such imitative has become an inescapable necessity, because most international credit companies don't really know a lot about the financial backgrounds and the dealing mechanics of the Shari'a banks," he said.

An internationally recognised rating will give these institutions the credibility and the transparency they need to deal with the international market.

The agency, an idea born in 2000 and sponsored by the Bahrain Monetary Agency (BMA), will have a technical advisory committee that consists of "reputed and highly-skilled experts," Youssif stated.