From the Wall Street Journal, via the Free Debate at the Economist:
Six years ago, a Malaysian bank asked 80 financial institutions in the Persian Gulf for help in selling a corporate bond that complied with Islamic prohibitions on interest.
All but one declined to participate, branding the novel security “haram,” or banned by Islam. Just a few months after the $150 million offering proved a success, however, many of these doubters shelved their theological qualms and came up with similar Islamic bonds of their own.
The global Islamic bond market that has developed since then is now worth an estimated $50 billion in securities outstanding, part of a burgeoning Islamic financial industry that’s fast approaching $1 trillion in assets. The torrents of cash that fuel this boom mostly come from the Persian Gulf’s oil bonanza. But it is distant Malaysia, thousands of miles to the east, that has emerged as the industry’s unlikely trailblazer.
“Malaysia is the catalyst for change,” says Faiz Azmi, Kuala Lumpur-based global head of Islamic finance at PricewaterhouseCoopers, the accounting and consulting firm. Much of what is now considered conventional in the industry, he explains, was test-driven here first — often against the objections of conservative clerics in places like Saudi Arabia. Now such innovations are not just commonplace in the Gulf, but also have become an important revenue source for Western financial giants with Islamic-banking divisions, such as Citigroup Inc. and HSBC Holdings PLC. [Malaysia Transforms Rules For Finance Under Islam. Wall Street Journal. April 4 2007]
I remember religious conservatives claiming that the stock market is haram as well.