While a regional slowdown is holding back capital and debt markets, the Islamic private equity investment market remains strong.

“We are seeing more movement in private equity than Islamic debt markets,” says Imran Shafiq, partner at Dubai-based Galadari, Advocates & Legal Consultants. “Schools are in big demand and we have worked on three acquisitions in the past three months. It’s still a market where the fundamentals are good and you get very healthy returns.”

The medical sector (for example, general hospitals) is also seeing good demand from private equity.

The region’s private equity investors tend to look for long-term deals where they can work with a company to build it up, rather than selling on in the short term.

Many experts expect lower oil prices and slowing growth to encourage a boom in private equity transactions, as public offerings and obtaining finance from banks become more challenging. However, political risk may hold investors back.

“We were approached by a Bahraini private equity house,” says Shafiq. “Over the next six to 12 months, they won’t invest in this region due to instability.”

As for capital markets, and Islamic and project finance, they are likely to see lower activity levels as long as oil prices stay low and political instability continues.

“There are very liquid entities looking to invest,” says Shafiq. “But there is an issue of quality with the underlying assets, and they will wait and see due to uncertainty in the GCC region.”

Both corporates looking to raise money and investors will be watching market conditions carefully for the best time to resume activity.

The standardisation or legislation of Islamic finance rules would help to introduce more certainty and comfort.

The UAE is the most advanced in this area. Its Central Bank has proposed establishing a central board to monitor the industry and improve consistency. However, no timetable has been set for its implementation.

Currently financial institutions rely on their own sharia boards to rule on whether a product is sharia-compliant. This leads to a wide range of interpretations and investor uncertainty.