Malaysia's AmanahRaya Investment Bank said today it will team up with Asian Finance Bank to launch an Islamic green fund to tap the multi-trillion dollar sharia-compliant market.

The RM1 billion green fund will invest in environmentally friendly projects compliant with sharia law such as biofuel ventures in Malaysia and the Middle East.

"We want to provide an alternative to investors by creating new asset classes," said Mohamed Azahari Kamil, managing director of AmanahRaya-JMF.

AmanahRaya-JMF is the asset management unit of state-owned AmanahRaya.

The green fund will be the second Islamic fund to be set up by AmanahRaya and Asian Finance Bank, a 71 percent-owned unit of Gulf-based Qatar Islamic Bank.

Islamic marine fund

The two banks also signed an agreement to establish an Islamic marine fund which will invest in vessels from the oil and gas industry. It will also acquire bulk cargos that carry halal - or Islamically permissible - goods.

It will raise up to US$250 million to finance the purchase of its initial fleet of some 10 vessels.

Plans for the new funds come after the government's announcement last month of more measures aimed at promoting growth in the Islamic financial industry.

Faisal Al Showaikh, chief executive officer of Asian Finance Bank, said the bank will leverage its ready access to the Gulf Cooperation Council market to bring in Middle East investors into the new funds.

He said the Malaysian market needs more new products and greater liquidity in order to compete with other major Islamic financial hubs around the world.