Deutsche Bank has notched up a first in Indonesia becoming the only custodian bank to offer ShariÆa fund administration services. The announcement follows approval by IndonesiaÆs National ShariÆa Board (NSB) and comes at a time when ShariÆa funds are experiencing strong growth in Indonesia on the back of growing affluence, growing awareness and imminent issuance of ShariÆa bonds.

Unlike traditional mutual funds in Indonesia, ShariÆa-based fund administration services are governed by a different set of principles. The biggest different between this and traditional fund administration services stem from the method in which income and stock dividends are calculated and recognised. In accordance with Islamic principles, the options for payment of tax and donations are different than for mutual funds.

DeutscheÆs new Indonesia platform will also differ from its existing domestic fund administration business in terms of what investments are available to ShariÆa funds. The applicable ShariÆa investors can only purchase approved assets and are supervised by independent ShariÆa compliance board.

The approval by the NSB for Deutsche Bank to offer administration for ShariÆa funds is timely. Although there are limited ShariÆa funds in Indonesia compared to the traditional mutual funds industry, awareness and investing habits are changing. In addition, the expected issuance of ShariÆa government bonds will further support the market and create demand for Deustche BankÆs new services.

Going on these market assumptions, Deutsche Bank expects the net asset value of ShariÆa funds to grow by over two-thirds by the end of 2006, with a market value of Rp1 trillion ($107.6 million) forecast.

ôThe certification of ShariÆa fund administration services further reinforces our market leading position as the value of ShariÆa funds is expected to increase due to a surge in new ShariÆa-based government and corporate bonds,ö says Thibaud de Maintenant, director, head of product and client management for Deutsche BankÆs domestic custody services, Asia Pacific.

Deutsche currently administers 125 of the 347 mutual funds in Indonesia, which according to data published by BAPEPAM, the countryÆs capital market supervisory agency, puts Deustche Bank as the market leader in funds administration.