The fledgling Islamic finance industry is still growing thanks to new markets and an inflow of oil money, but it is struggling to leave behind the legacy of the global financial crisis in the form of a real estate crash in the Gulf Arab region. Islamic banking is one of the world's fastest growing financial sectors, according to industry estimates. It has attracted more attention in the aftermath of the global financial crisis as investors are increasingly looking for alternative, ethical ways of investing. But in the Gulf Arab region, alongside South East Asia its most important regional center, a funding crunch at Bahrain-based Islamic investment house Gulf Finance House shows that the industry still has a long way to go to diversify from real estate products and investments. “We have the same state of affairs across the region whether the companies are listed or unlisted”, said Mohieddine Kronfol, managing director at Dubai-based Algebra Capital. “This situation is very common whereby companies have gone out to get short-term funding but then put it into illiquid assets (such as real estate),” he said. Asset management is seen as a key growth area for the industry, but experts say it needs to diversify its products by adding fixed-income components to its funds that are focused on real estate and private equity. Next week, Reuters journalists in London, Dubai, Bahrain, Geneva, Kuala Lumpur and Jakarta will bring together the industry's decision makers to ask them how they will overcome these challenges and where opportunities lie. Interviewees at the Reuters Islamic Banking and Finance Summit include some 40 bankers and lawyers. Regulation also remains fragmented, with central banks, its own standard-setting bodies and scholars interpreting Islamic law all having a say in governing the industry. The industry also needs to create bigger players, with local banks being too small to grab market share from the Islamic windows of Western conventional banks in syndicating loans and arranging Islamic bonds, or sukuk. Sukuk is a key product of the industry, but global issuance could fall this year from 2009 levels, according to a recent Reuters poll. The Dubai debt crisis and an expected rise in borrowing costs weigh on market sentiment. Western companies looking to diversify their investor base are expected to help the market to a certain extent, and several issuers in the Gulf Arab region have launched fixed-income programs targeting US investors. “Sukuk issuances in the UK could happen within the next 12 months,” Mohamed Damak, Islamic finance credit analyst Mohamed Damak told Reuters Insider ahead of the summit.