A group of Gulf banks and investors plan to raise $9 billion by selling shares in a planned Islamic investment bank.

The bank will tap the rising liquidity in Muslim nations, a senior banker said.

The bank, tentatively named Ummar Bank, will have a paid-up capital of $11 billion, of which $2 billion will be raised in private equity placement, Sheikh Saleh Kamel told Reuters in an interview.

Billionaire Kamel, the largest shareholder in Albaraka Banking Group, chairs the General Council of Islamic Banks and Financial Institutions, which is leading the project.

He declined to say when the IPO, the largest in the region, would take place, only that the stocks would first be floated on the Bahrain stock exchange.

Albaraka's chief executive officer Adnan Yousif said in February that the bank plans to start operations in 2009.

"We will raise $2 billion in private equity … and the remainder of the normal shares will be raised in public offerings," Kamel said on the sidelines of an annual Islamic Development Bank governors' meeting in Jeddah.

"We started collecting funds for the private equity in May and we hope to complete this in June. We have raised (about) $500 million," Kamel said.

Among firms that have so far contributed are Albaraka and Kuwait Real Estate Bank. "Dubai Islamic Bank and Kuwait Finance House are studying the project … IDB (Islamic Development Bank) have studied the idea and we are awaiting its board to make a decision," Kamel said.

The bank will aim mainly at creating a market for Islamic financial paper and develop new instruments, Kamel said.

"This will be a unique and global player. It will help Islamic banks raise liquidity by providing easy to trade and wholly sharia-compliant instruments."     

A feasibility study for the bank was conducted by Ernst and Young, which said in February that the value of assets under management in Islamic institutions has been growing at over 20 percent a year and reached $900 billion in 2007 and is set to hit $2 trillion by 2010.

"The investment funds that (Ummar Bank) will launch will be worth ten times the capital … we will issue asset-backed sukuk (Islamic bonds) worth up to $100 billion," Kamel said.

"This is not a lot when you know that Islamic banks have more than  $200 billion invested in global commodities markets which is not benefiting anyone," Kamel added. -Reuters