Gerard Kennedy, a principal at Macpherson and Kelley (M+K), told Lawyers Weekly today that the move was made in a bid to address some of the difficulties the Muslim community faced in ensuring its financial needs in a Western society were compliant with Shariah laws.

Under Islamic Laws, banking and finance by Muslims must comply with certain principles - such as the fact that it is forbidden under the Holy Koran to charge, or receive, interest.

"The simple way of getting around that in Islamic law is that if I lend you money and you borrow it for a reason which will involve you making profit ... by agreement I can share in a percentage of that profit," said Kennedy.

But with a growing Islamic community in Australia, said Kennedy, there were few options for the Muslim community to pursue financial arrangements that met the legislative needs of the Australian financial system.

"The demand was big; they [the Muslim community) needed to be able to access money in Australia through the Western banking system which, of course, involves interest," he said. "It took a lot of thinking by me to create an idea which would be palatable to the Islamic community as far as using Western money is concerned - and having it accepted under Shariah law."

Kennedy worked with fellow M+K principal Peter Rawling on the fund, which essentially runs as a co-operative for the provision of predominantly Islamic financial services to clients through the MCCA. M+K said all of MCCA's financial services products had been carefully prepared in order to permit Islamic law structure and terminology, while also ensuring that the organisation complied with Australian legislation and regulations.

Kennedy believes such finance vehicles are pioneering the market for Shariah banking and Islamic finance in Australia. He cited research from Oliver Wyman's research division, Celent, which recently found that Islamic banking was growing across the world at a rate of 10 to 15 per cent per year.

- Angela Priestley