According to new report by Standard & Poor's (S&P) Islamic finance is likely to keeping growing in 2010, fueled by demand from Southeast Asian countries and helped by further inroads being made in developed Western markets.

The S&P report claims the assets of the top 500 Islamic banks expanded 28.6% to total $822bn in 2009, compared with $639bn in 2008. While total assets at Islamic financial institutions in the Gulf Cooperation Council (GCC) have grown continuously between 2003 and 2008, to reprent $288.2bn at the beginning of 2009.

However, it said the main reason why Islamic financial institutions appear to have weathered the global financial crisis better is due to their rules which prohibit interest. It said: "This is the reason why Islamic banks didn't invest in structured products and so have not suffered from the fall in some of these instruments' values."

Going forward it did note Islamic financial institutions did not completely side-step the global economic slowdown, flagging economic recession, scarce liquidity, stock market declines, and falling real estate prices in some GCC countries as hitting the profitability of Islamic banks. It said: "Some of the negative rating actions that Standard & Poor's has taken on some Islamic banks over the past 18 months reflect our view of the impact of these adverse changes.

It also said it was uncertain as to the size of demand for Shariah-compliant products and stressed that to build the foundation for Islamic finance development outside of its countries of origin there is a need to ensure the same treatment for Islamic and conventional banks from a regulatory and tax perspective.