In news that startled many observers this week, Ireland's prime minister  launched an unexpected bid to become the home of Islamic finance in Europe - even as the recession hit nation seeks to rebuild its financial services sector.

Enda Kenny told the Irish Funds Industry Association (IFIA) this week that he was doing everything he could to 'ensure' Dublin became 'a centre of excellence for Islamic finances.'

In an announcement that raised some eyebrows Kenny said that Irish tax laws and financial regulations are now sharia-compliant, and the Irish government recently signed double-taxation agreements with Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates.

'There is first-mover advantage. If they (Islamic institutions) feel comfortable in a particular jurisdiction and you develop a cluster, more will follow,' said Ken Owens, chairman of the IFIA.

Sharia law prohibits the payment of interest on loans or overdrafts, or the receipt of interest, and also prevents investment in certain categories including defence, adult entertainment and gambling.

'Their investment universe is quite limited. Islamic funds want to own the ship or the building, not a share in it. They want to own things outright because they can't pay interest. They want commmodities, infrastructure, manufacturing, property,' Owens told The Guardian.

Owens said Irish and UK financial institutions, which were devastated by the financial crisis, saw opportunities worth billions in Islamic finance, and were either seeking to get a foothold in Islamic countries or attract Islamic institutions to Dublin.

The value of funds administered in Dublin is worth 1,890 billion Euro, split evenly between Irish and non-domiciled funds.