KUALA LUMPUR, Feb 23: A mega Islamic bank that can fund large projects in Muslim countries is still being developed, the General Council for Islamic Banks and Financial Institutions (CIBAFI) said on Friday, denying talk that it had scrapped plans to set up the bank.

A large Islamic lender would help develop the Islamic finance industry which has $300bn of assets but lacks well-capitalised banks.

About a quarter of the around 285 Islamic lenders worldwide are reported to have less than $25 million in paid-up capital.

The Bahrain-based CIBAFI had planned to launch a $1 billion Islamic bank in 2006, according to media reports.

The delay in the roll out had led to speculation that the council had called off its plans.But the council said plans to establish the bank were intact.

"A committee of the IDB, CIBAFI, and other parties has been established to follow up the establishment of the Islamic Mega Bank," Shaymaa Masri, the council's Director of Public Relations and Marketing, told Reuters.