Asia presents huge developmental potential for Islamic finance and is likely to be the main driver of Islamic banking growth in the near future given the untapped potential in India, Bangladesh and Indonesia, according to a report. Islamic finance can be utilised for greater integration of financial markets with the real economy and for improvement of the economic balance between emerging and frontier markets, according to Kuwait Finance House Group report. Islamic banking is banking that is consistent with the principles of Sharia which prohibits acceptance of specific interest or fees for loans of money.
Hong Kong lawmakers passed a bill on Wednesday that will allow the AAA-rated government to raise around $500 million via sukuk, or Islamic bonds.
A debut sukuk from Hong Kong would help boost its Islamic finance credentials and position itself as a gateway between mainland China and investors in the Gulf and Southeast Asia.
The Legislative Council's bills committee confirmed the bill was passed in an email response to Reuters.
Regulatory reforms are underway to help Malaysia's Islamic banking industry expand further, but for government plans to succeed, they will need to be matched by action from some reluctant banks.
The government originally aimed for 20 percent market share for Islamic banks by 2010, but despite double-digit growth in both lending and assets, the sector has fallen shy of this mark.
While lenders in the United States and Europe have downsized their exposure in banking in compliance with Islamic law, Islamic financial institutions in Southeast Asia and the Middle East and Africa (MEA) region are taking over the initiative.
According to global consultancy Ernst and Young, worldwide investments done in line with Islamic law, known as Shari'ah, will reach 1.8 trillion U.S. dollars globally in 2013.
The Financial Services and the Treasury Bureau presented feedback last year on the consultation on proposed amendments to the Inland Revenue Ordinance and the Stamp Duty Ordinance to ease development of an Islamic bond, or sukuk, market in Hong Kong.
As part of the Hong Kong government's long-standing policy initiative to develop Islamic finance in the city, the bureau sent out a consultation paper with detailed proposals for the amendment of relevant tax-related legislation. The essence of the proposal is that a level playing field needs to be created to enable Islamic finance products to be structured in Hong Kong.
Abu Dhabi may find it cheaper to borrow with Islamic bonds than non-Sharia compliant securities, National Bank of Abu Dhabi and EFG-Hermes UAE Ltd say. The yield on the emirate's 5.5 per cent dollar-denominated non-Islamic note due April 2014 fell 3 basis points, or 0.03 percentage point, last week to 2.32 per cent on March 11, the lowest in a month on speculation the UAE will be spared from protests.
The yield on neighbouring Dubai's 6.396 per cent sukuk maturing in Nov-ember 2014 was at 6.23 per cent, data compiled by Bloomberg show.