Singapore and Malaysia should look for more cross-border opportunities to collaborate on Islamic financing.
This is according to speakers at the inaugural Islamic Finance Services Conference on Tuesday.
Experts said Singapore should also widen its breadth of Islamic finance products to cover the areas of retail, real estate and equities, in order to spur growth in this area.
In his welcome remarks at the Islamic Finance News Singapore Roadshow, Ng Nam Sin, Assistant Managing Director of the Monetary Authority of Singapore (MAS), pointed out that, despite the expiry of certain tax incentives, Singapore is still looking to develop the city's Islamic finance capabilities by ensuring it a level playing field with conventional financial products.
As Malaysia’s Islamic banking industry records new growth and reaches new heights, neighboring Singapore tries to catch up but continues to fail. Most experts attribute this deficit to a lack of domestic interest, and an inability to garner investors from outside.
Islamic banking is widely hailed as being the fastest-growing financial field, at roughly 15 to 20 percent each year, by many banking experts. However, Singapore has been unable to take advantage of the sector, which is expected to reach $1.1 trillion globally in 2012.
Ahmad Mohamed Ali, president of the Jeddah, Saudi Arabia-based Islamic Development Bank, comments on plans to set up a Shariah-compliant megabank. He commented in an interview at the World Islamic Banking Conference in Singapore today.
“There’s a team working very hard to finalize this, hopefully by the end of this year. It’s very important for the Islamic banking industry to manage their liquidity in a professional way. The megabank will issue papers and instruments which will allow Islamic banks to buy or disinvest them.”
Syed Alwi bin Mohamed Sultan, the Kuala Lumpur-based head of Islamic banking for Asia Pacific at BNP Paribas Malaysia Bhd., discusses the trends in Islamic finance at the World Islamic Banking Conference in Singapore.
“There’s greater diversification of the investor base. What we have seen from recent issuance is that there are greater non-Islamic investors coming in to accept sukuk or invest in sukuk instruments. The Khazanah Nasional Dim Sum sukuk witnessed more than 50 percent from Singapore and Hong Kong investors.
With an estimated value of around $1.1trn in global assets, Islamic finance has maintained continuous growth against the backdrop of global economic turmoil across many of the conventional world markets. Yet while their inherent conservatism and overweight exposure to low risk investment has proven a strong point for Islamic-compliant financing of real estate, as safer investments have generally out-performed the market, the ongoing lag in Shari’a rules harmonisation is threatening to stifle their full potential in the Middle East and Islamic Asia, reflects Mark Faithfull.
Islamic finance could provide some of the multi-billion-dollar loans needed by Asia to pay for $US8 trillion in infrastructure costs over the next decade, says ratings agency Standard and Poor's (S&P).
Islamic financing is a growing source of loans worldwide and is now a better way to fund huge Asian infrastructure deals than banks, S&P says in a new report.
The Government will issue new income tax rules for Islamic finance products, said deputy chairman of the Monetary Authority of Singapore Mr Lim Hng Kiang.
The new regulations, to be issued by the Ministry of Finance, will cover financing agreements based on financing through partnership agreement, project financing and the interbank placement of funds, Mr Lim said.
Takaful Insurance companies around the world especially in the Middle-East, North Africa and South Asia have set a target of $12billion USD premium generation from takaful insurance for 2011 as the demand by Muslim populations across the globe for the products are on the rise. Takaful insurance operators at the sixth Annual World Takaful Conference held in Dubai predicted a $12 billion USD premium income from Takaful insurance this year. The $12billion projected premium from takaful insurance represents 31 per cent increase from the $9.15 billion income generated from the Islamic products in 2010
With a supportive regulatory and tax framework and proximity to large Muslim populations in its neighbourhood, it is only a matter of time before Singapore becomes a major player in Islamic finance, experts say.
Analysts say Sukuk, or Islamic bonds and Syariah-compliant real estate investment trusts, are two products that have strong growth potential in Singapore.