Looking for a win-win situation, Thai bankers are eyeing to lure Islamic finance investors to pump money into infrastructure projects in Thailand in exchange of gaining a foothold in a nearly untouched market.
"A lot of money has been received by the rise in petrol and that needs to be reinvested," Dheerasak Suwannayos, president of the state-owned Islamic Bank of Thailand, was quoted by Reuters as telling an industry event in Bangkok on Wednesday, June 29.
"Not many sukuk (Islamic bonds) have been recently issued so it's an opportunity to grab that liquid market."
The booming Islamic finance industry was propelled into the global spotlight in the aftermath of the financial crisis as it was seen as a more ethical, less leveraged way of banking.
Neighboring Malaysia issued on Wednesday a $2 billion sukuk, almost 30 percent of which was mopped up by Middle Eastern investors.
Infrastructure investment is expected to jump in Thailand as well as other Southeast Asian countries.
Dheerasak cited plans to expand Bangkok's public transport and the city's main airport.
So far Thailand has been able to use the abundant liquidity in local markets to finance infrastructure projects.
Dheerasak said companies such as Thailand's top energy firm, PTT were increasingly diversifying from their home market and needed to raise finance in dollar markets.
A PTT unit issued a local-currency Islamic bond in Malaysia last year, the first time a Thai company had tapped Islamic capital markets abroad.
Dheerasak also said Thai Airways was considering offers from Middle Eastern providers of airplane lease financing.
Thailand has a Muslim population of about 9.5 million, many of whom live in rural areas not well served with banking products.
Bankers believe that marketing campaigns are still needed to raise awareness about the Islamic finance products.
"We need more marketing here in Thailand, we need to clarify what a sukuk is and that it is comparable to a conventional bond," Konthee Prasertwongse, senior vice president at CIMB Thai Bank, told Reuters.
Thailand has been planning for some time to issue a 5 billion baht ($161 million) sovereign sukuk to help the sector get off the ground.
Dheerasak said the issue could come to the market this year after necessary tax legislation was passed in May.
Islamic Bank of Thailand, set up in 2003, has already turned buses into mobile branches to reach out to communities.
Konthee said a drive by the Islamic Bank of Thailand to introduce the industry into the local market means more options for the country's Muslim population.
"Islamic Bank of Thailand is pushing a lot of products into the retail market. The Muslims in the past did not have any alternatives," Konthee said.
The Islamic banking system has been already practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
In a report last November, PricewaterhouseCoopers said the $1 trillion Islamic finance industry was expected to grow by between 15 to 20 percent per year going forward.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Transactions by Islamic banks must be backed by real assets, not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.