The recent decision by South Korea's central bank to join the Islamic Financial Services Board (IFSB), one of the main standard-setting bodies for Islamic finance, as well as Japan's Bank for International Cooperation’s proposal to issue ringgit sukuk shows a second wave of interest in Islamic Finance for the East Asian economic powerhouses.
Unlike European nations looking to tap the Gulf Sukuk markets, South Korean and Japanese corporations have expressed interest in issuing Ringgit denominated Sukuk out of Malaysia, a Kuala Lumpur based Islamic banker said today with issuances likely in 2015.
Such issuances will further reinforce confidence in the Malaysian Sukuk market to meet issuer's requirements as well as bolstering its already number one position as the preeminent global Sukuk market.
Whilst Japan's engagement in Islamic Finance is nothing new with Nomura Holdings already having issued a 2 year, $100M Ijara Sukuk in Malaysia in 2008, the rekindling of South Korean interest marks a change of direction.
In 2010, South Korean legislators blocked Tax laws, which would have given tax neutrality to alternative financial products such as sukuk. This is one of the few Islamophobic instances observed in the development of Islamic Finance in non-Islamic nations, and was acknowledged by South Korean officials as being religiously motivated after lobbying from powerful Christian evangelical groups.