Singapore to cultivate Islamic finance sector

Singapore to cultivate Islamic finance sector

SINGAPORE: Singapore’s central bank said it prefers that the island’s private lenders and wealth-management companies create products that comply with Islamic principles, freeing it to build an environment where such instruments can be developed.

“We’re leaving it mostly to the private sector,” said Teo Swee Lian, deputy managing director of the Monetary Authority of Singapore, said in an interview Tuesday in Dubai. “We have been fine-tuning our rules and regulations to facilitate the offerings of Islamic finance products.”

Singapore is encouraging companies to introduce more products that comply with Islamic law, or Shariah, to increase its share of the market.

The assets managed under Islamic rules will almost triple by 2015 to $2.8 trillion, according to the Islamic Financial Services Board, an association of central banks based in Kuala Lumpur.

The city-state has about 2 billion Singapore dollars, or $1.32 billion, of Shariah-compliant property funds and 500 million dollars of Islamic insurance funds, the central bank said in a September report.

DBS Group Holdings, Southeast Asia’s largest bank, announced last week that it would set up Singapore’s first Islamic bank this month, together with 22 Middle East investors, to tap increased demand for such investment.

DBS will own 60 percent of the bank, which will be called the Islamic Bank of Asia, and will contribute $250 million to the joint venture’s initial working capital. The Islamic bank will offer corporate, capital market and private banking services.

“It’s not just Islamic funds that are looking for Islamic products,” Teo said. “Many of the other fund managers are also looking at any asset class that offers them diversification, so secular fund managers are also looking at the possibility of Islamic products.”

The island is also vying with its neighbor Malaysia to boost its market as a destination for Islamic wealth. Malaysia, where about 60 percent of the population is Muslim, is positioning itself as a center for Islamic financial services to attract investors from the Middle East and to compete with Bahrain and other Persian Gulf states.

Malaysia sold the world’s first Islamic global bond in 2002. Islamic financial assets in Malaysia have increased to 133 billion ringgit, or $39.1 billion, accounting for more than 12 percent of the country’s total banking assets, Prime Minister Abdullah Ahmad Badawi said in March.

Singapore sees itself as a financial center with offerings of Shariah-compliant products as one of many choices for investors, Teo said.

“We do not aim to be a purely Islamic financial center, that’s where there is a difference between ourselves and some of the other centers,” she said. “It’s not going to be the be-all and end-all for us. What we are going to do is to set up structures that accommodate Islamic finance products.”

Demand for Islamic investments is growing as oil money floods into the Persian Gulf, which pumps about 20 percent of the world’s crude oil.

“It’s a huge and growing market, growing very rapidly, so there’s a lot of room for more than one center,” Teo said. “It’s not a zero-sum game, one center or none.”

The island can also be a “gateway” for Asian investors looking for opportunities in the Middle Ease and vice versa, she said. “There is a lot of Asian money that is looking for investments in the Gulf region and a lot of Gulf money looking for investments in the Asian region,” Teo said. “We hope to be able to facilitate those flows.”

source : iht