Growth of Islamic finance may waver
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Bloomberg
Oluşturulma Tarihi: Mayıs 09, 2009 00:00
SINGAPORE - This year will be one of slower growth for the Islamic finance industry, which has boomed for the past decade. Sales of Islamic bonds, or sukuks, plummeted last year as oil prices rapidly declined and the global financial crisis hit investor confidence. Still, the industry looks promising due to its risk-sharing concept
The Islamic finance industry will have a "year of slower growth" in 2009 after expanding assets by 28 percent globally last year, Saudi Arabia central bank Governor Mohammed al-Jasser said in Singapore on Thursday.
"The industry has had an annual growth rate of 20 to 30 percent over the last 10 years," al-Jasser said in a speech. "There are signs that 2009 will be a year of slower growth but it should stay in positive territory."
Sales of Islamic bonds worldwide plunged in 2008 as tumbling crude oil prices sapped demand from the Middle East, falling to $13.9 billion from a record $31 billion in 2007.
Singapore, which said last year it was seeking to develop a market in Islamic real-estate investment trusts, said Wednesday that effort may be delayed amid the global property slump.
Sales of sukuk, or Islamic bonds, have reached $3.4 billion this year. About $1.3 billion of sovereign sukuk bonds may be issued in Indonesia, Malaysia and Singapore in the first half of this year, Monetary Authority of Singapore Managing Director Heng Swee Keat said on Thursday.
Annual summit in Singapore
Central bank officials from the Middle East and Asia gathered in Singapore for the annual Islamic Financial Services Board summit to discuss the direction and development of the industry.
Rising oil wealth and government initiatives have turned Islamic banking and insurance into an industry with $1 trillion in assets globally. Islamic financial products comply with the religion’s ban on the payment of interest and investment in industries such as gambling.
The current global conditions provide "excellent conditions" for growth in Islamic finance as risk-sharing should be the first thing on the mind of investors, al-Jasser said. There’s a "huge potential" for growth in the Islamic insurance industry, he said. Saudi Arabia alone has 26 new insurance companies operating under the so-called takaful licenses, he said.
Singapore announced a sukuk, or Islamic bond program, in January as it sought a larger pool of international investors. It issued the debt to the Islamic Bank of Asia, and is "evaluating" requests from others for more of the bonds, Heng said.
Singapore, which has signed free-trade agreements with Jordan and the Gulf Cooperation Council, expects more of such accords between Asian and Middle East nations, Heng said on Thursday.
City-state relaxes rules
Meanwhile, the Monetary Authority of Singapore issued new Islamic finance regulations to boost the industry, betting demand will grow as investors seek alternative assets.
There’s still interest in bonds and other products that comply with Muslim Shariah law amid the global financial crisis, the central bank’s Managing Director Heng Swee Keat said in an interview in Singapore on Wednesday. The city state will maintain its regulation standards as it grows its Islamic finance market, he said.
"Maintaining a very high standard of regulation is a very important part of this whole development effort," Heng said. "It’s undesirable to pull the shoots to get it to grow faster.
It has to be organic."Singapore-based banks may now enter into so-called diminishing Musharaka financing and spot Murabaha transactions, the central bank said in a statement. The central bank will also ensure equal tax, regulatory and liquidity treatment of Singapore-dollar Islamic bonds with government securities.
"These various changes will allow banks to conduct a wide range of Islamic financing activities, and to have greater flexibility in structuring instruments to meet their risk management needs," the central bank said.
The central bank is also planning to issue more licenses for Shariah-compliant funds, depending on demand for the products, Heng said.
"The industry has had an annual growth rate of 20 to 30 percent over the last 10 years," al-Jasser said in a speech. "There are signs that 2009 will be a year of slower growth but it should stay in positive territory."
Sales of Islamic bonds worldwide plunged in 2008 as tumbling crude oil prices sapped demand from the Middle East, falling to $13.9 billion from a record $31 billion in 2007.
Singapore, which said last year it was seeking to develop a market in Islamic real-estate investment trusts, said Wednesday that effort may be delayed amid the global property slump.
Sales of sukuk, or Islamic bonds, have reached $3.4 billion this year. About $1.3 billion of sovereign sukuk bonds may be issued in Indonesia, Malaysia and Singapore in the first half of this year, Monetary Authority of Singapore Managing Director Heng Swee Keat said on Thursday.
Annual summit in Singapore
Central bank officials from the Middle East and Asia gathered in Singapore for the annual Islamic Financial Services Board summit to discuss the direction and development of the industry.
Rising oil wealth and government initiatives have turned Islamic banking and insurance into an industry with $1 trillion in assets globally. Islamic financial products comply with the religion’s ban on the payment of interest and investment in industries such as gambling.
The current global conditions provide "excellent conditions" for growth in Islamic finance as risk-sharing should be the first thing on the mind of investors, al-Jasser said. There’s a "huge potential" for growth in the Islamic insurance industry, he said. Saudi Arabia alone has 26 new insurance companies operating under the so-called takaful licenses, he said.
Singapore announced a sukuk, or Islamic bond program, in January as it sought a larger pool of international investors. It issued the debt to the Islamic Bank of Asia, and is "evaluating" requests from others for more of the bonds, Heng said.
Singapore, which has signed free-trade agreements with Jordan and the Gulf Cooperation Council, expects more of such accords between Asian and Middle East nations, Heng said on Thursday.
City-state relaxes rules
Meanwhile, the Monetary Authority of Singapore issued new Islamic finance regulations to boost the industry, betting demand will grow as investors seek alternative assets.
There’s still interest in bonds and other products that comply with Muslim Shariah law amid the global financial crisis, the central bank’s Managing Director Heng Swee Keat said in an interview in Singapore on Wednesday. The city state will maintain its regulation standards as it grows its Islamic finance market, he said.
"Maintaining a very high standard of regulation is a very important part of this whole development effort," Heng said. "It’s undesirable to pull the shoots to get it to grow faster.
It has to be organic."Singapore-based banks may now enter into so-called diminishing Musharaka financing and spot Murabaha transactions, the central bank said in a statement. The central bank will also ensure equal tax, regulatory and liquidity treatment of Singapore-dollar Islamic bonds with government securities.
"These various changes will allow banks to conduct a wide range of Islamic financing activities, and to have greater flexibility in structuring instruments to meet their risk management needs," the central bank said.
The central bank is also planning to issue more licenses for Shariah-compliant funds, depending on demand for the products, Heng said.