Islamic Banking

SINGAPORE: Singapore will host the annual summit of the Islamic Financial Services Board in May next year.

It will be the first time the event will be held in Asia. Previous summits were held in London, Doha, Beirut and Dubai. This year’s summit will be held in Amman.

The annual summit is the single largest concentration of top financial regulators from IFSB member countries taking part in an industry-led event.

Singapore will play host to central bank governors, top executives of securities and insurance regulators, and major private sector participants, who will discuss key issues and developments on the regulation and supervision of Islamic financial services.

The IFSB is the international standard-setting organisation that promotes the soundness and stability of the Islamic financial industry.

The IFSB currently has 163 members, comprising 41 banking, securities and insurance regulatory and supervisory authorities, six international organisations and 116 market players and professional firms from over 31 jurisdictions worldwide.

Hosting the event will underscore Singapore’s role as an international financial centre, says the Monetary Authority of Singapore (MAS). And it comes amid a push to develop the fast-growing Islamic financial sector in Singapore.

Singapore is gearing up to offer more Shariah-compliant products and services as part of efforts to tap into the industry, currently valued at US$750 billion and growing by over 20 percent annually.

In recent years, Singapore has taken steps to level the playing field between Islamic financing and conventional financing deals.

But the MAS notes that there is currently a shortage of expertise in the area.

Tai Boon Leong, MAS executive director, said: "As the Islamic industry develops, we foresee that there will be a need for adequate supply of talent and expertise in Shariah-compliant concepts and structuring as well as Shariah law.

"We urge more training institutes and other ancilliary service providers to offer such training… MAS will work with interested parties to tie up with local educational institutes and bodies to offer such programmes here."

Mr Tai was speaking at the inaugural Singapore Islamic Finance News Forum on Wednesday.

According to some industry players, the opportunities for Islamic financial activities in Singapore are huge.

CIMB Islamic Bank’s CEO, Badlisyah Abdul Ghani, said: "Islamic financial market is not just confined to capital market - it is banking, it is ‘takaful’ which is Islamic insurance, it is wealth management, it is asset management.

"Singapore has a lot of value proposition in these activities. It’s a matter of choosing which one to do first, and eventually to end up with a full spectrum of Islamic financial activities in Singapore."

Source: Channel News Asia

Singapore’s first Islamic bank is looking for opportunities in Qatar, its chief executive officer has said.

The Islamic Bank of Asia, with a paid up capital of US$500mn was incorporated in May 2007, and its major shareholders include DBS, Singapore’s largest bank and some prominent businessmen based in the GCC region. Islamic Bank of Asia (IB Asia) chief executive officer, Vince Cook told Gulf Times here though the bank had not set any timeframe to expand to Qatar, IB Asia wanted to achieve it in the “medium term”.

“Qatar is a booming and very promising economy. We believe we will have significant opportunities there for growth. We have our eyes definitely set on Qatar,” Cook said without elaborating. (A general manager with QNB in charge of corporate banking and capital markets till last year, Cook had visited Qatar in early 2008 as part of a high-level Singaporean delegation led by the city state’s senior minister, Goh Chok Tong.

He said IB Asia focused on wholesale commercial banking, corporate finance, capital markets and private banking services.

“We are well-versed in typical Shariah-compliant structures that employ concepts such as Murabaha, Musharaka, Mudaraba, Ijarah and Istisna. We continually seek to create new and innovative solutions to our clients’ needs, especially in the Gulf region who are seeking new markets and innovative ways to protect and grow their wealth in line with Islamic principles,” he said.

Asked whether IB Asia would have adequate room for expansion given the neighbouring Malaysia’s head start in Islamic banking, Cook said: “We are not in competition with anyone. We are only trying to complement efforts in Islamic banking which is growing by leaps and bounds.” He said, “Although we are a dedicated and independent Islamic bank, we are fortunate to have promoters such as DBS, the Southeast Asia’s largest bank, and some prominent investors based in the GCC region. “Our goal is to create one of the largest, most profitable, innovative and truly Islamic universal banks in the world with significant positions across the GCC region and Asia.”

Cook said: “IB Asia is ideally positioned to facilitate access to Asian and Middle East investment opportunities and distribution capabilities.” He said IB Asia together with DBS was a mandated lead arranger (MLA) in many Islamic deals including the US$600mn Murabaha facility for Qatar’s Barwa in June 2007.

“We look forward to playing a key role in such syndications in future,” Cook said. The Singapore-headquartered IB Asia received a banking licence from the Central Bank of Bahrain to set up a representative office in the kingdom in October last year.

Besides being QNB general manager (corporate banking and capital markets) Cook was also the chairman of Qatar Capital Partners (when it was under formation), and a director of both QNB International Holdings and Ansbacher Group Holding. During this period he was responsible for the bank’s Islamic business before spinning it out into a new unit QNB Al Islami. Under his leadership, QNB launched the first corporate sukuk transaction in Qatar.

Source: Gulf Times

OCBC Bank has announced another first in Islamic Banking in Singapore, with the launch of the OCBC Treasury Mudharabah Account (OTMA), a new Shari’ah approved product that is based on the concept of ‘Mudharabah’ or ‘profit sharing’.

OTMA was specifically developed to address an increasing need for more Islamic treasury products among Muslim corporate customers, Islamic financial institutions, Non-Profit Organisations, mosques and other Islamic bodies both in Singapore and the region.

With OTMA, Muslim customers can now have access to a Shari’ah compliant product based on the ‘Mudharabah’ model, where profit sharing ratios are predetermined and mutually agreed between the customer and the Bank on the onset of the investment.

Although potential returns will depend on the customer type, investment amount and tenure, OTMA is designed to remain flexible by offering a shorter investment term starting from one month and a wider range of investment amounts and denominated currencies which include the SGD, USD, EURO, AUD and GBP.

“The introduction of OTMA is another example of OCBC Bank’s attention to customer feedback. Over the years, we have received good response to our Islamic Banking treasury products, hence the impetus for us to continually develop new Shari’ah compliant solutions to cater to the fast growing market demand,” said Haji Ismail Bin Syed Ahmad, Head of Islamic Banking Unit, Group Treasury, OCBC Bank.

To ensure that the Bank’s Islamic treasury products and services are relevant and meet the needs of customers from all market segments, OCBC Bank constantly seeks to understand the Muslim banking community better whileassessing emerging market opportunities. This is in line with OCBC Bank’s aspiration to be the forerunner in the development of relevant Shari’ah compliant products for the Muslim community in Singapore and the region. “OCBC Bank has always regarded Islamic Banking as an important segment of our market. We were the first bank in Singapore to launch Islamic depository products and facilities such as the OCBC Islamic Treasury Facility (OITF) and OCBC Ijarah Participating Facility (OIPF). These products are approved by the OCBC Shari’ah Advisory Council, giving customers the added assurance that their funds are strictly invested only in protected Shari’ah compliant assets,” said Haji Ismail who is also a member of the OCBC Shari’ah Advisory Council In 1998, OCBC Bank launched the OCBC Al-Wadi’ ah Savings and Current Accounts for both individual and corporate customers, followed by the introduction of the OCBC Al-Wadi’ah Savings Monthly Savings Account and the Zakat Auto-Deduction Facility, a first in Singapore that provides our Muslim customers with a convenient and disciplined way to save and also pay their obligatory tithe or ‘Zakat’ from their OCBC Bank Accounts to the Islamic Religious Council of Singapore (MUIS).

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SINGAPORE : Some of the top bankers from the Gulf are in Singapore to encourage Asian countries to take advantage of the growth in Islamic banking.

Arab bankers want to tap into Asia’s experience. A special Arab Asia Financial Forum was held on the sidelines of the IMF/World Bank meetings.

Unlike conventional banking, Islamic law prevents the collection of interest payments or trading in financial risk, which is seen as gambling.

And it is big.

According to the Union of Arab Banks, there are some 470 Arab banks managing assets worth more than US$1 trillion, US$632 billion of which are deposit-based.

While growth in this sector is healthy in the Gulf states, banks there are looking to expand beyond the Arab world and Asia is one destination.

Dr Joseph Torbey, President of the Union of Arab Banks, said: "Also let me take the opportunity to express the Union of Arab Banks’ willingness to further cooperate in the future with international organisations to enhance the cooperation between Asian and other organisations, and contribute effectively and increasing the volume of economic exchanges between Asian countries and the Arab world."

Resource-rich states like Qatar are looking beyond just refining crude oil in Singapore.

Mr R. Seetharaman, Deputy Chief Executive of Doha Bank, said: "We need professional intermediaries, knowledge-based by collaboration. Also, billions of dollars have been going on capital expenditure for infrastructure creation as well as industry expansion from Qatar. Singapore banks can participate in the project financing opportunities."

But the synergies, knowledge transfer, and investments cannot flow if challenges are not tackled.

Islamic bankers say upgrading Islamic banking to international standards is one key factor in making the sector flourish.

Dr Torbey said: "Today some Arab markets specifically Bahrain, Qatar, Saudi Arabia, and UAE, are in the process of building comprehensive financial hubs to attract most Arab and international capital as well as international financial and banking institutions."

Mr Seetharaman added: "Singapore has been the third largest partner for Qatar. You look at its objective. Qatar is a huge reserve of oil and gas, and you have a refinery here. Singapore is in between Japan and Qatar, the largest trading partner for Qatar is Japan.

"As a financial centre, it can add value. We need Islamic finance, we need professional intermediaries knowledge-based by collaboration. Also billions of dollars have been going on capital expenditure for infrastructure creation, as well as industry expansion from Qatar. Singapore banks can participate in the project financing opportunities." - CNA/de

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Singapore, 29 September 2005…The Monetary Authority of Singapore (MAS) today announced that banks in Singapore will be able to offer an important form of Islamic finance known as Murabaha. It is commonly used as short-term financing and in trade finance.

2. MAS issued the Banking (Amendment) Regulations 2005 to exempt Murabaha financing from the restriction in the Banking Act against non-financial activities. With the exemption, banks may offer Murabaha financing by purchasing goods on behalf of a customer and selling the goods to the customer at a marked-up price to be paid at a later date. 
 
3. MAS’ exemption of Murabaha financing follows its discussions with market participants and its ongoing review of the regulatory framework to facilitate the development of Islamic finance. Banks which offer Murabaha financing will add breadth and depth to the range of financial products and services offered in Singapore.

4. "MAS recognizes that Islamic finance is gaining global importance. It is an important complement to the suite of products and services that Singapore as an international financial centre can offer. MAS is open to introducing refinements such as this to our regulations to ensure that our framework is conducive to the development of Islamic financial services", said Mr Heng Swee Keat, Managing Director of MAS.

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Editor’s Note

New Regulation 22 allows banks to carry out the business of purchasing and selling an asset provided that the purchase is at request of the customer and is for the purpose of financing. The bank sells the asset to the customer at a marked-up price, which will be paid at a later date. The customer is under a legal obligation to take delivery of the asset. In addition, the bank should not be exposed to any market risk from this financing transaction.

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There will be no separate banking regulatory framework for Islamic financing in Singapore.

Instead, the Monetary Authority of Singapore said it would promote Islamic financing using the existing regulatory framework.

In what is seen as a step forward, the central bank announced on Thursday that all banks would now be allowed to offer an important form of Islamic finance known as Murabaha.

According to the central bank, not having a separate regulatory framework could make it less burdensome for Islamic banks to set up shop here.

Heng Swee Keat, Managing Director, MAS, said: "As many of the supervisory processes and prudential measures are common to both conventional and Islamic banking activities, MAS’ assessment is that there is no need to create a separate islamic banking supervisory framework in Singapore. Hence, MAS is open to admitting Islamic banks based on prudential criteria for admission."

From Thursday, all banks will be allowed to offer Murabaha which is commonly used as short-term financing and in trade finance.

It is a contract under which a client wishing to buy some items requests the Islamic bank to purchase them and sell them to him at cost plus a declared profit.

Mr Heng said: "Previously, MAS regulations impose broad restrictions on banks against conducting non-financial activities. Starting from Thursday, MAS will exempt Murabaha financing, which requires the banks to purchase goods on behalf of its customers, and to sell the goods to the customer at a mark-up, from this restriction."

The move is seen as significant.

Ahmad Khalis A Ghani, Chief Executive Officer, IFIS Business Advisory, said: "With the allowing of Murabaha processes, it will allow banks to develop many syariah-compliant products, whether in the retail side, trade financing and other services as well. There are also many bankers in Singapore who are able to create interesting financial products. With this talent, if we assimilate with expertise in Islamic banking, it will position as an interesting, reliable financial hub, with Islamic expertise in its suite."

The MAS sees explosive growth ahead for Islamic financing.

Mr Heng said: "Globally, we see all areas of islamic capital markets growing rapidly. Global asset size for Islamic finance is estimated at between 200 and 400 billion US dollars - and growing at 15 percent per annum. Global issuance of sukuk is expected to top US$10 billion this year, compared with just US$2 billion in 2003."

Rising oil prices are helping the push towards Islamic finance in the region as cash-rich businesses in the Middle East look for opportunities to raise their exposure in Asia.

Mr Heng said: "Asia is estimated to need over a trillion dollars in infrastructure financing in the coming years to build power plants, gas pipelines, toll roads, airports and telecommunication systems."

The MAS said all these projects were well-suited for Islamic financing.

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