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Friday, 26 September 2008

Thailand - Muang Thai to offer Islamic insurance and issue Islamic bond to fund Thai infrastructure

by Darana Chudasri/Bangkok Post

The Muang Thai Group has teamed up with the Islamic Bank to offer insurance services to Thailand's over eight million Muslims.

Eight types of Muang Thai Takaful life insurance policies will be promoted by the group's sales agents and through all 28 branches of the Islamic Bank.

According to Muang Thai Life Assurance president Sara Lamsam, the group also plans to launch Islamic non-life insurance products under Muang Thai Insurance.

Dheerasak Suwannayos, managing director of the Islamic Bank of Thailand, said the market for Islamic financial services is growing fast.

"The global Islamic banking system has been growing by 35% per year for several years compared with 3% to 4% for conventional banking," he said.

"Over the next 15 years, it is estimated that assets invested in the Islamic finance system will equal those in the conventional financial system."

Mr Dheerasak added that, while the US financial market was facing a credit crunch, the Middle East remained largely unaffected.

Although oil prices have swung sharply lower than earlier highs of nearly US$150 this year, the Middle East remains flush with cash.

"Thailand should consider the Islamic capital market as a funding alternative," Mr Dheerasak said.

He added that the Islamic Bank may alter how it floats up to $600 million in Islamic bonds in the third quarter of 2009.

The seven-year bonds were originally to have been offered 90% to the US market and 10% to the Middle East.

But after the liquidity crunch in the US, the Islamic Bank may look to raise 60% of funds from Middle Eastern investors and 40% from US investors. Funds raised from the issue will be used to finance investment in the government's infrastructure megaprojects.

"There is strong demand for Islamic investment certificates. The Palm Island project in Dubai, for instance, had $1.2 billion financed through Islamic bonds," Mr Dheerasak said.

"The certificate is not a bond really, but an ownership certificate, backed up by tangible collateral assets that clearly state the percentage ownership held by bondholders. This is very much different from, say, a collateralised debt obligation backed by loan assets."

The Islamic Bank meanwhile plans to launch a gold deposit product in October, followed by auto hire-purchase services in November.

The bank expects its customer base to reach 70,000 and its outstanding credit to hit 14 billion baht by the end of the year, with net profits for 2008 projected at 110 million baht.

The Muang Thai Group is the Islamic Bank's third business partner after Dhipaya Insurance and Kamol Insurance.

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