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Sunday, 14 December 2008

Singapore's Islamic finance draws interest anew


SINGAPORE is well-placed to ride a new wave of interest in Islamic finance by global investors who have been badly burnt by the Western financial system, a conference here heard yesterday.
Middle Eastern Islamic finance expert Hari Bhambra said top-notch wealth management infrastructure here can be used to tap into the fast-growing industry.
Since about 2005, Singapore has stepped up efforts to develop an Islamic finance industry by drawing on its existing strengths in wealth management, trade financing and capital markets.
Ms Hari, 34, a senior partner at Dubai- based consultancy Praesidium, believes Islamic finance is set to gain momentum as investors look for safer investments and liquidity in the Middle East - the global Islamic finance centre.
Speaking at a lecture at the National University of Singapore (NUS) co-organised by the NUS Business School's Saw Centre for Financial Studies and the Securities & Investment Institute, Ms Hari predicted that the financial and economic crisis would accelerate plans by financial institutions to introduce Islamic finance products.
'Islamic finance is not going to rescue us totally from what's happened,' she said. 'But investors have no confidence in the market...If you're unhappy with the conventional system, you might be more inclined to listen to an alternative now that seems more risk-averse, more secure.'
Islamic finance is based on syariah or Islamic law, and requires that any gains be derived from ethical and socially responsible investments. It frowns on interest-based banking as well as sectors such as pork, gambling and pornography.
About 300 Islamic financial institutions operate worldwide. The sector is valued at about US$1 trillion (S$1.5 trillion) - and is growing at 15 per cent a year.
Mr Nick Brewer, vice-president of global banking solutions at SunGard, which provides risk and compliance solutions for Islamic banking institutions, told The Straits Times that the sector is likely to perform more strongly over the next two to three years than other banking sectors.
He estimates there will be 850 to 1,200 Islamic funds around the world by about 2010-2011.
Ms Hari said many financial institutions here already support syariah-compliant funds around the world as custodians or administrators. Greater efforts could boost this number by making the Republic more conducive for such funds, she added.
'Without intentionally promoting Singapore as an infrastructure hub, it's already happening,' she said.
She added that the industry still faces many challenges. For instance, across different jurisdictions, there is still a lack of syariah standardisation, as well as differing levels of know-how, which could cause the industry to fragment as it moves into a more mainstream market.
But Singapore can help overcome some of these obstacles by, for example, standardising the operational infrastructure surrounding Islamic finance.
Such steps could include standardising or streamlining the appointment of fund custodians or administrators and equipping them with industry best practice.
Singapore is also already a recognised jurisdiction, which enables distributors of Islamic financial products here to sell their products in other markets. That, combined with improved infrastructural support, would ensure that Islamic finance business gravitates towards Singapore, Ms Hari said.
(The Straits Times)
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