SINGAPORE: Industrial trust (REIT) Sabana is the largest Islamic REIT globally, in terms of assets - and it is based in Singapore. Overall, shariah-compliant assets under management here have risen by 22 per cent since 2010, while banking assets have grown by more than 73 per cent. This is expected to grow further, as more Islamic funds in the Gulf seek foreign investment opportunities, particularly in Asia.
Speaking at the 6th World Islamic Banking Conference Asia Summit on Wednesday (Jun 3), Ms Jacqueline Loh, Deputy Managing Director at the Monetary Authority of Singapore, said: "GCC (Gulf Cooperation Council) banks have already been expanding their operations in Singapore in recent years to support the deployment of Islamic funds to corporates in the region, through Islamic bank , and sukuk issuances.”
She added: “The asset-backed nature of Islamic finance makes sukuk ideal for financing of infrastructure projects and would complement ongoing work by Singapore to enhance the bankability of infrastructure projects in the region and involve more capital market participants."
Sukuks are securities that are similar to bonds but they comply with the Islamic law. In the past five years, there were 31 sukuk issuances in Singapore - more than in other conventional jurisdictions, with total outstanding issuance reaching a high of S$3.8 billion in 2014, compared to S$440 million in 2009.
Industry participants said growth in this segment can help support the financing needs in the region. In particular, an estimated US$60 billion will be needed annually until 2022 for basic infrastructure projects in Southeast Asia.
Growing infrastructure needs and cross border trade and investments are expected to drive demand for Islamic finance in ASEAN. Observers said markets in the region are well-positioned to meet the rising demand, and are working together to capture these opportunities.
Said Bursa Malaysia chief Tajuddin Atan: "Growth of the global Muslim population coupled with increase of global HNWI have been a factor to the rising demand for Islamic finance services and . Importantly, the ASEAN region will need to mobilise these funds.
“With this interesting fund size, the development of ASEAN economies, the infrastructure needs and the cross border activities in trade and finance, the outlook of future demand for Islamic finance industry, to me, remains bright," he added. "It is expected to almost double or grow by 98 per cent by 2018 to bridge the demand for Islamic finance and to support mobilisation of funds in Southeast Asia alone."
Mr Tajuddin said this will bring up the question of product innovation, to preserve and grow the wealth of the Asian and ASEAN population: “So what the exchanges of ASEAN have done so far ... Malaysia together with SGX, the Singapore stock exchange, and stock exchange of Thailand have collaborated in developing the ASEAN exchanges to facilitate more efficient cross border trading among ASEAN."
In 2012, the Malaysia, Singapore and Thailand stock exchanges established the ASEAN trading link, to allow investors easier access to each other's markets.
(Channel News Asia / 03 Jun 2015)---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com