Islamic finance not fully tapped

KUALA LUMPUR: The US$1.6 trillion (RM5.07 trillion) global Islamic finance industry is growing at a third of its potential as efforts to introduce sukuk tax legislation in non-Muslim nations have stalled, according to CIMB Group Holdings Bhd. Syariah-compliant assets account for less than two per cent of conventional equivalents, providing ample room for growth, said Badlisyah Abdul Ghani, chief executive officer at CIMB Islamic Bank Bhd, in an interview. Mohd Effendi Abdullah, the head of Islamic markets at AmInvestment Bank Bhd, said there is a need for more education and innovative new products to achieve that objective. Efforts in South Korea, Australia, France and the United Kingdom to approve regulation have come to a halt, while Thailand is reviving plans to tap the market for the first time after a two-year delay. Nigeria is the latest to grant equal tax treatment, paving the way for a debut sukuk. Opposition from political and religious groups has prevented some nations from embracing banking that complies with the Quran's ban on interest, according to Effendi. "If the rules and regulations to make Islamic finance as accessible as the conventional market are in place, there's no reason why it cannot grow at least three to four times the pace of today," said Badlisyah recently. Global issuance of bonds that pay returns on assets to comply with Islamic principles dropped 8.6 per cent this year to US$19.2 billion after reaching a record US$46.4 billion last year, according to data compiled by Bloomberg. Some countries with Islamic regulations are still reluctant to sell syariah-compliant securities because the conventional market is more developed and issuers are more comfortable with such bonds, Effendi said, citing Singapore as an example. The syariah debt market is dominated by Malaysia, Indonesia and the six-member Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates. Malaysian Islamic finance consultancy Amanie Advisors said asset expansion is healthy and interest will pick up. Bloomberg http://www.btimes.com.my/Current_News/BTIMES/articles/CIMBII/Article/