Growth of Islamic Finance in Singapore

Singapore is eyeing to play a bigger role in the rising Islamic finance industry, with its central bank looking into tax and other regulatory policies to expedite the issuance of sukuk and other Islamic market instruments in the citystate.

“The growth potential for Islamic finance in Singapore has yet to be fully realised and Singapore can play a role in giving growth of cross-border Islamic financing an even greater push,” said Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of Monetary Authority of Singapore at the opening of 4th World Islamic Banking Conference.

The Islamic finance industry has seen strong growth over the past year. The Islamic Financial Services Board (IFSB) estimated that assets of the global Islamic financial services industry grew by 20.4 per cent year-on-year to reach an estimated US$1.6 trillion at end of 2012.

Industry estimates show that the assets of the global Islamic financial services industry grew by some 20 per cent on-year to US$1.6 trillion as at the end of last year and industry players said prospects ahead are bright.

Sukuk or Islamic bond issuances totalled US$137 billion in 2012, up from US$92b in 2011. Yet there is still a gap to fill in the Islamic capital market. According to Mr Ng Nam Sin, Assistant Managing Director (Development) at the Monetary Authority of Singapore, the increased volume of issuance is still insufficient to meet the huge demand for Islamic assets for investments and Islamic financial institutions to manage their liabilities. Moreover, there is also a need to broaden the range of Islamic capital market products. Singapore already has the right infrastructure and good regulations already in place. Experts say Singapore’s strong regulatory environment and the depth and diversity of its capital markets will enable it to capture a bigger slice of the Islamic financing market.

More than US$11 billion worth of Islamic bonds (Sukuk) was issued in January 2013 alone, according to the 3rd Edition Sukuk report by the International Islamic Financial Market.

The momentum is set to continue, leading to more financial centres eyeing a slice of the Islamic financial pie, say experts.

A big opportunity lies in the rising connectivity between the Middle East and Asia, as well as robust growth in both regions.

Growth of Islamic Finance in Singapore