wsj.com - Don’t expect a surge in Australian Islamic finance even when the country’s government finally releases a widely expected proposal to change tax guidelines, opening up the local market to more of these type of products. Still relatively obscure here, the major Australian banks offer only a small number of retail investors watered down versions of the products that prohibit the payment of interest in compliance with Islamic laws. (source)
- Bloomberg
- Will Islamic finance catch on Down Under?
But few bankers expect that the new rules designed to free up the Islamic finance market will work.
“When they approve the laws, we’re unlikely to see a wall of supply in Islamic transactions,” said Sean Henderson, head of debt capital markets for HSBC in Australia, noting buyers of these Islamic products are mostly offshore.
That’s a lost opportunity for Australia’s banks, which risk missing out on a modest chuck of the more than US$1 trillion global market for Islamic finance, according to estimates of the industry by Ernst & Young. Starved of new opportunities for revenue growth in a relatively small domestic market, Islamic finance could offer Australia’s big-four lenders with new product streams that would tap into one of the country’s fastest growing demographic groups, Muslims.
Government statistics show about 400,000 Muslims live in Australia. The country is also right next door to one of the biggest Muslim nations, Indonesia. About 62% of the world’s Muslim population within reach of Australia’s financial orbit.
Islamic finance prohibits the earning of interest, choosing to focus instead on the buying and selling of tangible assets such as property under the principles outlined within Sharia law.
Still some companies Down Under are trying to get ahead of Canberra’s expected new legislation with new Islamic finance products in the pipeline.
Asset-managers Crescent Investments Australasia just recently launched the first Islamic finance fund locally.
Working with the Australian Securities & Investment Commission, or ASIC, Chief Executive Chaaban Omran was able to create a fund that will meet all the principles of Sharia law while still adhering to the country’s tax laws. The fund hopes to have 30 million Australian dollars (US$29.9 million) in investments within six months to a year, with a cap of A$500 million. Mr. Omran estimates there is about A$10 billion in local pension money ready to be interested in Islamic products and forecasts about A$13 billion in funds under management for the local industry by 2019.
“We’re not waiting on the government because there’s not anything stopping us as an asset management firm. That said, I don’t think it’s a priority for them,” said Mr. Omran, who is targeting self-managed superannuation funds of local high-net worth individuals with ties to the Middle East.
HSBC’s Mr. Henderson — who was a part of the bank’s work on Islamic bond offerings in both Indonesia and Malaysia — said the change will provide opportunities for certain issuers, most notably those firms that have business or other links in either the Middle East or Southeast Asia where the Muslim investor base has gravitated.
No comments:
Post a Comment