Singapore’s plunge into the Islamic finance scene did not come as a surprise to many in the industry. Seeing the Islamic finance industry take-off in Malaysia and with Hong Kong and Indonesia playing catch up, Singapore’s obvious move was to take on this ethical form of financing with formidable force. Despite being the first Asian country to fall into a recession, which prompted the government to declare the situation as the worst ever for it, the Lion City was still optimistic about launching its first Sukuk at a signing ceremony last month.
Monetary Authority of Singapore (MAS) managing director Heng Swee Keat described the Sukuk as the Shariah-compliant equivalent of Singapore Government Securities (SGS) and said it was of the highest credit standing. He assured investors that it would be given equal regulatory treatment as SGS, such as qualifying as an asset in the computation of capital and liquidity requirements, and as eligible collateral for tapping MAS’ liquidity.
“MAS is committed to the facility, issuing to meet the needs of financial institutions that are carrying out or plan to carry out Shariah-compliant activities in Singapore, as this will strengthen their ability to meet their capital and liquidity requirements.” He added.
Research and consulting firm Cerulli Associates released a report recently on the Islamic finance industry in Singapore, focusing on the Islamic funds available in the republic. According to it, Hong Kong and Singapore have been financial services hub rivals in Asia and their competition has now extended to Islamic finance. The report states that the Islamic finance is not to cater for their relatively small Muslim populations, but rather to encompass all areas of financial services as well as attract the petro-dollars from the Middle East.
Describing Hong Kong’s and Singapore’s effort as wholesale as opposed to Malaysia’s and Indonesia’s “more retail approach”, Cerulli said the Singapore government had decided several years ago that as trade with its Middle East counterparts increased, there would be a need for an Islamic finance industry. Its Middle East trade doubled to US$37 billion in four years to the end of 2007.
