Singapore's de facto central bank sees 'promising growth' in Islamic finance

(Thomson Financial) Singapore is proceeding smoothly in the development of its Islamic finance industry with the first listing of a Shariah-compliant exchange traded fund (ETF) on the local bourse.

'We have seen promising growth,' Monetary Authority of Singapore (MAS) managing director Heng Swee Keat said on Tuesday at the launch of the Daiwa FTSE Shariah Japan 100 ETF.

Daiwa's first ETF that debuted on the Singapore Exchange (SGX) today offers an investment channel into Japanese companies that fully complies with Shariah investment principles.

Daiwa Asset Management Co. Ltd. president and chief executive officer Michihito Higuchi hopes to grow the size of the ETF to between 30 billion to 50 billion yen ($290 million to $484 million) in the next six months.

Heng said this listing adds to the range of ETF and Shariah compliant products in Singapore and provides a direct channel for investing in Japan.

Singapore has refined its regulatory framework and tax structures over the years to facilitate the growth of the Islamic finance industry, he said.

The initiatives include the grant of a 5 percent concessionary tax rate for income derived from Shariah-compliant fund management, lending and insurance and re-insurance that was announced in February, Heng said.

The MAS will also be developing a facility for the issuance of Singapore dollar denominated sovereign-rated sukuks, which are Islamic financial certificates of indebtedness similar to a bond, in response to the needs of financial institutions conducting Shariah-compliant activities in Singapore.

'These initiatives are catalysed by feedback from the industry, which has taken an active interest in the development of Islamic Finance in Singapore,' Heng said.