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SINGAPORE: The Monetary Authority of Singapore has approved the selling of Murabaha investment products.
The move will help broaden the range of Islamic financing products in Singapore.
At an international Islamic financing conference on Monday, industry players said it paves the way for a bigger Islamic banking and financing market in Singapore.
But they add that more can be done to develop the Islamic capital market.
Singapore fund managers seeking to attract investment dollars from the Middle East can now sell Murabaha investment products.
The green light came in response to market feedback.
"We did this in response to feedback from the industry, that they'd like to see these changes so that they can offer the range of products," said Heng Swee Keat, Managing Director of MAS.
Murabaha is a contract under which a client wishing to buy some items requests the Islamic bank to purchase them and sell them to him at cost plus a declared profit.
Major Islamic banking players in the region at a seminar on Monday said such basic, principle-protected products will pave the way for more sophisticated products.
"It creates awareness in terms of providing a basic product to the market. And hence by enhancing education and knowledge, it will allow for greater market participation for both corporate and consumers," said Baljeet Kaur Grewal, Chief Economist and Head of Research, Aseambankers M'sia, Maybank.
The Murabaha is one way to structure investment products.
When it comes to putting money into funds though, banks have said they prefer a different instrument -- the Mudharabah.
That is because these tend to yield higher returns.
However, bankers have said they are keen to sell Murabaha products to the 300 asset managers in Singapore managing assets amounting to US$375 billion.
They have said these fund managers would otherwise turn to banks with Islamic products to tap the lucrative Middle Eastern investment market.
There are 250 Islamic mutual funds in the world that manage combined assets amounting to US$300 billion, and industry leaders have said a greater variety of Islamic financial products is a must if Singapore wants to serve the Islamic funds market - which is growing at up to 15 percent a year.
"The decision by the government to accommodate or facilitate Murabaha investments structures is a good development and banks will definitely come in and undertake that type of transactions. But it cannot stop there. MAS will probably need to facilitate mudharabah types of transactions and also other types of investment structures," said Badlisyah Abdul Ghan, Head of CIMB Islamic Commerce Int'l Merchant Bankers, Malaysia.
To date, Singapore has removed double taxations or lowered taxes on some Islamic transactions and products -- to help grow its Islamic capital market. - CNA /dt
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