Singapore is stepping up efforts to position itself as a hub for Islamic banking.
In the recent Budget, a 5 percent concessionary tax rate was announced for income derived from qualifying Shariah-compliant products. Industry watchers said this would help to draw in key global players. The global Islamic banking sector is estimated to be worth around US$500 billion. And Singapore is making yet another push for a piece of the fast-growing pie, with a 5 percent concessionary tax on Shariah-compliant products.
Shariah refers to guidelines and principles which are followed in accordance with Islamic law, such as prohibiting the collection and payment of interest.
Industry players said it is a good time to tap into opportunities here.
Arfat Selvam, Arfat Selvam Alliance LLC, said: "The government now has set the right regulatory environment; what's now needed is for the private sector to come in and to activate this, and to take advantage of all these tax concessions that are being offered.
"And it is hoped that these changes will now lead to... the growth of the Islamic finance industry from here. What we need is more Islamic banks here - Islamic finance houses to create the depth in the market, and to complement the wealth management industry that is already here in Singapore.
"And we need more professionals involved in the field who understand Islamic products and who can effectively market these products."
Industry players said that Singapore's multi-cultural society, in which Islamic holidays are celebrated, is also seen as a plus when attracting Islamic investors.
However, they stressed that there is competition from other countries which are seeking to build up their Islamic banking sector.
Raj Maiden, CEO, Five Pillars Associates, said: "What will happen is - it definitely will create some interest. Is the 5 percent attractive enough? You have to look at it in relative to the other players in the market, the other countries, in the similar space and what they are offering. So that will be crucial in getting the necessary players to jump onboard and take advantage of it.
"I think if you scour the scenario, some of them are very competitive, some are even giving tax holidays for a substantial period of time, and I think that is something Singapore needs to be wary of. I think we are taking baby steps in terms of introducing Islamic finance."
Industry experts said Singapore could further attract key global players with grants or subsidiaries to help product innovation for Shariah-compliant products.
They added that Singapore could build on its strengths, such as in fund management, to draw in high net worth individuals. - CNA/ms
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