“Maintaining a very high standard of regulation is a very important part of this whole development effort,” Heng said. “It’s undesirable to pull the shoots to get it to grow faster. It has to be organic.”

Rising oil wealth and government initiatives have turned Islamic banking and insurance into an industry with US$1 trillion in assets globally. Singapore, among Asian nations seeking a larger share of Muslim wealth, is giving incentives for Islamic services as it encourages financial institutions to introduce more products that comply with Shariah law.

Singapore-based banks may now enter into so-called diminishing Musharaka financing and spot Murabaha transactions, the central bank said in a statement Thursday. The central bank will also ensure equal tax, regulatory and liquidity treatment of Singapore-dollar Islamic bonds with government securities.

“These various changes will allow banks to conduct a wide range of Islamic financing activities, and to have greater flexibility in structuring instruments to meet their risk management needs,” the central bank said.

Sukuk program

Central bank officials from the Middle East and Asia are gathering in Singapore this week for the annual Islamic Financial Services Board summit to discuss the direction and development of the industry.

Singapore announced a sukuk, or Islamic bond program, in January as it sought a larger pool of international investors. It issued the debt to the Islamic Bank of Asia, and is “evaluating” requests from others for more of the bonds, Heng said Wednesday.

Sales of sukuk worldwide plunged in 2008 as tumbling crude oil prices sapped demand from the Middle East, falling to $13.9 billion from a record $31 billion in 2007, according to data compiled by Bloomberg. Sales have reached $3.4 billion so far this year.

About $1.5 billion of sukuk bonds may be issued in Indonesia, Malaysia and Singapore this year, Heng said.

“That’s not a bad development considering the state” of the global economy, Heng said. “It shows a certain fundamental momentum.”

Indonesia’s first international sale of dollar sukuk drew orders for $4.7 billion, seven times the $650 million of securities on offer, the nation’s debt management office Director General Rahmat Waluyanto said April 17.

In June 2008, the Singapore monetary authority said it was seeking to develop a market in Islamic real-estate investment trusts to attract funds from the wealthy in Asia and the Middle East. That may be delayed and the central bank has no plans to hurry the development, Heng said.

Source: Bloomberg