Developments in Islamic Finance
Islamic finance has grown significantly in recent years and has become
an integral component of the international financial system. Singapore's
financial industry has similarly seen increased investor interest for
Shariah-compliant financial products and services, especially after the
establishment of its first Islamic bank - Islamic Bank of Asia. More fund
managers are also offering Shariah-compliant funds. In May 2008, the
first Shariah-compliant exchange-traded fund was launched on the
Singapore Exchange. MAS sees Islamic financial services as part of
the broad range of financial service capabilities that Singapore as an
international financial centre should provide.
MAS' regulatory approach is to accommodate Islamic banking products
within the existing conventional regulatory framework, and to level the
playing field by ensuring the neutrality of MAS' rules where Islamic
financing is similiar to conventional financing in economic substance
and risks. Where there are specific risks or impediments, MAS will
refine rules to address these specific areas.
On taxes, Singapore had removed the imposition of double stamp
duties in Islamic transactions involving real estate and accorded the
same concessionary tax treatment on income from Islamic bonds.
Exemptions from income tax were also granted on amounts payable
to investors from Islamic Bonds which are Qualifying Debt Securities.
In February 2008, the Finance Minister announced the introduction of
a 5% concessionary tax rate for qualifying Shariah-compliant financial
activities such as in lending, fund management takaful and retakaful.
To further promote the growth of Islamic finance and to meet the needs
of financial institutions conducting Shariah-compliant activities in
Singapore, MAS announced in May 2008 that it will develop a facility
to make available sovereign-rated sukuks. The design of the sukuk
issuance facility reflects our efforts to tap the strengths of conventional
finance, while adhering carefully to Shariah principles.
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