MAS Announces Measures to Further Develop Islamic Finance
Singapore, 29 September 2005...The Monetary Authority of Singapore (MAS) today announced that banks in Singapore will be able to offer an important form of Islamic finance known as Murabaha. It is commonly used as short-term financing and in trade finance.
2 MAS issued the Banking (Amendment) Regulations 2005 to exempt Murabaha financing from the restriction in the Banking Act against non-financial activities. With the exemption, banks may offer Murabaha financing by purchasing goods on behalf of a customer and selling the goods to the customer at a marked-up price to be paid at a later date.
3 MAS' exemption of Murabaha financing follows its discussions with market participants and its ongoing review of the regulatory framework to facilitate the development of Islamic finance. Banks which offer Murabaha financing will add breadth and depth to the range of financial products and services offered in Singapore.
4 "MAS recognizes that Islamic finance is gaining global importance. It is an important complement to the suite of products and services that Singapore as an international financial centre can offer. MAS is open to introducing refinements such as this to our regulations to ensure that our framework is conducive to the development of Islamic financial services", said Mr Heng Swee Keat, Managing Director of MAS.
New Regulation 22 allows banks to carry out the business of purchasing and selling an asset provided that the purchase is at request of the customer and is for the purpose of financing. The bank sells the asset to the customer at a marked-up price, which will be paid at a later date. The customer is under a legal obligation to take delivery of the asset. In addition, the bank should not be exposed to any market risk from this financing transaction.