Professor Yeo Tiong Min, Dean of the School of Law, Singapore Management University

Ladies and Gentlemen, good morning

I am pleased to join you this morning at the Singapore Management University (SMU).  I understand this is the 6th year that the Islamic Finance News Road-show is being held in Singapore.  I congratulate the organisers Redmoney Group on this effort. The SMU is an appropriate venue for this event. The university has been a strong proponent for developing human capital for the Islamic finance industry.  Last year the university launched its Masters of Laws programme, which comprises specialisation in Islamic Law and Finance.  Such programmes are very important for the growth of Islamic finance in Singapore and I commend SMU on these initiatives.

As many of you are familiar with, the global Islamic finance industry has grown to reach some US$1.3 trillion in total asset size. Sukuk issuance reached a record level in 2012.  The demand for these Islamic financial products came not only from the Muslim community, but also non-Muslim investors. Thus, Islamic finance now features prominently alongside other conventional financial services. With a view on this trend, Singapore started to promote Islamic finance in 2004. Our aim is to leverage on our strengths in wholesale banking, asset management and capital markets to allow Islamic financial services to flourish, alongside other conventional financial services.

Broadly, our approach is three-pronged. Firstly to ensure a level playing field between Islamic finance and conventional financial products, we have recognised the unique characteristics of the former in both regulatory & tax treatments. Singapore has accommodated Islamic finance products within its current regulatory and tax framework. We have ensured the neutrality of the rules insofar as Islamic financing is similar to conventional financing in economic substance and risks.  Where the structures are unique, we have and will continue to work closely with industry stakeholders to ensure that level playing field is preserved.

Secondly, we have promoted talent development to build up a pipeline of Islamic finance professionals in Singapore.  To facilitate this, MAS has encouraged Islamic finance training providers to tie-up with Singapore-based educational institutes to meet this rising demand.  MAS’ financial training schemes also cover courses in Islamic finance.  We have also included Islamic finance into the list of specialised post-graduate courses eligible for funding under our Finance Scholarship Programme.

Thirdly, to foster international standards and co-operation, MAS has participated in international Islamic financial organisations to build capabilities, and contribute to developmental and standard setting initiatives for the industry.  MAS is a Council member of the Islamic Financial Services Board (IFSB) and is involved in the standard setting and industry developmental work of the organisation.  In 2009, Singapore became the first East Asian country to host the IFSB Summit.  Last year we worked with the International Islamic Financial Market (IIFM) to organise a seminar on hedging and risk management practices in Islamic finance.    I am pleased to inform that IIFM will hold another industry briefing in June this year, along-side the World Islamic Banking Conference Asia Summit (WIBC Asia).

Based on these efforts over the past few years, the range of financial instruments in Singapore has expanded. Leveraging on the depth and diversity of Singapore’s capital market, we saw the growth of capital market instruments such as Sukuk and REITs as well as innovative investment funds.  We have already seen many sukuk issuances since 2001, and we understand there are more in the pipeline.  We are pleased to note many “firsts” among them.  MUIS, or the Islamic Religious Council of Singapore, pioneered the use of sukuk to finance the development of wakaf properties under its management.  Sabana REIT, which is managed in Singapore, is presently the largest Shariah compliant REIT globally in terms of assets.  Recently it issued the first convertible sukuk in Singapore. AEP Investment Management and Keppel Data Centre Investment Management have jointly structured and managed Securus, the world’s first Shariah-compliant data centre fund, which is strongly supported by investors in Asia and Middle East.  Banks from the region are contributing to the Islamic financial sector in Singapore, bringing with them experience and expertise from their home countries.  In addition, a growing cluster of banks from the Middle East region operating in Singapore has begun to offer Islamic financial services.   The growth potential for Islamic finance in Singapore is strong.  As such MAS remains committed to further grow this important sector of our financial services industry.

Recently, we had allowed to lapse two of the tax incentives for Islamic finance introduced in Budget 2008. Like all our tax incentives, they have a fixed tenure and in this case, of five years. It is useful to note that Islamic Finance activities will continue to be incentivized alongside conventional finance activities under our other existing schemes.  The lapsing of the two incentives is thus no reflection of MAS’ continuing commitment to develop Islamic financial services in Singapore. Here, it is useful for me to emphasize that Singapore’s proposition for Islamic finance must be broader than just tax advantage. Singapore’s success as an international financial sector stems from its high standards of regulation; deep and liquid capital market, the presence of international buy side players, and a critical mass of financial intermediaries with expertise to address a wide range of financing needs. It is these strengths that allow Singapore to support the growth of Islamic finance.
 
In summary, MAS will continue to ensure that we provide a conducive environment for growth, support talent development and continue to refine our regulatory framework. We will maintain our fundamental approach of providing a level playing field between Islamic and conventional finance.  MAS will continue to work with the industry and we welcome feedback on areas that could facilitate the development of the Islamic finance industry in Singapore.

So industry gatherings like today’s Road-show are important platforms for such exchange of views and ideas.

With this, I wish you a fruitful discussion ahead. Thank you.