Labuan: Asia's overlooked Islamic finance growth story.
The presentation of the new "Market Report 2018" by the Labuan Financial Services Authority last week gives the opportunity to cast a light on Asia's underreported Islamic finance hub and its future potential: Labuan. Labuan is a federal territory of Malaysia comprising one large main and six smaller islands located off the northern coast of Borneo. The territory enjoys preferential tax status and has become an attractive destination for foreign companies from all over the world to register offshore branches since the foundation of the Labuan International Business and Financial Center (IBFC) under the Labuan Financial Services Authority in 1990 as Malaysia's sole offshore financial hub within a special economic zone. Today, Labuan is regarded as a premium financial centre for regional Asian companies looking to expand internationally, as well as for global companies entering Asian markets. The IBFC meanwhile dropped the term "offshore" in the wake of the global crackdowns on tax havens in recent years and now identifies itself as a "midshore" financial centre that provides a balance between client confidentiality and stringent regulatory requirements. As such, it sees itself as a complement to established financial centres in Asia-Pacific, such as Singapore and Hong Kong. But most of all, Labuan also has been marketing itself successfully as a hub for Islamic finance and Islamic businesses owing to its robust regulatory framework, including what the IBFC calls "the world's first omnibus legislation governing all Islamic businesses in an international financial centre," which covers not only Islamic banks and financial service providers, but also takaful and retakaful businesses, waqf and other foundations, Islamic family offices, Islamic trusts and Islamic wealth management service providers. It also regulates Islamic financial products formats and issues guidelines for Shariah advisory, sukuk issuances and Shariah-compliant captive structures. Those activities are trailed by the Labuan branch of the Malaysian International Islamic Finance Center, which adheres to the Labuan Islamic Financial Services and Securities Act, a legislative basis containing all the specific requirements governing Islamic finance in this particular jurisdiction. Over the past five years, Labuan has been fairly successful in positioning itself as a home for Islamic finance businesses. According to the market report, Shariah-compliant assets grew from $1.6bn in 2014 to $3.2bn in 2018. From 2016 to 2017, the volume of assets made the largest jump by more than 63% to 3.1bn, while growing a further 2.4% to $3.2bn by the end of 2018. Total financing generated by Labuan's 16 Islamic banks (including the conventional banks with Islamic windows and one investment centre) increased by 8.4% to $2.7bn in 2018 over 2017, while non-resident customers accounted for 70.4% of this volume. Total Islamic deposits at IBFC-registered Islamic banks rose by 10% to $212.7mn, translating into a market share of 2.2% of total deposits at Labuan's banks and financial institutions. Labuan's financial exchange also has eleven sukuk listed at a combined value of $7,7bn, representing 31.7% of total market capitalisation. According to Danial Mah Abdullah, director of the Labuan Financial Services Authority, Labuan will further strengthen its exposure to the Islamic finance market and the halal economy with new initiatives and products. "Malaysia has always played an important innovative role in Islamic financial services, boasting a comprehensive regulatory framework for Islamic banking, finance, takaful and asset management," he said, adding that "as an extension to and in support of this, the Labuan International Business and Financial Center has also been an innovative bed for Islamic financial products." To attract more Islamic banks financial institutions to Labuan, under the Malaysia International Islamic Financial Center's initiative, Islamic banks in Labuan have been given greater flexibility such as exemption from maintaining physical presence in Labuan. Islamic banks incorporated in Labuan may open offices anywhere in Malaysia, subject to consideration by Labuan's Financial Services Authority. Furthermore, there is no limitation on staffing and number of operational offices to be opened outside Labuan, and Islamic banks can conduct business in foreign currencies under this regulation.
[c] Gulf Times Newspaper 2019 Provided by SyndiGate Media Inc. ( Syndigate.info ).
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|Publication:||Gulf Times (Doha, Qatar)|
|Date:||Apr 2, 2019|
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