With numerous recent developments over the past year, Australia is rapidly developing into a focus area for Islamic finance in Asia Pacific. CHAABAN OMRAN provides an update on developments in the country in the first edition of the iFAR report — a name that according to feedback from market players is highly appropriate, as Australia is “just too far!”
A recent conference on Islamic finance held in Melbourne in April of this year welcomed high-profile speakers including the minister for financial services, Bill Shorten and the parliamentary secretary to the treasurer, Bernie Ripoll. While it was good to have such high-profile government representatives at this forum, their speeches echoed the words of their predecessors Chris Bowen and Nick Sherry, advocating recommendations that came out of the Johnson Report back in 2010.
Both Bowen and the then-assistant treasurer Sherry, advocated Islamic finance to be in the best interests of Australia’s economy. Ripoll this year announced that the Board of Taxation has submitted its final report into Australia’s tax laws to ensure they do not inhibit the provision of Islamic finance, banking and insurance products.
Both Shorten and Ripoll were able to make reference to the massive size and growth of the international Islamic finance industry and highlighted future growth projections, however unfortunately, they were not able to share any thoughts on new details to progress the tax changes. The forum invited experts from the infrastructure finance, property and investment management industry.
The Australian Islamic finance industry also recently welcomed the latest investment fund manager specializing in wholesale property Shariah compliant trusts. Piety Investments specializes in structuring and managing Shariah compliant investment funds across both residential development and commercial real estate within Australia. Piety offers property trusts aimed at offshore investors seeking to tap into the under-supply of Australian bricks and mortar.
With the population continuing to grow rapidly from significant immigration and natural growth, the demand for quality commercial and residential housing continues to skyrocket. The team at Piety, led by managing director Bilal El Cheikh, managed numerous large-scale residential and commercial developments for many years prior to attaining their wholesale Australia Financial Services License.
The first IFN Roadshow Australia was held on the 7th May 2013 at Victoria University in Melbourne and covered the latest developments in Islamic finance in Australia. The mix of expert speakers was a reflection of the retail issuers in Australia.
However, vital contributions also came from academic speakers such as Almir Colan, the director of the Australian Centre for Islamic Finance and a lecturer at La Trobe University, involved with educating Australians about the basics of Islamic finance. Islamic finance education is paramount for any new innovative market which exhibits huge growth prospects, especially when the government shows strong support.
Other notable contributors to the IFN Roadshow included Hilton Wood, the former head of international business at Arab Bank, now the Australian representative officer for the conventional Doha Bank. Hilton commented that: “In Qatar, the central bank requested (told) all banks to either stick to conventional banking, or be fully compliant from an Islamic banking perspective. This resulted in banks that operated both models shutting down Islamic windows. Accordingly, Doha Bank has removed its Islamic window, but of course, we still invest into Islamic structures and try to support Islamic banks on compliant products.” It would be great if Doha Bank could pursue Islamic finance in Australia.
In has been reported in a previous issue of Islamic Finance news that Crescent Wealth (CW) was given approval for its Shariah compliant Crescent Wealth Superannuation Fund in February 2013. We mentioned the huge challenges and obstacles faced by CW, however with persistence and a strong compliance team, they were able to get the approval from the regulator. Now that their forms and applications are available online, CW should see its funds under management grow exponentially as they accommodate the demand for Shariah investment products and raise awareness amongst Australians about ethical investment using Shariah compliance rules.
CW has expanded rapidly over the past 12 months. This rapid growth is down to quality investment products supported by big names such as Ernst & Young and HSBC. CW continues to appoint international high profile advisors to its global advisory board, such as Dr Jamal El Jaroudi, CEO of Bank Nizwa in Oman.
Melbourne-based MCCA is in advanced discussions with an unnamed Middle Eastern company with a view to setting up a US$180 million mortgage fund, a US$150 million property fund, a US$180 million Sukuk fund and a US$5 million asset-leasing fund. This further supports the view that international Islamic banks, Takaful firms and investment managers should consider Australia as a viable and profitable investment destination; especially as the wealth per capita is one of the highest in the world.
Non-existent in Australia as yet are Takaful offerings. However there are developments afoot to start with a small product such as online Funeral Takaful. Both the Takaful provider and re-Takaful provider are internationally recognized companies and are rated very highly so hopefully, the product will be welcomed by the Australian population. The opportunities for Takaful products are large in Australia since it is currently non-existent. With a small investment, Takaful operators could set up their operations in Australia within the existing legislative framework.
I can also confirm that a project has been initiated by a group of businessmen who are working closely with one of the ‘Big Four’ advisory firms to form Australia’s first Islamic bank in Australia. We hope to hear more from this exciting development in the coming years including the roadshow for the capital raising, both domestic and abroad.
I read with great interest the developments of Islamic finance technology solutions provider Path Solutions and its recent announcement last month of the successful ‘Go Live’ of iMAL at Bank Al Muamelat Assahiha (BMS) in Mauritania. Path Solutions has expanded remarkably in Malaysia and now in Oman and I believe it is well-positioned to provide technology solutions to Islamic finance companies in Australia. Discussions with Rohana Abdul Munim, the sales director and head of Islamic finance strategic initiatives, indicate that Australia would be an ideal market for its technology especially as Australia moves closer towards developing its Islamic finance industry.
This is iFAR from down under! That’s all for now.
Chaaban Omran is the former CEO of Crescent Investments Australasia (trading as Crescent Wealth) and former managing director of MCCA. He is currently the founder of CPS which provides consulting services within financial services & funds management. He can be contacted at [email protected]