My broken record repeats: Aligning banking, company and tax laws are the keys to launching Islamic banking. These countries will struggle to execute if the legal and regulatory frameworks are not properly evaluated and suitable changes introduced. As civil law environments, this is always a greater challenge than in common law countries. After that comes the key question as to where is the market? It is not always true that if one builds something people will come. What will these countries do for market development? Without investment in this aspect, I cannot imagine much growth.
ABDULKADER THOMAS
CEO and President, SHAPE Financial Corp
Financial institutions from China, Hong Kong and Taiwan have become increasingly aware of Islamic finance as a consequence of these countries, significant trade links with the Gulf. Imports are often financed by Islamic banks which have correspondent relationships with banks from Shanghai, Hong Kong and Taipei. It would be a natural progression for Asia-based exporting companies to attract Shariah compliant finance from the Gulf, both through managed funds and corporate Sukuk. There are no significant legal or regulatory constraints, and Singapore is likely to be seen as the model to follow for regulation.
Most of the exposure to Islamic finance in China, Hong Kong and Taiwan is likely to remain trade related. Development of retail Islamic banking is in its infancy in China, as although there are 65 million Muslims in the western part of the country, there is only one Islamic bank so far, which started operations last year.
Neither Hong Kong nor Taiwan have as large a Muslim population as Singapore, where Islamic finance market penetration remains very limited. The distribution of Islamic banking products through retail networks is unlikely in the immediate future.
PROFESSOR RODNEY WILSON
Director of postgraduate studies, Durham University
As the Islamic finance industry grows and more banks, institutions, pension funds and individual portfolios look to diversify; markets such as China, Hong Kong and Taiwan will draw capital from the Islamic market provided they create products meeting the industry’s needs. China has a significant retail Muslim market that can be catered to and seeing the growth of Islamic finance acceptance by ethnic Chinese in Malaysia can also be a model to be replicated in these markets.
OMAR KALAIR
President and CEO, UM Financial Canada