Japan looks for rise and influence from Islamic finance boom

2015-04-06 10:52:16 | Al Muslim News
Japan looks for rise and influence from Islamic finance boom

 

Japan is the latest global financial hub to start making inroads into Islamic finance, a move that could help strengthen regional economic ties and give its lenders an edge in winning business in markets whose growth prospects far outpace their home turf.
Tokyo has long been a major provider of financial assistance for developing countries and its banks are active across Asia and the Middle East, but until now Islamic finance has played a minor role, Alarabia News reported.
That could soon change amid a regulatory effort to facilitate development of the sector, and could even help Japan counter any loss of regional influence ahead of the launch of the China-led Asian Infrastructure Investment Bank.
Islamic finance, which follow religious principles such as bans on interest and monetary speculation, has boomed in the last few years on the back of strong economic growth in its core markets, the Gulf, Pakistan and southeast Asian countries.
The sector has grabbed the attention of global financial centers - Britain, Hong Kong and Luxembourg have all issued debut sovereign Islamic bonds over the past year - and the industry’s worldwide assets are now estimated at more than $2 trillion.
In February, Japan’s financial regulator said it would study relaxing rules for domestic banks to use Islamic financial products, potentially opening the world’s second largest bond market to sukuk, or Islamic bonds.
Over the past year, Bank of Tokyo-Mitsubishi, Japan’s largest lender, and Sumitomo Mitsui Banking Corp have expanded their Islamic finance activities overseas.
In September, BTMU became the first Japanese commercial bank to issue sukuk via its Malaysian unit.
Even the Japan International Cooperation Agency is jumping on the action, assisting Jordan in its plans to issue debut sukuk, as demand for such funding tools grows among majority-Muslim countries.
The moves are similar to those taken by Britain, as mature economies seek deeper links with high-growth markets, several of which are majority-Muslim countries, said Khalid Howladar, Moody's global head of Islamic finance.
In 2008, Japan’s Financial Services Agency (FSA) amended rules to allow subsidiaries of Japanese banks to conduct Islamic finance transactions, with foreign subsidiaries later allowed to take Islamic deposits, but the rules are seen as restrictive.
That trails the 8.3 percent growth in financing posted by Indonesian Islamic banks in 2014, a modest figure compared with the 25.2 percent growth posted a year earlier.
Japanese banks are keen to grab a greater share of that business: Sumitomo Mitsui started offering Islamic finance via its Malaysian subsidiary last year.
It has also partnered with the export credit insurance arm of the Islamic Development Bank to explore financing of infrastructure deals.
State-owned Japan Bank for International Cooperation has also considered sukuk, although a spokeswoman said the lender had no specific plans to tap the market.
Even the Asian Development Bank, where Japan is a key player, is ramping up efforts to encourage use of Islamic finance by its member countries.

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