Despite the unrest and uncertainty in the Middle East, the outlook for the Islamic finance sector looks promising. 'The future for Islamic finance is moving in one direction and that direction is growth,' says Dr Khoo Guan Seng, head of the innovative unit at the Singapore Stock Exchange and an internationally recognised Islamic finance expert.
Speaking at the 'Islamic Finance: Opportunity and Risk' seminar, jointly organised by Classified Post and Kornerstone, Khoo said the global Islamic financial market is worth around US$1 trillion and is expected to grow by 15 per cent annually. He believes Hong Kong, which plays a key role in financial intermediation of conventional finance instruments, is ideally positioned to provide a range of Islamic finance products and services.
'While countries like Malaysia and Indonesia have an established head start, it is not too late for Hong Kong banks and financial services firms to compete for business in Islamic finance. To be successful, they will need to establish a more prominent presence in the region, as have their competitors,' Khoo said.
He said for Hong Kong to successfully make inroads into the Islamic finance sector requires a better understanding of the mechanisms that drive and govern Islamic finance markets. Hong Kong also needs to implement regulatory changes to establish a level playing field between traditional financial products and their Islamic counterparts.
Khoo said developing an Islamic finance platform could also create employment opportunities for accountants, tax professionals and investment analysts familiar or willing to learn the skills necessary to provide services that meet Islamic religious practices referred to as Sharia compliance.
Under this concept, investment in alcohol, gambling, pornography, tobacco, weapons, pork products and businesses that produce media gossip columns are not allowed. Investments should also conform to Islam's avoidance of receiving or paying interest.
Khoo added that Hong Kong is strongly placed to provide Middle Eastern investors with a platform to invest in the region. He believes the city's best opportunities are in the wholesale market.