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ISLAMIC BANKS CAN HELP FUND ASIA'S INFRASTRUCTURE NEEDS!


Islamic banks can help finance Asia's burgeoning infrastructure investment needs while continuing to adhere to fundamental Sharia tenets,executives said today.
Islamic banks, which emerged relatively unscathed from the
global economic crisis in 2008,saw total assets top $1.6 trillion
(1.22 trillion euros) in 2012, a 20.4 per cent rise from 2011.
Asian nations hold 13 per cent of global Islamic banking assets, the highest outside of the Middle
East, speakers said at the World Islamic Banking Conference in
Singapore.
"Within Asia and the Middle East, there is a huge amount of
infrastructure building to cater to
the needs of growing
populations in some countries and mass urbanisation in
others," Mohammad Y Al-Hashel,governor of the Central Bank of
Kuwait, said in a keynote speech.
"Since Islamic finance dictates that lending should be backed by
tangible real assets, it has the potential to offer the much needed funding for
infrastructure building," he said.
The Asian Development Bank in
2012 estimated that fast-growing Asia needs to invest a
total of $8.0 trillion to fund national infrastructure needs
such as rail networks, airports,power networks and water
treatment plants in the current decade to 2020.
Ranjit Ajit Singh, chairman of the Securities Commission of Malaysia, said the region's "staggering and substantial"
infrastructure capital needs could be a key driver for Islamic
finance to gain a foothold in more Asian economies.
"These substantial amounts provide tremendous potential in my view for financing and capital
raising through the issuance of sukuk (Islamic bonds) as many infrastructure assets are inherently Sharia-compliant," he
said.
Singh added that the growing affluence of middle-class Asian
consumers could also spur an increased demand for Sharia-
compliant investments and savings products,especially
within Southeast Asia, which has a substantial Muslim population.
"The opportunity for Islamic investments to meet this prospectively strong demand should not be underestimated,"
he said.
Officials also reiterated the need
for Islamic banks to avoid the excesses of their mainstream
counterparts that led to the global economic crisis, and to invest in "socially responsible" industries.
Apart from barring investments in "haram" or banned sectors such as gambling and alcohol,
Islamic finance does not allow the payment of interest, which is seen as a form of gambling.