Earlier this month, the Singaporean Malay language newspaper Berita Harian published an article by Rosebi Mohd Sah regarding an MEI lecture on Islamic finance. The lecture, given by Dr. Cedomir Nestorovic, a professor of international marketing and geopolitics at the ESSEC Business School of Paris and Singapore, provided the audience with the fundamentals of Islamic finance and also analyzed the driving forces behind it and its success. Rosebi Mohd Sah’s article looked particularly at the part of Dr. Nestorovic’s lecture on the role Islamic finance can play in Singapore.
Ms. Nurhidayahti Mohammad Miharja, an MEI research assistant, translated the Berita Harian article into English:
More Room for Singapore’s Involvement
By Rosebi Mohd Sah
There is still more room for Singapore’s involvement in the Islamic financial system, says Dr. Cedomir Nestorovic, a professor at the ESSEC Business School, Singapore.
He added that Singapore, however, would not hesitate to promote it, should the system prove profitable.
Sharing his personal views in a forum yesterday entitled “Driving Forces for the Development of Islamic Finance: Special Focus on the Middle East” at the Bukit Timah Campus, National University of Singapore (NUS), Professor Cedomir said:
“Singapore is very near to Malaysia, which is active in promoting Islamic finance. Despite the lack of emphasis on the system, the pragmatic government still provides the infrastructure for companies engaged in Islamic banking. However, I believe there is a lot more room for Singapore’s involvement in Islamic finance if it proves to be profitable,” he said.
Professor Cedomir revealed statistics by Ernst & Young on total Islamic assets this year, which are expected to reach US$1.13 trillion ($1.42 trillion). Statistics in 2009 showed that nearly 90% of market share in the global Islamic banking market was dominated by six leading countries in the Islamic finance market, namely Iran (36 %), Saudi Arabia (16%), Malaysia (10%), the United Arab Emirates – UAE (10%), Kuwait (8 percent), and Bahrain (6%).
At the same time, according to Professor Cedomir, transactions in Islamic finance were also dependent on the countries’ political stability. “For example, in terms of Islamic finance market share, although Malaysia is smaller than Iran, it is easier to conduct Islamic financial business in Malaysia due to political reasons.”
He also said that most of the Islamic financial systems were formed with governmental support and initiatives, and were not based on demand from customers or society.
Islamic banking, according to him, has not developed as expected. He gave the example of Britain, which has three Islamic retails banks in which none has yet to show good progress.
“Maybe the banks still need time,” he added.
However, according to him, sukuk and takaful have continued to show growth. In the first three months of this year, US$6 billion in sukuk was sold in six Gulf Cooperation Council (GCC) countries—close to reaching the total sukuk production for the previous year, which amounted to US$7.3 billion.