By Arno Maierbrugger/Gulf Times Correspondent/Bangkok
Australia, a country of just 23mn people of which around 2% are Muslim, is seen as having strong potential to jump upon the bandwagon of Islamic finance, with a number of Muslim-led financial firms expanding in the market and sukuk becoming an increasingly popular option for long-term financing.
Over the past few years, despite the small Muslim population base in Australia, an impressive number of Shariah-compliant financial service providers have been launched in the country, highlighting the fact that Islamic finance products can be useful to anyone, not just Muslims. This has also to do with Australia’s strong asset-backed economy with its most important pillars being infrastructure, agriculture and mining.
The country also aspires to become a financial hub for Asia-Pacific, and thus needs to open up to any segment of the financial industry that a customer in the region would be looking for, particularly from population-rich nearby countries such as Indonesia and Malaysia, and for Middle Easterners.
Among the dominant financial service firms in Australia that offer Shariah-compliant services such as Islamic home finance, car loans and insurance, as well as halal investments are Crescent Wealth, an Islamic fund manager that last year exceeded $100mn in assets under management and helped create the ASX Islamic index encompassing more than 140 firms listed at the Australian Stock Exchange (ASX) that represent 55% of the ASX’s overall market capitalisation, as well as MCCA Limited, one of the longest established Islamic finance firms focusing on real estate, vehicle leasing and wealth management.
Others are Islamic home financing specialist Amanah Islamic Finance, which has its own board of Shariah scholars, Islamic Cooperative Finance Australia, specialising on home and vehicle finance and on fund investments, home financing specialist Iskan Finance, fully-fledged Islamic banking institutions such as Arab Bank Australia, as well as the Islamic window of Westpac Bank, in addition to industry associations such as the Australian Center for Islamic Finance and a number of law firms and consultancies specialized on Shariah-compliant financial services.
One of the latest entrants in the market was Sydney-based Equitable Financial Solutions (Efsol), specialised in Islamic savings structures, home and car financing and halal investment products. Efsol turned out to become the most expansive Australian Islamic finance firm. In addition to its Sydney headquarters, it has offices in Brisbane, Melbourne, Adelaide and Perth, one overseas office each in Karachi and Singapore (opened in April 2016), and just last week announced it launched a branch in Dubai to open the avenue for Middle Eastern investors for Shariah-compliant investments in Australia.
“We have not seen any competitive Australian Shariah-compliant investment products available in the global market. Efsol is looking to change that”, said John Isaacs, the company’s managing director.
According to Crescent Wealth’s managing director Talal Yassine, Islamic finance in Australia has the potential to double from the 11bn Australian dollars under management in 2013 to A$22bn ($16.5bn) by 2020 owing to a combination of growing domestic demand and foreign capital inflows seeking halal investment opportunities.
Furthermore, Islamic finance is expected to be bolstered significantly in Australia when newly proposed tax changes eventually will come into effect. Currently, uncertainty surrounding the tax treatment of Islamic investments is hampering the development of the market as Islamic investors are technically subject to a multitude of obligations such as capital gains tax, withholding tax, land tax and stamp duty. But a new law proposed in Australia’s 2016-17 budget and expected to become effective July 1, 2018, will eventually remove or at least drastically reduce tax barriers for Islamic investment structures such as asset-backed deferred payment contracts and hire-purchase arrangements.
“We see this budget announcement as having broad implications for stimulating growth in long-term projects in the infrastructure, agriculture and mining sectors, as well as for providing an alternative funding source in the Australian property and development space,” says Matthew Bode, banking and finance adviser at Sydney-headquartered law firm Colin Biggers & Paisley.
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