Sukuk seen to boost ASEAN emerging markets

EMERGING MARKETS in the Association of Southeast Asian Nations (ASEAN) should tap the Islamic finance market to access more capital for their development policies, the Hongkong and Shanghai Banking Corp. (HSBC) said.

This comes as the bank sees Islamic financing or sukuk gaining traction and awareness within the ASEAN region.

“There is a growing interest in the region to use sukuk for infrastructure financing and investor appetite remains. With the right structure, policies and legal framework to facilitate sukuk, Islamic finance can be a good infrastructure investment vehicle for emerging markets and developing economies such as the Philippines,” Wick Veloso, President and Chief Executive Officer of HSBC Philippines, was quoted in the bank’s news release.

Sukuks are bonds which do not violate the Islamic law when investors take in their returns. Unlike conventional banking, Islamic banks comply with the Shariah law, which prohibits lenders from charging interest on its loans.

“For ASEAN countries, particularly sovereigns, the sukuk market cannot be ignored. It is a strategic tool to access capital,” Arsalaan Ahmed, Chief Executive Officer of HSBC Amanah Malaysia Berhad, said.

“Islamic finance gives ASEAN nations access to more capital in uncertain times and helps its citizens chart a better future without compromising their values. It’s a story that deserves to be told,” he added.

He said that while the usage of capital market grows in the ASEAN region, he expects sukuk to be a “natural part of the funding tool evolution of issuers led by sovereigns and eventually by others.”

Aside from greater access to funds, Islamic finance would also be a tool for non- Muslim countries to promote financial inclusion.

“Through a period of recovering from a global economic downturn, giving people an ability to access the financial system and see their prospects change is undoubtedly desirable,” said Mr. Ahmed. “Exclusions based on faith however, will undoubtedly cause friction and discontent.”

The Bangko Sentral ng Pilipinas in 2014 started to draft an Islamic banking framework. •