KPMG facilitates formation of Islamic Financial Services

The contemporary Islamic finance industry globally is now in its fourth decade and, during this period the industry has developed extremely rapidly. In the past few years, overall market growth has been estimated at between 15-20 percent annually, although individual Islamic banks have reported even faster growth. Presently the sector is estimated to have assets under management of an estimated US$500bn globally.

Over 40 participants representing existing and potential Islamic financial services providers gathered together to participate in a common industry forum organized by KPMG Ford, Rhodes, Thornton and Co.

The initiative was aimed at the formation of industry focus groups to collectively address various issues faced by the Islamic Financial Services industry in Sri Lanka. Partner / Head of Advisory of the firm Reyaz Mihular moderated the forum.

Addressing the gathering, - KPMG Director of Tax Suresh Perera pointed out that the issues faced by Islamic financial services are not unique to Sri Lanka.

The development of Islamic Financial Hubs in UK, Singapore, Malaysia, etc has been facilitated due to the fiscal legislative changes introduced in these countries. Finance Acts of 2003, 2005, 2006 and 2007 enacted in UK has helped to create a level playing field for Islamic Financial Instruments such as Murabaha, Ijara, Mudaraba, Musharaka, Diminishing Musharaka and Sukuks.

The Malaysian Government in seeking to promote the country as an International Islamic Financial Centre (IIFC) has granted many tax exemptions and incentives. Singapore which is competing with Malaysia to attract the high liquidity in Middle East to their economy has also introduced many changes to their tax and legal regimes to create a level playing field for the Islamic Financial Instruments and incentives to attract funds from the investors seeking Shari'ah Complaint financial Instruments. Hong Kong and Thailand are more recent entrants to the industry.

Suresh in his address emphasised that the development of secondary market for the instruments is a crucial element in the development of the industry.

For this purpose the cooperation of the Colombo Stock Exchange and the Securities Exchange Commission of Sri Lanka is a vital factor as there will be a need for a forum for trading of Sukuks which could encourage more Issuers and Investors into the market.