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OCBC eyes Brunei, Jakarta and S’pore for sharia growth

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Points of Essence:

  • Singapore’s OCBC sets to be on an aggressive Islamic banking growth plan.  It first establishes an Islamic banking subsidiary in Malaysia known as OCBC Al Amin, and now its plans a regional expansion which includes Brunei, Indonesia and Singapore.
  • Whilst Malaysia is being made a launch pad to market Islamic banking products in those countries, Brunei, Indonesia and Singapore were chosen to tap the surging demands in the Shariah products there.

KUALA LUMPUR, Nov 11 (Reuters) – OCBC, Singapore’s No. 3 bank, will expand its Islamic business in Brunei, Indonesia and Singapore, which it sees as the fastest growing Asian sharia finance markets, its Malaysian unit said on Tuesday.

The bank will use Malaysia as a springboard to tap demand for Islamic products in these countries, OCBC Bank (Malaysia) Bhd chief executive Jeffrey Chew said.

Demand in Brunei and Singapore would be driven by the Islamic treasury business while Indonesia’s large Muslim population provided a large consumer market, he said.

“We do see Brunei and Jakarta probably will also move quite quickly in the next couple of years,” Chew told reporters at the launch of OCBC Malaysia’s Islamic subsidiary.

“We believe that Islamic banking on the wholesale side for Singapore will also take off over time as well.”

The Islamic banking market has expanded beyond the traditional centres of Middle East and Malaysia as lenders seek new sources of growth and a larger share of Gulf oil earnings.

Indonesia has passed a banking law to encourage foreigners to set up sharia banks and the government plans to sell its first global Islamic bond in an effort to spur growth of its nascent sharia market.

Singapore has also jumped into the race to lure Islamic investments, with a 5 percent concessionary tax rate on income derived from sharia-compliant fund management, lending and insurance.

The tiny oil-rich sultanate of Brunei has been issuing Islamic bonds to capitalise on rising demand for sharia assets.

OCBC Malaysia said its Islamic subsidiary, OCBC Al-Amin, would open five branches by 2009, three of which would be in the area around the capital Kuala Lumpur.

The Islamic subsidiary will start operations on Dec 1 and is licensed to offer the full range of sharia-compliant universal banking services including Islamic hire-purchase and sharia-compliant corporate finance activities.

OCBC Bank’s Islamic assets stood at 3.7 billion ringgit ($1.04 billion) as at December 31, 2007.

(To read more Reuters stories on Islamic finance, click on [ID:nISLAMIC]) ($1=3.545 Malaysian Ringgit)

(Reporting by Liau Y-Sing in Kuala Lumpur and Kevin Lim in Singapore; Editing by Kim Coghill)

Note: See BERNAMA’s take on the OCBC plans here.

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Written by Suapi Shaffaii

November 11, 2008 at 3:49 pm

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