Two Philippine-based banks have received approval to operate an Islamic banking window to broaden the scope of financial solutions offered to Muslims. 

The Bangko Sentral ng Pilipinas (BSP) has approved the application of two banks, Maybank Philippines being one of them, local news agency BusinessMirror reported. 

The two lenders will have an Islamic banking window where it could be a dedicated branch offering Islamic banking products and services.

Maybank Philippines is a member of the Maybank Group, the largest bank in Malaysia in terms of assets. 

“Those two [banks] have been licensed and I think they’ll soon be starting their operation[s],” BSP deputy governor Chuchi G. Fonacier said. He did not name the second lender. 

According to BSP governor Eli M. Remolona, 92% of those in the Bangsamoro Autonomous Region in Muslim Mindanao (Barmm) are unbanked.

On surface level, Australia offers several opportunities for the growth of its Islamic finance sector. 

The country has a young Muslim population which continues to propel the demand for Shariah-compliant products. It has developed a well-regulated and thriving financial sector, too, and can potentially capitalize on its Islamic finance space to prompt foreign direct investment (FDI) inflows as well as beckon prominent Islamic financial institutions to set up shop. 

Yet, despite key positive indicators, long-standing challenges continue to hinder the industry’s progress and development. An unfavourable regulatory environment, funding inadequacy, and lack of trust among consumers are to name a few.

Serving an underserved yet promising community

Muslims accounted for 3.2% - equating to 813,400 - of Australia’s approximately 25.5 million people in 2021, according to latest census data. Whilst the numbers may be modest, they indicate promising prospects for Shariah-compliant products. 

Talal Yassine, managing director at Salaam (previously Crescent Wealth), a Sydney-based Shariah-compliant investment manager said that a recent survey of 709 customers revealed 96% were interested in a home finance product that adheres to Islamic finance principles. 

“91% ranked Shariah compliance as the most important feature for a home finance product,” he told Salaam Gateway.  

For all the optimism surrounding the potential of the Islamic finance space, its current state remains small, with Australia’s Islamic financial assets estimated to be worth $2 billion.

Muzzammil Dhedhy, co-founder of Hejaz Group, a Melbourne-based financial institution identifies three key areas to spur sector growth. 

“There is significant potential to expand Shariah-compliant banking products, like savings accounts, personal loans, business banking, and trade finance,” he explained.

The second area is investment products.  “Developing more Islamic investment products can attract both local and international investors seeking ethical investment opportunities.” 

The third is takaful, REITs [real estate investment trusts], and sukuk. 

A handful of financial institutions do offer Shariah-compliant products and services across Australia, including Hejaz; finance and investments provider MCCA; and Melbourne-headquartered Amanah Islamic Finance. Conventional banks also offer some Islamic finance products, such as National Australia Bank (NAB), which extends Shariah-based construction financing.

“We’re playing in the larger commercial property space and are seeing a lot of opportunities in construction residential developments, land sub-divisions, etc. Because of the [country’s] young population, we are getting [interest from] a lot of Islamic schools that are looking to fund new campuses to help accelerate growth,” said Imran Lum, Islamic finance head at NAB. 

“It also makes sense for them to get financing that aligns with their school ethos.”

Nevertheless, there are no Islamic banks in Australia, a scenario unlikely to change for a while. 

In March, Islamic Bank Australia (IBA) requested the Australian Prudential Regulation Authority (APRA), the country’s financial services regulator, to revoke its licence to operate as a restricted authorised deposit-taking institution.

The lender, which sought to become the country’s first Islamic bank, had received its licence in July 2022. 

IBA, renamed to Islamic Money Australia, said it did not have enough capital to operate as a regulated bank and therefore decided to return its licence before any potential legal breach.

Dean Gillespie, CEO of Islamic Money Australia told Salaam Gateway, that once they raise sufficient capital - currently in progress - they would re-apply for a licence. 

“Our plans haven't changed,” he added. “We [have] approached Islamic investors and private equity houses in Australia and the Middle East.” 

However, he conceded that it has been a challenge to raise financing in regions such as the Gulf, as a lot of investors are not familiar with Australia as an investment proposition. 

“Nonetheless, we are hoping to complete our fundraising within the next three to four months,” he said.

Regulatory, trust issues chip away at sector growth

Although Australia’s banking sector is developed and well regulated, practitioners complain existing laws are not favourable for facilitating Islamic finance transactions.

“While there have been improvements, the regulatory framework is still not fully conducive to the unique needs of Islamic finance, creating hurdles for market entry and growth,” said Dhedhy.

Gillespie added that major challenges such as taxation exist. “We have written to relevant lawmakers and called for these regulations to be amended to accommodate Shariah-compliant [policies],” he explained. “It will take some time to change and adopt.” 

In addition to unfavourable regulations, stakeholders also point to the lack of trust stemming from poor performance and high fees associated with Islamic finance products. 

For example, three of Crescent Wealth’s investment products failed APRA’s performance tests last year as returns underperformed benchmarks. 

“The annual performance test to assess relevant super products is based on benchmarks set by the government, and do not take into account faith-based or ethical investment criteria, like criteria associated with Shariah-compliance principles underpinning the fund's underlying investments,” noted Yassine.

Reclaiming consumer trust is expected to be a cumbersome process. “As an industry we need to focus on having the right governance structures in place,” explained Lum. 

Depleting trust coupled with a lack of awareness regarding Islamic finance products means Shariah-compliant service providers have their work cut out.

“Despite being the first Islamic bank in the country, we will have to work to gain trust as well as be competitive on a price basis,” said Gillespie. "There is a lot of distrust among incumbent conventional banks in Australia.”

Boosting foreign inflows, trade ties

Hejaz’s Dhedhy suggested that by offering Shariah-compliant financing options, Australia can attract investment from Muslim-majority countries as well as investors seeking ethical investment opportunities. 

Australia is seeking to strengthen economic ties with Muslim-majority countries like the GCC and Southeast Asian states to fuel trade and develop its investment landscape. 

The UAE is Australia’s largest trade and investment partner in the Middle East. Bilateral trade (goods and services) stood at $9.3 billion in 2022, while the UAE’s investment in Australia totalled $12.6 billion the same year. The two countries started negotiations for a bilateral free trade agreement last December. 

Qatari and Australian chambers also signed a memorandum of understanding in May to improve trade and investment opportunities. Bilateral trade of goods and services reached approximately $2.4 billion in 2022-23.

Furthermore, economic relations between Australia and Malaysia have strengthened in recent years, with bilateral trade equalling $18.57 billion in 2023. 

“[Additionally], Islamic finance can facilitate trade with countries in the Middle East and Southeast Asia, where Islamic finance is more established. This can lead to stronger economic ties, increased bilateral trade, and a more diversified investment portfolio for Australia,” Dhedhy added. 

What’s in store ahead?

On balance, there are several domains across the country’s Islamic finance sector that offer immense potential for growth. 

Australia could mirror initiatives of other countries to develop a robust regulatory framework, a strong funding pipeline and educational campaigns that help increase awareness of Islamic finance and Shariah-compliant policies. 

Such initiatives coupled with rising demand from young Muslims will continue to ensure that opportunities across the sector stay abound. 

*Edited on July 22, 2024, with changes to paragraphs 11 and 12. 

Abu Dhabi developer Eagle Hills Properties is looking to add Indonesia to its global portfolio. 

Mohammed Alabbar, the developer’s chairman and founder, and Erick Thohir, Indonesia’s minister of state-owned enterprises signed a memorandum of understanding this week.

The agreement includes plan to invest up to $3 billion to develop Indonesia’s tourism infrastructure assets, including property, airports and tourism destinations.  

The agreement will be effective for one year only, with the possibility to extend, the company said in a statement. No timeline was outlined for the investment.

Development of new tourism spots, and enhancing state-owned hotels and airport infrastructure, including the Soekarno-Hatta International Airport, are part of the deal. 

"Indonesia has significant potential due to its resources and tourism destinations,” Mohammed Alabbar said. 

“[We believe] Indonesia can be competitive and increase its proportion of the tourism sector’s contribution to the GDP [gross domestic product] – Eagle Hills would like to support this endeavour."

Eagle Hills, which operates in more than 11 countries across three continents, has a global projects portfolio valued at around $30billion. In May, the developer said it would invest $3.25 billion to redevelop a beachfront property in Latvia. It also plans to invest $4 billion to develop real estate in Bahrain. 

“This partnership aligns perfectly with our national strategy to diversify our economy and establish Indonesia as a premier global tourism destination,” minister Erick Thohir said. 

“We are confident that this collaboration will not only boost our infrastructure but also create significant employment opportunities and drive sustainable economic growth across our beautiful archipelago."
 

Here's a roundup of key developments across the Islamic lifestyle ecosystem during the month of July

Editor's note: Thailand is looking to boost its Muslim tourist numbers, which has led its government to task all tourism agencies to promote the country as a viable Muslim-friendly destination. 

Philippines is also looking to develop a halal ecosystem to bolster tourism with Muslim countries. 

Trade Developments

Philippines

Philippines looks to ‘halal ecosystem’ to boost tourism, trade

The Philippines is developing a "halal ecosystem" to boost tourism and trade with Arab and Muslim countries, according to the National Commission on Muslim Filipinos (NCMF).

With around 10 million Muslims in its nearly 120 million population, the country aims to expand its domestic halal industry.

The government targets raising 230 billion pesos ($4 billion) in investments and creating 120,000 jobs by 2028, tapping into the global halal market worth over $7 trillion. (Arab News)

Qatar

Qatari ministry launches calligraphy competition

Qatar has launched the inaugural Qatar International Arabic Calligraphy Competition, Al Raqim, enriching its cultural heritage.

Inaugurated by Ghanem bin Shaheen Al Ghanim, Minister of Awqaf and Islamic Affairs, at the Sheikh Abdulla bin Zaid Al Mahmoud Islamic Cultural Centre in Doha, the event aims to elevate Arabic calligraphy on the global stage. (The Halal Times)

Thailand

Thailand to boost appeal to Muslim tourists

Thailand aims to become the region's hub for halal tourism, according to government spokesman Chai Wacharonke.

Prime Minister Srettha Thavisin has instructed all tourism-related agencies to promote the country as a Muslim-friendly destination.

This announcement follows Thailand's fifth-place ranking among non-OIC countries on the Global Muslim Travel Index (GMTI) by Crescent Rating and Mastercard, which evaluates countries based on the conveniences they offer to Muslim travellers, including halal food options and access to places of worship. (Bangkok Post)

Regulatory

Azerbaijan

Azerbaijan to issue ‘halal hotel’ certificate

Azerbaijan will issue "halal hotel" certificates to tourist facilities following the adoption of a new state standard for halal tourism services, based on international experience, the State Tourism Agency announced. Interested hotels can undergo halal certification to present themselves as "halal hotels" to customers. (Azerbaycan24)

Here's a roundup of key developments across the OIC ecosystem during the month of July.

Editor's note: Cooperation is a wonderful concept in general, and moreso for businesses and economies. Perhaps why countries across the OIC are capitalizing on it for greater economic growth and prosperity. 

Qatar is looking to enhance economic ties with both Iraq and Uzbekistan. Oman and Algeria are also looking at ways to bolster trade and investment cooperation. 

Investment

Türkiye / Turkmenistan / Suriname

IsDB allocates $369m for development projects in Turkiye, Turkmenistan, and Suriname

The Islamic Development Bank's board approved $368.98 million for new development projects in Türkiye, Turkmenistan, and Suriname.

These initiatives aim to bolster sustainable development and socio-economic growth, focusing on transportation, health, education, and energy sectors. (Zawya)

Trade Developments

Oman / Algeria

Oman, Algeria discuss enhancing investment, trade cooperation

Oman's Minister of Trade, Qais bin Mohammed Al Yousef, and Algeria's Minister of Trade, Tayeb Zitouni, held a videoconference to explore ways to boost investment and trade cooperation.

They agreed to encourage companies to enhance partnerships and transfer technology, aiming for long-term collaboration. (Zawya)

Qatar / Iraq

Qatar, Iraq to enhance economic, trade ties

Qatar's Minister of Commerce, Sheikh Mohamed bin Hamad bin Qassim al-Thani, and Iraq's Minister of Commerce, Atheer Daoud Salman al-Ghurairi, co-chaired the seventh session of the Qatari-Iraqi Joint Committee for Economic and Trade Cooperation in Baghdad on July 7-8.

The session underscored mutual efforts to enhance bilateral cooperation, economic partnerships, and joint mechanisms.

Sheikh Mohamed praised the strong relations between Qatar and Iraq, highlighting their role in deepening economic, trade, and investment cooperation. (Gulf Times)

Qatar / Uzbekistan

Qatar, Uzbekistan discuss ways to enhance trade ties

Mohammed bin Ahmed bin Twar Al Kuwari, First Vice Chairman of the Qatar Chamber, held a video call with Rasulov Dilshod Ozodovich, Deputy Chairman of the Uzbekistan Chamber of Commerce and Industry.

They discussed key sectors for potential investment and the activation of agreements between the chambers of commerce in both countries.

The meeting attended by officials from both countries focused on enhancing bilateral trade and economic cooperation.

(The Peninsula)

UAE / Kuwait

UAE, Kuwait discuss economic cooperation

UAE Minister of State for Foreign Trade Dr. Thani Al-Zeyoudi met with Kuwaiti officials to discuss enhancing economic and trade cooperation between the two countries.

He held talks with the Kuwaiti Consul General in Dubai and Northern Emirates, Ambassador Ali Al-Thaidi, and the Chairman of the Kuwaiti Business Council in Dubai and Northern Emirates, Dr. Firas Al-Salem.

They explored ways to boost bilateral cooperation and exchanged views on investment opportunities across various sectors. (Zawya)

UK-based Shariah-compliant fintech Offa has introduced a new buy-to-let (BTL) finance service to overhaul traditional property finance solutions. 

The service offered by the bridge finance fintech is available to anyone - British resident or expatriate, Muslim or non-Muslim – who is keen to purchase a property in England and Wales and is above the age of 21. The property must be valued at between £60,000 and £1 million.

Offa’s BTL product is built on Islamic finance principles of co-ownership-with-leasing. Customers can acquire the property in partnership with Offa and make regular monthly payments to increase their share, over time owning it. 

If a customer’s rental income does not meet the product's affordability criteria, Offa allows them to make the up the difference with their personal monthly income, the company said in a statement. 

“Our digital application process means clients can potentially get a fair decision within minutes, depending on credit rating and risk criteria,” Sagheer Malik, Offa’s chief commercial officer said. 

The Birmingham-headquartered fintech offers an ethical model designed in accordance with Islamic finance principles, which includes no interest and invests in sectors not involved in activities deemed harmful to society. 

In April, Offa announced a £100 million credit line for its bridge finance arm from a fund managed by UAE-based Gulf Islamic Investments Group. The credit line is the largest of its kind outside the Gulf. 
 

UAE-based food and beverage company Agthia Group has launched a manufacturing facility in Saudi Arabia, the largest economy in the GCC. 

The new 90-million-dirhams protein manufacturing facility in Jeddah’s Industrial City 1 will help address the growing demand for its protein products in the kingdom.

The facility spans over 9,000 sq m and will have an annual production capacity of more than 9,000 tons.

“The launch of this new facility highlights the group's strategic initiative to tap into the immense growth potential of the largest market in the GCC region,” the company said in a bourse filing. 

The kingdom’s processed meat market is expected to reach $7.11 billion by the end of the decade, reflecting a compound annual growth rate of 5.49%, the company added. 

“By bolstering our presence in the kingdom's rapidly expanding processed meat market, we are not only reinforcing our market position but also contributing significantly to the diversification and growth of our regional product portfolio,” said Agthia Group CEO Alan Smith.

Agthia reported a group net profit of 127.6 million dirhams for Q1 2024, up 32% year on year.