In my earlier article, "How Does Shariah Compliance Work?" I touched upon the challenges that Hong Kong's authorities faces whereas attempting to implement the required modifications to ascertain a degree taking part in area between conventional monetary merchandise and the alternate options introduced by Islamic finance. Wanting on the expertise within the UK offers a helpful instance of absolutely the potential and development this monetary companies area of interest presents.
The UK authorities made the institution of a possible fiscal and regulatory framework for Islamic finance within the UK a key focus in 2003. Since then the UK authorities has achieved the next:
o In 2003 it eliminated the double tax on Islamic mortgages and prolonged the tax reduction on Islamic mortgages to corporations in addition to people.
o As a monetary heart, London turned extra enticing to concern and commerce sukuks, ie Islamic bonds, by reforming the preparations for issuance of bonds in order that returns and earnings funds may very well be valued as in the event that they have been curiosity.
o The UK's monetary companies regulatory physique, the Monetary Companies Authority, launched initiatives that ensured that the regulatory therapy of Islamic finance is in keeping with its total statistical targets and rules.
The UK authorities even thought-about issuing Shariah-compliant bonds in addition to providing Shariah-compliant retail banking merchandise by way of Nationwide Financial savings & Investments and performed a corresponding evaluation. Though it introduced in November 2008 that nonetheless current presents worth for cash, the federal government confirmed that it will monitor the scenario carefully. On the similar time, the UK authorities determined to assist the event of Islamic finance whereas making certain that typical and different finance are handled equally. The main focus is thus on figuring out current market boundaries and utilizing laws to make sure that Shariah-compliant merchandise may be supplied and may compete on an equal footing with extra typical types of finance. Sure efforts have been made to make sure that current tax and regulatory methods within the UK don’t distort the marketplace for traders wishing to put money into these varieties of merchandise.
The upshot of this pro-active and ahead wanting method by the UK authorities may be seen by the outcomes achieved up to now. To-date, Islamic product choices within the UK embrace:
o 5 absolutely Shariah-compliant banks. An extra 17 present Shariah-compliant companies by way of "Islamic home windows" wherey can provide experience in Islamic finance to companies and members of the general public. That is greater than every other non-Muslim nation.
o The London Inventory Trade has listed a complete of 18 sukuk points, which raised US $ 10bn. That is exceeded solely by Dubai Nasdaq.
o Of the full seven Shariah compliant trade traded funds, 4 have been launched in 2008 alone. Additionally, 2008 noticed an extra two new fairness funds launched.
o By way of non-banking merchandise, the primary firm to supply Shariah-compliant insurance coverage, generally known as takaful, to UK residents was approved in 2008.
o Supporting this improvement of Islamic finance are 18 regulation companies that present Islamic finance assist. As well as, the Large 4 skilled service companies present Islamic finance advisory companies.
o To supply instructional assist in extra of 50 establishments provide the required Islamic finance instructional and coaching merchandise. That is extra important than every other nation worldwide.
It is a powerful act to observe for the Hong Kong authorities. Not solely will it should compete with the stable authorized and regulatory platform that the UK authorities has offered, however the UK has a six 12 months head begin. The UK has carried out a superb job in securing its place as the important thing western heart for Islamic finance. Given the potential for, particularly, East Asia, I might hope that the Hong Kong authorities is suitably motivated to make the required modifications within the Hong Kong authorized and regulatory framework as nicely.
Let me due to this fact repeat my name to the Monetary Secretary, John Tsang. Please, Mr Tsang, be daring, and make the leap. Enact the required laws as quickly as potential. You’ll not solely elevate the profile of Hong Kong as a worldwide monetary heart however additionally, you will create a big variety of new jobs, jobs that the monetary companies trade in Hong Kong badly wants. Simply in case you require recommendation on any extra modifications required, there are a selection of domestically resident specialists who can level you in the appropriate course. As well as, my e mail deal with can also be proven on the backside of this text, and I might solely be too joyful to sit down down and talk about this in additional element with you. The monetary companies trade, in addition to its supporting skilled companies, like accounting and regulation, will thanks for it!