Sharia Banking and the Financial Industry » Incentives http://www.shariabanking.info Islamic Banking The Fastest Growing Segments of The Financial Industry Sat, 14 Jan 2012 10:31:21 +0000 en hourly 1 http://wordpress.org/?v=3.2.1 Government Eyes Incentives for Islamic Finance http://www.shariabanking.info/government-eyes-incentives-for-islamic-finance.php http://www.shariabanking.info/government-eyes-incentives-for-islamic-finance.php#comments Thu, 17 Jun 2010 07:17:42 +0000 admin http://www.shariabanking.info/?p=312 islamic finance2Indonesian government may offer tax incentives for Shariah bond issues and bank deposits to better compete with Malaysia, the world’s top Islamic finance market, the central bank official said on Tuesday. One sweetener being considered would help boost bank capital and another could provide a tax holiday for sukuk (Islamic bond) issues. The country has already removed double taxation on Islamic finance transactions to give the industry a level playing field with conventional banking, but new policy was needed.
To support Islamic banking and finance, it’s not enough just to have tax neutrality. We need also tax incentives like in Malaysia as islamic banking director at Bank Indonesia said on the sidelines of an Islamic-banking conference in Singapore. For investment to come into Indonesia, it is possible to give a kind of tax holiday. Islamic bank assets in Indonesia are just a fraction of total banking assets, while in Malaysia they are close to a fifth.

Indonesia’s Islamic bank assets were Rp 66 trillion ($7.2 billion) as of December, compared with Rp 2,534 trillion for the banking industry as a whole, central bank figures show. In Malaysia, Islamic banking assets totaled about $95 billion. Still, with the world’s biggest Muslim population, Islamic bankers say Indonesia is set for explosive growth. But first, authorities need to lay the right legal and regulatory framework.

Malaysia, the top sukuk market, accounted for about 40 percent of total global issuance last year of $19.1 billion. Incentives include a 20 percent stamp-duty exemption on Islamic securities through 2015. The Finance Ministry and central bank were studying tax incentives that could boost growth of Islamic finance. The study is expected to be finished by the end of the year.

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