Earlier this month, the British government announced it favoured stepping into Islamic finance, and wanted to raise some $4 million through Shari’ah compliant bonds. I was not surprised by this development as London is already home to the largest Islamic finance market in the western world, and I was quite confident the government would want to maintain its leadership status in the industry.

But what excites me the most is that my home country, Singapore, has finally decided to embrace Islamic finance. The Singapore government rarely makes the wrong decisions and I am sure they did their homework before plunging into Islamic finance. And although it is relatively a late entrant into Islamic finance, I am confident that Singapore will be making waves in the Islamic finance industry in the near future.

The Daiwa FTSE Shari’ah Japan 100 exchanged traded fund (ETF) finally made its debut on the Singapore stock exchange and has the distinct honour of being the country’s first Shari’ah compliant ETF to be listed on a local bourse. It offers an investment channel into Japanese companies that fully complies with Shari’ah investment principles.

The country has also been refining its regulatory framework and tax structures over the years to facilitate the growth of the Islamic finance industry. Some of these incentives include a 5 per cent concessionary tax rate for income derived from Shari’ah compliant fund management, lending, insurance and reinsurance.

The Monetary Authority of Singapore also has plans to develop a facility for the issuance of Singapore dollar denominated sovereign rated Sukuk in response to the needs of financial institutions conducting Shari’ah compliant activities in Singapore.

Although tiny in size, Singapore’s status as one of the economic hubs in Asia puts all of its actions under the microscope. And I believe Singapore’s endorsement of Islamic finance will further spur the development of the industry in Asia.