Sydney, February 17: Australia’s largest bank has launched the country’s first Islamic financing tool for commodity trade, joining a booming global industry.
“We believe it is the first in Australia,” Emmanuel Alfieris, head of Westpac Banking Corp’s financial institution and trade, told.
Under the new tool, the bank buys commodities on behalf of investors, holds them on its books for a short time and then, once they are sold, splits the profit with them.
The time period and profit share are pre-agreed.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
“Depending on the success of this one, we are looking at other asset classes,” said Alfieris whose bank is the largest in Australia.
Westpac was recognized by the Dow Jones Sustainability Index as the most sustainable bank in the world for five consecutive years.
Government surveys show that Australia is home to 365,000 Muslims, who would use Islamic financial services if they were more accessible.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Booming Sector
The launch is part of Australian efforts to join the increasingly-growing Islamic finance industry.
“Islamic financing is a booming sector and Australia should be part of the action,” Trade Minister Simon Crean told the Financial Standard.
He said the expanding Islamic banking would help turn Australia into a dominant player in regional financing.
“The continued growth in major Asian economies will create a need for resources-related services and infrastructure, which are ideal assets for forms of Islamic financing.”
Last May, Australia launched its first Shari`ah-compliant real estate in Bahrain in an effort to lure Muslim investors looking for opportunities in alternative investments and in new markets.
Islamic finance is one of the fastest growing sectors in the global financial industry.
Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.
-Agencies